G.R. No. 95326 March 11, 1999 6.
6. To require PESALA to enforce collection of the overpayment to the Vista Grande Management and
ROMEO P. BUSUEGO, CATALINO F. BANEZ and RENATO F. LIM, petitioners,  loan proceeds and P3.9 million other unsupported cash disbursements from the responsible directors and
vs.
THE HONORABLE COURT OF APPEALS and THE MONETARY BOARD OF THE CENTRAL
BANK OF THE PHILIPPINES, respondents.
 
PURISIMA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking a reversal of the
Decision, 1dated September 14, 1990, of the Court of Appeals in CA-G.R. CV No. 23656.
As culled from the records; the facts of the case are as follows:
The 16th regular examination of the books and records of the PAL Employees Savings and Loan
Association, Inc. ("PESALA") was conducted from March 14 to April 16, 1988 by a team of CB examiners
headed by Belinda Rodriguez. Following the said examination, several anomalies and irregularities
committed by the herein petitioners; PESALA's directors and officers, were uncovered, among which are:
1. Questionable investment in a multi-million peso real estate project (Pesalaville).
2. Conflict of interest in the conduct of business.
3. Unwarranted declaration and payment of dividends.
4. Commission of unsound and unsafe business practices.
On July 19, 1988, Central Bank ("CB") Supervision and Examination Section ("SES") Department IV
Director Ricardo F. Lirio sent a letter to the Board of Directors of PESALA inviting them to a conference on
July 21, 1988 to discuss subject findings noted in the said 16th regular examination, but petitioners did not
attend such conference.
On July 28, 1988, petitioner Renato Lim wrote the PESALA's Board of Directors explaining his side on the
said examination of PESALA's records and requesting that a copy .of his letter be furnished the CB, which
was forthwith made by the Board. 2
On July 29, 1988, PESALA's Board of Directors sent to Director Lirio a letter concerning the 16th regular
examination of PESALA's records.
On September 9, 1988, the Monetary Board adopted and issued MB Resolution No. 805 the pertinent
provisions of which are as follows:
1. To note the report on the examination of the PAL Employees' Savings and Loan Association, Inc.
(PESALA) as of December 31, 1987, as submitted in a memorandum of the Director, Supervision and
Examination Section (SES) Department IV, dated August 19, 1988;
2. To require the board of directors of PESALA to immediately inform the members of PESALA of the
results of the "Central Bank examination. and their effects on the financial condition of the Association;
xxx xxx xxx
5. To include the names of Mr. Catalino Banez, Mr. Romeo Busuego and Mr. Renato Lim in the Sector's
watchlist to prevent them from holding responsible positions in any institution under Central Bank
supervision;
1
Development Corporation and to require the accounting of P12.28 million unaccounted and unremitted bank
officers; or to properly charge these against their respective accounts, if necessary;
7. To require the board of directors of PESALA to file civil and criminal cases against Messrs. Catalino
Banez, Romeo Busuego and Renato Lim for all the misfeasance and malfeasance committed by them, as
warranted by the evidence;
8. To require the board of directors of PESALA to improve the operations of the Association; correct all
violations noted, and adopt internal control measures to prevent the recurrence of similar incidents as shown
in Annex E of the subject memorandum of the Director, SES Department IV; 3
xxx xxx xxx
On January 23, 1989, petitioners filed a Petition for Injunction with Prayer for the Immediate Issuance of a
Temporary Restraining Order 4 docketed as Civil Case No. Q-89-1617 before Branch 104 of the Regional
Trial Court of Quezon City.
On January 26, 1989, the said court issued. a temporary restraining
order 5 enjoining the defendant, the Monetary Board of the Central Bank, (now Banko Sentral ng Pilipinas)
from including the names of petitioners in the watchlist.
On February 10, 1989, the same trial Court issued a writ of preliminary injunction, 6 conditioned upon the
filing by petitioners of a bond in the amount of Ten Thousand (P10,000.00) Pesos each. The Monetary Board
presented a Motion for Reconsideration 7 of the said Order, but the same was denied.
On September 11, 1999, the trial court handed down its Decision, 8 disposing thus:
WHEREFORE, judgment is hereby rendered declaring Monetary Board Resolution No. 805 as void and in
existent. The writ of preliminary prohibitory injunctions issued on February 10, 1989 is deemed permanent.
Costs against respondent.
The Monetary Board appealed the aforesaid Decision to the Court of Appeals which came out with a
Decision 9 of reversal on September 14, 1990, the decretal portion of which is to the following effect:
WHEREFORE, the decision appealed from is hereby reversed and another one entered dismissing the
petition for injunction.
Dissatisfied with the said Decision of the Court of Appeals, petitioners have come to this Court via the
present petition for review on certiorari.
On June 5, 1992, petitioners filed an "Urgent Motion for the Immediate Issuance of a Temporary Restraining
Order and/or Writ of Preliminary Injunction against the Secretary of Justice and the City Prosecutor of
Pasay" 10stating that several complaints were lodged against the petitioners before the Office of the City
Prosecutor of Pasay City pursuant to Monetary Board Resolution No. 805; that the said complaints were
dismissed, by the City Prosecutor and the dismissals were appealed to the Secretary of Justice for review,
some of which have been reversed already. Petitioners prayed that Temporary Restraining Order and/or Writ
of Preliminary Injunction issue "restraining and enjoining the Secretary of Justice and the City Prosecutor of
Pasay City from proceeding and taking further actions, and more specially from filing Information's in I.S.
Nos. 90-1836; 90- 1831; 90-1835; 90-1832; 90-1248; 90-1249; 90-3031; 90-3032; 90- 1837; 90-1834,
pending the final resolution of the case at bar . . ." However, in the Resolution 11 dated September 9, 1992,
the court denied the said motion.
The petition poses as issues for resolution:
I 4. The evidence must be substantial;
WHETHER OR NOT THE PETITIONERS WERE DEPRIVED OF THEIR RIGHT TO A NOTICE AND
THE OPPORTUNITY TO BE HEARD BY THE MONETARY BOARD PRIOR TO ITS ISSUANCE OF
MONETARY BOARD RESOLUTION NO. 805.
II
WHETHER OR NOT THE RESPONDENT BOARD IS LEGALLY BOUND TO OBSERVE THE
ESSENTIAL REQUIREMENTS OF DUE PROCESS OF A VALID CHARGE, NOTICE AND
OPPORTUNITY TO BE HEARD INSOFAR AS THE PETITIONERS SUBJECT CASE IS CONCERNED.
III
WHETHER OR NOT MONETARY BOARD RESOLUTION NO. 805 IS NULL AND VOID FOR BEING
VIOLATIVE OF PETITIONERS' RIGHTS TO DUE PROCESS.
With respect to the first issue, the trial court said:
The evidence submitted Preponderates in favor of petitioners. The deprivation of petitioners' rights in the
Resolution undermines the constitutional guarantee of due process. Petitioners were never notified that they
were being investigated, much so, they were not informed of any charges against them and were not afforded
the opportunity to adduce countervailing evidence so as to deserve the punitive measures promulgated in
Resolution No. 805 of the Monetary Board . . . 12
The foregoing disquisition by the trial court is untenable under the facts and circumstances of the case.
Petitioners were duly afforded their right to due process by the Monetary Board, it appearing that:
1. Petitioners were invited by Director Lirio to a conference scheduled for July 21, 1988 to discuss the
findings made in the 16th regular examination of PESALA's records. Petitioners did not attend said
conference;
2. Petitioner Renato Lim's letter of July 28, 1988 to PESALA.'s Board of Directors, explaining his side of the
controversy, was forwarded to the Monetary Board which the latter considered in adopting Monetary Board
Resolution No. 805; and
3. PESALA's Board of Director's letter, dated July 29, 1988, to Monetary Board, explaining the Board's side
of the controversy was properly considered in the adoption of Monetary Board Resolution No. 805.
Petitioners therefore cannot complain of deprivation of their right to due process, as they were given ample
opportunity by the Monetary Board to air their submission and defenses as to the findings of irregularity
during the said 16th regular examination. The essence of due process is to be afforded a reasonable
opportunity to be heard and to submit any evidence one may have in support of his defense 13 What is
offensive to due process is the denial of the opportunity to be heard. 14 Petitioner having availed of their
opportunity to present their position to the Monetary Board by their letters-explanation, they were not denied
due process. 15
Petitioners cite Ang Tibay v. CIR 16 and assert that the following requisites of procedural due process were
not observed by the Monetary Board:
1. The right to a hearing, which includes the right to present one's case and submit evidence in support
thereof;
2. The tribunal must consider the evidence presented;
3. The decision must have something to support itself;
2
5. The decision must be rendered on the evidence presented at the hearing, or at least contained in the record
and disclosed to the parties affected;
6. The tribunal or body or any of its judges must act on its or his own independent consideration of the law
and facts of the controversy and not simply accept the view of a subordinate in arriving at a decision;
7. The board or body should, in all controversial question, renders its decision in such manner that the parties
to the proceedings can know the various issues involved and the reason for the decision rendered.
Contrary to petitioners' allegation, it appears that the requisites of procedural due process were complied with
by the Monetary Board before it issued the questioned Monetary Board Resolution No. 805. Firstly, the
petitioner were invited to a conference to discuss the findings gathered during the 16th regular examination
of PESALA's records. (The requirement of a hearing is complied with as long as there was an opportunity to
be heard, and not necessarily that an actual hearing was conducted. 17) Secondly, the Monetary Board
considered the evidence presented. Thirdly, fourthly, and fifthly, Monetary Board Resolution No. 805 was
adopted on the basis of said findings unearthed during the 16th regular examination of PESALA's records
and derived from the letter-comments submitted by the parties. Sixthly, the members of the Monetary Board
acted independently on their own in issuing subject Resolution, placing reliance on the said findings made
during the 16th regular examination. Lastly, the reason for the issuance of Monetary Board Resolution No.
805 is readily apparent, which is to prevent further irregularities from being committed and to prosecute the
officials responsible therefor.
With respect to the second issue, there is tenability in petitioners' contention that the Monetary Board, as an
administrative agency, is legally bound to observe due process, although they are free from the rigidity of
certain procedural requirements. As held in Adamson and Adamson, Inc. v. Amores. 18
While administrative tribunals exercising quasi-judicial functions are free from the rigidity of certain
procedural requirements they are bound by law and practice to observe the fundamental and essential
requirements of due process in justiciable cases presented before them. However, the standard of due process
that must be met in administrative tribunals allows a certain latitude as long as the element of fairness is not
ignored. Hence, there is no denial of due process where records show that hearings were held with prior
notice to adverse parties. But even in the absence of previous notice, there is no denial of procedural due
process as long as the parties are given the opportunity to be heard.
Even Section 28, (c) and (d), of Republic Act No. 3779 ("RA 1779") delineating the powers of the Monetary
Board over savings and loan associations, require observance of due process in the exercise of its powers:
xxx xxx xxx
(c) To conduct at least once every year, and whenever necessary, any inspection, examination or
investigation of the books and records, business affairs, administration, and financial condition of any
savings and loan association with or without prior notice but always with fairness and reasonable opportunity
for the association or any of its officials to give their side of the case. . .
(d) After proper notice and hearing, to suspend a savings and loan association for violation of law, for unsafe
and unsound practices or for reason of insolvency. . .
xxx xxx xxx
(f) To decide, after appropriate notice and hearings any controversy as to the rights or obligations of the
savings and loan association, its directors, officers, stockholders and members under its charter, and, by
order, to enforce the same;
xxx xxx xxx (emphasis supplied)
Anent the third issue, petitioners theorize that Monetary Board Resolution No. 805 is null and void for being
violative of petitioners' right to due process. To support their stance, they cite the trial court's ruling, to wit:
A reading of Monetary Board Resolution No. 805 discloses that it imposes administrative sanctions against
petitioners. In fact, it does not only penalize petitioners by including them in the "watchlist to prevent them
from holding responsible positions in any institution under Central Bank supervision," it mandates the
PESALA Board of Directors as well to file Civil and Criminal charges against them 'for all the misfeasance
and malfeasance committed by them, as warranted by the evidence.' Monetary Board Resolution No. 805
virtually deprives petitioners their respective gainful employment, and at the same time marks them for
judicial prosecution. The crucial question here is that were petitioners afforded due process in the
investigations conducted which prompted the issuance of Monetary Board Resolution No. 805?
. . . Although the Monetary Board is free from the rigidity of certain procedural requirements, it failed "to
observe the essential requirement of due process" (Adamson and Adamson, Inc. v. Amores, 152 SCRA 237)
specifically its failure to afford petitioners the opportunity to be heard. In short, there is a clear showing of
arbitrariness resulting in an irreparable injury against petitioners as the Resolution certainly affects their "life,
liberty and property.
Monetary Board Resolution No. 805 violates basic and essential requirements. It must therefore be, as it is
hereby, declared, as void and inexistent because among other things, it openly derogates the fundamental
rights of petitioners.
Petitioners opine that with the issuance of Monetary Board Resolution No. 805, "they are now barred from
being elected or designated as officers again of PESALA, and are likewise prevented from future
engagements or employments in all institutions under the supervision of the Central Bank thereby virtually
depriving them of the opportunity to seek employments in the field which they can excel and are best fitted."
According to them, the Monetary Board is not vested with "the authority to disqualify persons from
occupying positions in institutions under the supervision of the Central Bank without proper notice and
hearing" nor is it vested with authority "to file civil and criminal cases against its officers directors for
suspected fraudulent acts."
Petitioners' contentions are untenable. It must be remembered that the Central Bank of the Philippines (now
Bangko Sentral ng Pilipinas), through the Monetary Board, is the government agency charged with the
responsibility of administering the monetary, banking and credit system of the country 19 and is granted the
power of supervision and examination over banks and non-bank financial institutions performing quasi-
banking functions of which savings and loan associations, such as PESALA, from part of. 20
The special law governing savings and loan associations is Republic Act No. 3779, as amended, otherwise
known as the "Savings and Loan Association Act." Said law authorizes the Monetary Board to conduct
regular yearly examinations of the books and records of savings and loans associations, to suspend a savings
and loan association for violation of law, to decide any controversy over the obligations and duties of
directors and officers, and to take remedial measures, among others. Section 28 of Rep. Act No. 3779, reads;
Sec. 28. Supervisory powers over savings and loan associations. — In addition to whatever powers have
been conferred by the foregoing provisions, the Monetary Board shall have the power to exercise the
following.
xxx xxx xxx
(c) To conduct atleast once every year, and whenever necessary, any inspection, examination or investigation
of the books and records, business affairs, administration, and financial condition of any savings and loan
association with or without prior notice but always with fairness and reasonable opportunity for the
association or any of its official to give their side of the case. Whenever an inspection, examination or
investigation is conducted under this grant power, the person authorized to do so may seize books and
records and keep them under his custody after giving proper receipts therefor; may make any marking or
3
notation on any paper, record, document or book to show that it has been examined and verified; and may
padlock or seal shelves, vaults, safes, receptacles or similar container and prohibit the opening thereof
without first securing authority therefor, for as long as may be necessary in connection with the investigation
or examination being conducted. The official of the Central Bank in charge of savings and loan associations
and his deputies are hereby authorized to administer oaths to any directors, officer or employee of any
association under the supervision of the Monetary Board;
xxx xxx xxx
(d) After proper notice and hearing, to suspend a savings and loan association for violation of law, for unsafe
and unsound practices or for reason of insolvency. The Monetary Board may likewise, upon the proof that a
savings and loan association or its board or directors or officers are conducting and managing its affairs in a
manner contrary to laws, orders, instruction, rules and regulations promulgated by the Monetary Board or in
a manner substantially prejudicial to the interest of the government, depositors or creditors, take over the
management of the savings and loan association after due hearing, until a new board of directors and officers
are elected and qualified without prejudice to the prosecution of the persons responsible for such violations.
The management by the Monetary Board shall be without expense to the savings and loan association, except
such as is actually necessary for its operation, pending the election and qualification of a new board of
directors and officers to take the place of those responsible for the violation or acts contrary to the interest of
the government, depositors or creditors;
xxx xxx xxx
(f) To decide, after appropriate notice and hearings any controversy as to the rights or obligations of the
savings and loan association, its directors, officers, stockholders and members under its charter, and, by
order, to enforce the same;
xxx xxx xxx
(I) To conduct such investigations, take such remedial measures, exercise all powers which are now or may
hereafter be conferred upon it by Republic Act Numbered Two Hundred sixty-five in the enforcement of this
legislation, and impose upon associations, whether stock or non-stock their directors and/or officers
administrative sanctions under Sections 34-A or 34-B of Republic Act Two Hundred sixty-five, as amended.
From the foregoing, it is gleanable that the Central Bank, through the Monetary Board, is empowered to
conduct investigations and examine the records of savings and loan associations. If any irregularity is
discovered in the process, the Monetary Board may impose appropriate sanctions, such as suspending the
offender from holding office or from being employed with the Central Bank, or placing the names of the
offenders in a watchlist.
The requirement of prior notice is also relaxed under Section 28 (c) of RA 3779 as investigations or
examinations may be conducted with or without prior notice "but always with fairness and reasonable
opportunity for the association or any of its officials to give their side." As may be gathered from the records,
the said requirement was properly complied with by the respondent Monetary Board.
We sustain the ruling of the Court of Appeals that petitioners' suspension was only preventive in nature and
therefore, no notice or hearing was necessary. Until such time that the petitioners have proved their
innocence, they may be preventively suspended from holding office so as not to influence the conduct of
investigation, and to prevent the commission of further irregularities.
Neither were petitioners deprived of their lawful calling as they are free to look for another employment so
long as the agency or company involved is not subject to Central Bank control and supervision. Petitioners
can still practise their profession or engage in business as long as these are not within the ambit of Monetary
Board Resolution No. 805.
All thing studiedly considered, the court upholds the validity of Monetary Board Resolution No. 805 and (b) To preserve the international value of the peso and the convertibility of the peso into other freely
affirms the decision of the respondent court. convertible currencies; and

WHEREFORE, the petition is DENIED, and the assailed Decision dated September 14, 1996 of the (c) To promote a rising level of production, employment and real income in the Philippines.
AFFIRMED. No pronouncement as to costs.
Sec. 5, Republic Act 265:
SO ORDERED.
Composition of the Monetary Board — The powers and functions of the Central Bank shall be exercised by a
Romero, Vitug, Panganiban and Gonzaga-Reyes, JJ., concur. Monetary Board, which shall be composed of seven members as follows:

Footnotes xxx xxx xxx

1 Penned by Associate Justice Jose A..R. Melo and concurred by Associate Justices Antonio M. and Nicolas 20 Sec. 25, Republic Act 265:
P. Lapena. Jr.
Creation of the Department. — In order to assure the observance of this Act and of other pertinent laws, and
2 See Rollo, p. 248. of the rules and regulations of the Monetary Board, the Central Bank shall have a Department of Supervision
and Examination which shall be charged with the supervision and periodic examination of all banking
3 Rollo, pp. 39-40. institutions operating in the Philippines, including all government credit institutions. The Department of
Supervision and Examination shall discharge its responsibilities in accordance with the instructions of the
4 Annex "B", Petition for Review, Rollo, pp. 33-38. Monetary Board. The Chief of the department shall be known as the Superintendent of Banks.
5 Annex "C", Petition for Review, Rollo, p. 41. The Superintendent of Bank is and the examiners of the Department of Supervision and Examination are
hereby authorized to administer oaths to any director, officer, or employee of any institution under the
6 Annex "G", Petition for Review, Rollo, p. 65.
supervision of the department and to compel the presentation of all books, documents, papers or records
7 Annex "H", Petition for Review, Rollo, pp. 63-72. necessary in his or their judgment to ascertain the facts relative to the true condition of any institution.

8 Annex "L", Petition for Review, Rollo, pp. 122-124.

9 Annex "A", Petition for Review, Rollo, pp. 28-32.

10 Rollo, pp. 334-360.

11 Rollo, pp. 405-406.

12 Rollo, p. 124.

13 Salonga v. Court of Appeals, 269 SCRA 534.

14 Garments and Textile Export Board v. Court of Appeals, et al., 268 SCRA 258.

15 See Naguiat v. National Labor Relations Commission, 269 SCRA 564.

16 69 Phil. 635.

17 Pono v. National Labor Relations Commission, 275 SCRA 611.

18 152 SCRA 237, 250.

19 Sec. 2, Republic Act 265:

Responsibilities and objectives — It shall be the responsibility of the Central Bank of the Philippines to
administer the monetary and banking system of the Republic. It shall be the duty of the Central bank to use
the powers granted to it under this Act to achieve the following objectives:

(a) To maintain monetary stability in the Philippines;

4
G.R. No. 76118 March 30, 1993 On 9 September 1985, TSB filed an urgent motion in the RTC to direct receiver Ramon V. Tiaoqui to restore
TSB to its private management. On 11 November 1985, the RTC in separate orders denied petitioners'
THE CENTRAL BANK OF THE PHILIPPINES and RAMON V. TIAOQUI, petitioners,  motion to dismiss and ordered receiver Tiaoqui to restore the management of TSB to its elected board of
vs. directors and officers, subject to CB comptrollership.
COURT OF APPEALS and TRIUMPH SAVINGS BANK, respondents.
Since the orders of the trial court rendered moot the petition for certiorari then pending before this Court,
Sycip, Salazar, Hernandez & Gatmaitan for petitioners. Central Bank and Tiaoqui moved on 2 December 1985 for the dismissal of G.R. No. 71465 which We
granted on 18 December 1985. 8
Quisumbing, Torres & Evangelista for Triumph Savings Bank.
Instead of proceeding to trial, petitioners elevated the twin orders of the RTC to the Court of Appeals on a
  petition for certiorari and prohibition under Rule 65. 9 On 26 September 1986, the appellate court, upheld the
orders of the trial court thus —
BELLOSILLO, J.:
Petitioners' motion to dismiss was premised on two grounds, namely, that the complaint failed to state a
May a Monetary Board resolution placing a private bank under receivership be annulled on the ground of
cause of action and that the Triumph Savings Bank was without capacity to sue except through its appointed
lack of prior notice and hearing?
receiver.
This petition seeks review of the decision of the Court of Appeals in CA G.R. S.P. No. 07867 entitled "The
Concerning the first ground, petitioners themselves admit that the Monetary Board resolution placing the
Central Bank of the Philippines and Ramon V. Tiaoqui vs. Hon. Jose C. de Guzman and Triumph Savings
Triumph Savings Bank under the receivership of the officials of the Central Bank was done without prior
Bank," promulgated 26 September 1986, which affirmed the twin orders of the Regional Trial Court of
hearing, that is, without first hearing the side of the bank. They further admit that said resolution can be the
Quezon City issued 11 November 1985 1 denying herein petitioners' motion to dismiss Civil Case No. Q-
subject of judicial review and may be set aside should it be found that the same was issued with arbitrariness
45139, and directing petitioner Ramon V. Tiaoqui to restore the private management of Triumph Savings
and in bad faith.
Bank (TSB) to its elected board of directors and officers, subject to Central Bank comptrollership. 2
The charge of lack of due process in the complaint may be taken as constitutive of allegations of arbitrariness
The antecedent facts: Based on examination reports submitted by the Supervision and Examination Sector
and bad faith. This is not of course to be taken as meaning that there must be previous hearing before the
(SES), Department II, of the Central Bank (CB) "that the financial condition of TSB is one of insolvency and
Monetary Board may exercise its powers under Section 29 of its Charter. Rather, judicial review of such
its continuance in business would involve probable loss to its depositors and creditors," 3 the Monetary Board
action not being foreclosed, it would be best should private respondent be given the chance to show and
(MB) issued on 31 May 1985 Resolution No. 596 ordering the closure of TSB, forbidding it from doing
prove arbitrariness and bad faith in the issuance of the questioned resolution, especially so in the light of the
business in the Philippines, placing it under receivership, and appointing Ramon V. Tiaoqui as receiver.
statement of private respondent that neither the bank itself nor its officials were even informed of any charge
Tiaoqui assumed office on 3 June 1985. 4
of violating banking laws.
On 11 June 1985, TSB filed a complaint with the Regional Trial Court of Quezon City, docketed as Civil
In regard to lack of capacity to sue on the part of Triumph Savings Bank, we view such argument as being
Case No. Q-45139, against Central Bank and Ramon V. Tiaoqui to annul MB Resolution No. 596, with
specious, for if we get the drift of petitioners' argument, they mean to convey the impression that only the CB
prayer for injunction, challenging in the process the constitutionality of Sec. 29 of R.A. 269, otherwise
appointed receiver himself may question the CB resolution appointing him as such. This may be asking for
known as "The Central Bank Act," as amended, insofar as it authorizes the Central Bank to take over a
the impossible, for it cannot be expected that the master, the CB, will allow the receiver it has appointed to
banking institution even if it is not charged with violation of any law or regulation, much less found guilty
question that very appointment. Should the argument of petitioners be given circulation, then judicial review
thereof. 5
of actions of the CB would be effectively checked and foreclosed to the very bank officials who may feel, as
On 1 July 1985, the trial court temporarily restrained petitioners from implementing MB Resolution No. 596 in the case at bar, that the CB action ousting them from the bank deserves to be set aside.
"until further orders", thus prompting them to move for the quashal of the restraining order (TRO) on the
xxx xxx xxx
ground that it did not comply with said Sec. 29, i.e., that TSB failed to show convincing proof of
arbitrariness and bad faith on the part of petitioners;' and, that TSB failed to post the requisite bond in favor On the questioned restoration order, this Court must say that it finds nothing whimsical, despotic, capricious,
of Central Bank. or arbitrary in its issuance, said action only being in line and congruent to the action of the Supreme Court in
the Banco Filipino Case (G.R. No. 70054) where management of the bank was restored to its duly elected
On 19 July 1985, acting on the motion to quash the restraining order, the trial court granted the relief sought
directors and officers, but subject to the Central Bank comptrollership. 10
and denied the application of TSB for injunction. Thereafter, Triumph Savings Bank filed with Us a petition
for certiorariunder Rule 65 of the Rules of Court 6 dated 25 July 1985 seeking to enjoin the continued On 15 October 1986, Central Bank and its appointed receiver, Ramon V. Tiaoqui, filed this petition under
implementation of the questioned MB resolution. Rule 45 of the Rules of Court praying that the decision of the Court of Appeals in CA-G.R. SP No. 07867 be
set aside, and that the civil case pending before the RTC of Quezon City, Civil Case No.
Meanwhile, on 9 August 1985; Central Bank and Ramon Tiaoqui filed a motion to dismiss the complaint
Q-45139, be dismissed. Petitioners allege that the Court of Appeals erred —
before the RTC for failure to state a cause of action, i.e., it did not allege ultimate facts showing
that the action was plainly arbitrary and made in bad faith, which are the only grounds for the annulment of (1) in affirming that an insolvent bank that had been summarily closed by the Monetary Board should be
Monetary Board resolutions placing a bank under conservatorship, and that TSB was without legal capacity restored to its private management supposedly because such summary closure was "arbitrary and in bad
to sue except through its receiver. 7 faith" and a denial of "due process";

5
(2) in holding that the "charge of lack of due process" for "want of prior hearing" in a complaint to annul a
Monetary Board receivership resolution under Sec. 29 of R.A. 265 "may be taken as . . allegations of
arbitrariness and bad faith"; and
(3) in holding that the owners and former officers of an insolvent bank may still act or sue in the name and
corporate capacity of such bank, even after it had been ordered closed and placed under receivership. 11
The respondents, on the other hand, allege inter alia that in the Banco Filipino  case, 12 We held that CB
violated the rule on administrative due process laid down in Ang Tibay vs. CIR (69 Phil. 635) and Eastern
Telecom Corp. vs. Dans, Jr. (137 SCRA 628) which requires that prior notice and hearing be afforded to all
parties in administrative proceedings. Since MB Resolution No. 596 was adopted without TSB being
previously notified and heard, according to respondents, the same is void for want of due process;
consequently, the bank's management should be restored to its board of directors and officers. 13
Petitioners claim that it is the essence of Sec. 29 of R.A. 265 that prior notice and hearing in cases involving
bank closures should not be required since in all probability a hearing would not only cause unnecessary
delay but also provide bank "insiders" and stockholders the opportunity to further dissipate the bank's
resources, create liabilities for the bank up to the insured amount of P40,000.00, and even destroy evidence
of fraud or irregularity in the bank's operations to the prejudice of its depositors and creditors. 14 Petitioners
further argue that the legislative intent of Sec. 29 is to repose in the Monetary Board exclusive power to
determine the existence of statutory grounds for the closure and liquidation of banks, having the required
expertise and specialized competence to do so.
The first issue raised before Us is whether absence of prior notice and hearing may be considered acts of
arbitrariness and bad faith sufficient to annul a Monetary Board resolution enjoining a bank from doing
business and placing it under receivership. Otherwise stated, is absence of prior notice and hearing
constitutive of acts of arbitrariness and bad faith?
Under Sec. 29 of R.A. 265, 15 the Central Bank, through the Monetary Board, is vested with exclusive
authority to assess, evaluate and determine the condition of any bank, and finding such condition to be one of
insolvency, or that its continuance in business would involve probable loss to its depositors or creditors,
forbid the bank or non-bank financial institution to do business in the Philippines; and shall designate an
official of the CB or other competent person as receiver to immediately take charge of its assets and
liabilities. The fourth paragraph, 16 which was then in effect at the time the action was commenced, allows the
filing of a case to set aside the actions of the Monetary Board which are tainted with arbitrariness and bad
faith.
Contrary to the notion of private respondent, Sec. 29 does not contemplate prior notice and hearing before a
bank may be directed to stop operations and placed under receivership. When par. 4 (now par. 5, as amended
by E.O. 289) provides for the filing of a case within ten (10) days after the receiver takes charge of the assets
of the bank, it is unmistakable that the assailed actions should precede the filing of the case. Plainly, the
legislature could not have intended to authorize "no prior notice and hearing" in the closure of the bank and
at the same time allow a suit to annul it on the basis of absence thereof.
In the early case of Rural Bank of Lucena, Inc. v. Arca [1965], 17 We held that a previous hearing is nowhere
required in Sec. 29 nor does the constitutional requirement of due process demand that the correctness of the
Monetary Board's resolution to stop operation and proceed to liquidation be first adjudged before making the
resolution effective. It is enough that a subsequent judicial review be provided.
Even in Banco Filipino, 18 We reiterated that Sec. 29 of R.A. 265 does not require a previous hearing before
the Monetary Board can implement its resolution closing a bank, since its action is subject to judicial
scrutiny as provided by law.
It may be emphasized that Sec. 29 does not altogether divest a bank or a non-bank financial institution placed
under receivership of the opportunity to be heard and present evidence on arbitrariness and bad faith because
6
within ten (10) days from the date the receiver takes charge of the assets of the bank, resort to judicial review
may be had by filing an appropriate pleading with the court. Respondent TSB did in fact avail of this remedy
by filing a complaint with the RTC of Quezon City on the 8th day following the takeover by the receiver of
the bank's assets on 3 June 1985.
This "close now and 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 Buhi, Inc. v. Court of Appeals, 19 We stated that —
. . . 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.
We stressed in Central Bank of the Philippines v. Court of Appeals 20 that —
. . . 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 (9 CJS 32).
Banks are affected with public interest because they receive funds from the general public in the form of
deposits. Due to the nature of their transactions and functions, a fiduciary relationship is created between the
banking institutions and their depositors. Therefore, banks are under the obligation to treat with meticulous
care and utmost fidelity the accounts of those who have reposed their trust and confidence in them (Simex
International [Manila], Inc., v. Court of Appeals, 183 SCRA 360 [1990]).
It is then the Government's responsibility to see to it that the financial interests of those who deal with the
banks and banking institutions, as depositors or otherwise, are protected. In this country, that task is
delegated to the Central Bank which, pursuant to its Charter (R.A. 265, as amended), is authorized to
administer the monetary, banking and credit system of the Philippines. Under both the 1973 and 1987
Constitutions, the Central Bank is tasked with providing policy direction in the areas of money, banking and
credit; corollarily, it shall have supervision over the operations of banks (Sec. 14, Art. XV, 1973
Constitution, and Sec. 20, Art. XII, 1987 Constitution). Under its charter, the CB 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. This power has been expressly recognized by this Court.
In Philippine Veterans Bank Employees Union-NUBE v. Philippine Veterans Banks (189 SCRA 14 [1990],
this Court held that:
. . . [u]nless 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. The government cannot simply cross its arms while the assets of a bank are
being depleted through mismanagement or irregularities. It is the duty of the Central Bank in such an event to
step in and salvage the remaining resources of the bank so that they may not continue to be dissipated or
plundered by those entrusted with their management.
Section 29 of R.A. 265 should be viewed in this light; otherwise, We would be subscribing to a situation
where the procedural rights invoked by private respondent would take precedence over the substantive
interests of depositors, creditors and stockholders over the assets of the bank.
Admittedly, the mere filing of a case for receivership by the Central Bank can trigger a bank run and drain its
assets in days or even hours leading to insolvency even if the bank be actually solvent. The procedure
prescribed in Sec. 29 is truly designed to protect the interest of all concerned, i.e., the depositors, creditors
and stockholders, the bank itself, and the general public, and the summary closure pales in comparison to the
protection afforded public interest. At any rate, the bank is given full opportunity to
prove arbitrariness  and bad faith  in placing the bank under receivership, in which event, the resolution may
be properly nullified and the receivership lifted as the trial court may determine.
The heavy reliance of respondents on the Banco Filipino case is misplaced in view of factual circumstances
therein which are not attendant in the present case. We ruled in Banco Filipino that the closure of the bank
was arbitrary and attendant with grave abuse of discretion, not because of the absence of prior notice and
hearing, but that the Monetary Board had no sufficient basis to arrive at a sound conclusion of insolvency to
justify the closure. In other words, the arbitrariness, bad faith and abuse of discretion were determined only
after the bank was placed under conservatorship and evidence thereon was received by the trial court. As this
Court found in that case, the Valenzuela, Aurellano and Tiaoqui Reports contained unfounded assumptions
and deductions which did not reflect the true financial condition of the bank. For instance, the subtraction of
an uncertain amount as valuation reserve from the assets of the bank would merely result in its net worth or
the unimpaired capital and surplus; it did not reflect the total financial condition of Banco Filipino.
Furthermore, the same reports showed that the total assets of Banco Filipino far exceeded its total liabilities.
Consequently, on the basis thereof, the Monetary Board had no valid reason to liquidate the bank; perhaps it
could have merely ordered its reorganization or rehabilitation, if need be. Clearly, there was in that case a
manifest arbitrariness, abuse of discretion and bad faith in the closure of Banco Filipino  by the Monetary
Board. But, this is not the case before Us. For here, what is being raised as arbitrary by private respondent is
the denial of prior notice and hearing by the Monetary Board, a matter long settled in this jurisdiction, and
not the arbitrariness which the conclusions of the Supervision and Examination Sector (SES), Department II,
of the Central Bank were reached.
Once again We refer to Rural Bank of Buhi, Inc. v. Court of Appeals, 21 and reiterate Our pronouncement
therein that —
. . . the law is explicit as to the conditions prerequisite to the action of the Monetary Board to forbid the
institution to do business in the Philippines and to appoint a receiver to immediately take charge of the bank's
assets and liabilities. They are: (a) an examination made by the examining department of the Central Bank;
(b) report by said department to the Monetary Board; and (c) prima facieshowing that its continuance in
business would involve probable loss to its depositors or creditors.
In sum, appeal to procedural due process cannot just outweigh the evil sought to be prevented; hence, We
rule that Sec. 29 of R.A. 265 is a sound legislation promulgated in accordance with the Constitution in the
exercise of police power of the state. Consequently, the absence of notice and hearing is not a valid ground to
annul a Monetary Board resolution placing a bank under receivership. The absence of prior notice and
hearing cannot be deemed acts of arbitrariness and bad faith. Thus, an MB resolution placing a bank under
receivership, or conservatorship for that matter, may only be annulled after a determination has been made
by the trial court that its issuance was tainted with arbitrariness and bad faith. Until such determination is
made, the status quo shall be maintained, i.e., the bank shall continue to be under receivership.
As regards the second ground, to rule that only the receiver may bring suit in behalf of the bank is, to echo
the respondent appellate court, "asking for the impossible, for it cannot be expected that the master, the CB,
will allow the receiver it has appointed to question that very appointment." Consequently, only stockholders
of a bank could file an action for annulment of a Monetary Board resolution placing the bank under
receivership and prohibiting it from continuing operations. 22 In Central Bank v. Court of Appeals, 23 We
explained the purpose of the law —
. . . in requiring that only the stockholders of record representing the majority of the capital stock may bring
the action to set aside a resolution to place a bank under conservatorship is to ensure that it be not frustrated
or defeated by the incumbent Board of Directors or officers who may immediately resort to court action to
prevent its implementation or enforcement. It is presumed that such a resolution is directed principally
against acts of said Directors and officers which place the bank in a state of continuing inability to maintain a
condition of liquidity adequate to protect the interest of depositors and creditors. Indirectly, it is likewise
intended to protect and safeguard the rights and interests of the stockholders. Common sense and public
7
policy dictate then that the authority to decide on whether to contest the resolution should be lodged with the
stockholders owning a majority of the shares for they are expected to be more objective in determining
whether the resolution is plainly arbitrary and issued in bad faith.
It is observed that the complaint in this case was filed on 11 June 1985 or two (2) years prior to 25 July 1987
when E.O. 289 was issued, to be effective sixty (60) days after its approval (Sec. 5). The implication is that
before E.O
. 289, any party in interest could institute court proceedings to question a Monetary Board resolution placing
a bank under receivership. Consequently, since the instant complaint was filed by parties representing
themselves to be officers of respondent Bank (Officer-in-Charge and Vice President), the case before the trial
court should now take its natural course. However, after the effectivity of E.O. 289, the procedure stated
therein should be followed and observed.
PREMISES considered, the Decision of the Court of Appeals in CA-G.R. SP No. 07867 is AFFIRMED,
except insofar as it upholds the Order of the trial court of 11 November 1985 directing petitioner RAMON V.
TIAOQUI to restore the management of TRIUMPH SAVINGS BANK to its elected Board of Directors and
Officers, which is hereby SET ASIDE.
Let this case be remanded to the Regional Trial Court of Quezon City for further proceedings to determine
whether the issuance of Resolution No. 596 of the Monetary Board was tainted with arbitrariness and bad
faith and to decide the case accordingly.
SO ORDERED.
Narvasa, C.J., Cruz, Padilla, Bidin, Griño-Aquino, Regalado, Davide, Jr., Romero, Nocon, Campos, Jr. and
Quiason, JJ., concur.
Feliciano and Melo, JJ., took no part.
 
# Footnotes
1 Penned by Judge Jose C. de Guzman, RTC, Br. 93, Quezon City.
2 Rollo, pp. 29-34.
3 Id., p. 5; see also Minutes of Meeting of the Monetary Board of 31 May 1985, Annex "D", Petition, CA-
G.R. SP No. 07867.
4 Id., p. 93.
5 Id., p. 30.
6 Triumph Sayings Bank vs. Hon. Jose de Guzman, G.R. No. 71465.
7 Rollo, pp. 30-31.
8 Brief for Petitioners, p. 4; Rollo, p. 70.
9 Central Bank of the Philippines vs. Hon. Jose de Guzman, CA G.R. SP No. 07867, penned by Melo, J.,
concurred in by De Pano, Jr., and Chua, JJ.; Rollo pp. 29-34.
10 Rollo, pp. 31-32, 34.
11 Id., p. 7-8.
12 Banco Filipino Savings and Mortgage Bank vs. Monetary Board, Central Bank, G.R. No. 70054, and 22 As amended by E.O. 289, then par. 4, now par. 5, reads: ". . . [T]he actions of the Monetary Board under
companion cases, G.R. Nos. 68878, 77255-58, 78766, 78767, 78894, 81303, 81304 and 90473, 11 December this Section . . . shall be final and executory, and can be set aside by a court only if there is convincing proof,
1991; 204 SCRA 767. after hearing, that the action is plainly arbitrary and made in bad faith; Provided, That the same is raised in
an appropriate pleading filed by the stockholders of record representing the majority of the capital stock of
13 Rollo, pp. 54-56. the institution before the proper court within a period of ten (10) days from the date the receiver takes charge
of the assets and liabilities of the bank . . . .
14 Rollo, p. 70.
23 Op. cit.
15 Sec. 29. Proceedings upon insolvency. — Whenever, upon examination by the head of the appropriate
supervising or examining department or his examiners or agents into the condition of any bank or non-bank
financial intermediary performing quasi-banking functions, it shall be disclosed that the condition of the
same is one of insolvency, or that its continuance in business would involve probable loss to its depositors or
creditors, it shall be the duty of the department head concerned forthwith, in writing, to inform the Monetary
Board of the facts. The Board may, upon finding the statements of the department head to be true, forbid the
institution to do business in the Philippines and shall designate an official of the Central Bank or a person of
recognized competence in banking or finance, as receiver to immediately take charge of its assets and
liabilities, as expeditiously as possible collect and gather all the assets and administer the same for the benefit
of its creditors, and represent the bank or through counsel as he may retain in all actions or proceedings for or
against the institution, exercising all powers necessary for this purposes including, but not limited to,
bringing suits and foreclosing mortgages in the name of the bank or non-bank financial intermediary
performing quasi-banking functions.

16 The provisions of any law to the contrary notwithstanding, the actions of the Monetary Board under this
Section, Section 28-A, and the second paragraph of Section 34 of this Act shall be final and executory, and
can be set aside by the court only if there is convincing proof that the action is plainly arbitrary and made in
bad faith; Provided, That the same is raised in appropriate pleading filed before the proper court within a
period of ten (10) days from the date the conservator or receiver takes charge of the assets and liabilities of
the bank or non-bank financial intermediary performing quasi-judicial functions or, in case of liquidation,
within ten (10) days from receipt of notice by the said bank or
on-bank financial intermediary of the order of its liquidation. No restraining order or injunction shall be
issued by the court enjoining the Central Bank from implementing its actions under this Section and the
second paragraph of Section 34 of this Act, unless there is convincing proof that the action of the Monetary
Board is plainly arbitrary and made in bad faith and the petitioner or plaintiff files with the clerk or judge of
the court in which the action is pending a bond executed in favor of the Central Bank, in an amount to be
fixed by the court. The restraining order or injunction shall be refused or, if granted shall be dissolved upon
filing by the Central Bank of a bond, which shall be in the form of cash or Central Bank cashier's check, in
an amount twice the amount of the bond of the petitioner or plaintiff conditioned that it will pay the damages
which the petitioner or plaintiff may suffer by the refusal or the dissolution of the injunction. The provisions
of Rule 58 of the New Rules of Court insofar as they are applicable and not inconsistent with the provisions
of this Section shall govern, the issuance and dissolution of the restraining order or injunction contemplated
in this Section.

17 G.R. No. L-21146, 29 September 1965, 15 SCRA 67, 72 and 74, citing Sec. 29, R.A. 265; 12 Am Jur.
305, Sec. 611; Bourjois vs. Chapman, 301 U.S. 183, 81 Law Ed. 1027, 1032; American Surety Co. vs.
Baldwin, 77 Law Ed. 231, 86 ALR 307; Wilson vs. Standefer, 46 Law Ed. 612.

18 Banco Filipino Savings and Mortgage Bank v. Monetary Board, Central Bank, and companion
cases, supra, p. 798, citing Rural Bank of Bato vs. IAC, G.R. No. 65642, 15 October 1984, Rural Bank vs.
Court of Appeals, G.R. 61689, 20 June 1988, 162 SCRA 288.

19 G.R. No. 61689, 20 June 1988, 162 SCRA 288, 302.

20 G.R. Nos. 88353 and 92943, 8 May 1992, 208 SCRA 652, 684, 685.

21 G.R. No. 61689, 20 June 1988, 162 SCRA 288, 302.

8
G.R. No. 115849             January 24, 1996
FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and
MERCURIO RIVERA, petitioners,  5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of P400,000.00 for and by
vs.
COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO DEMETRIA, and
JOSE JANOLO,respondents.
DECISION
PANGANIBAN, J.:
In the absence of a formal deed of sale, may commitments given by bank officers in an exchange of letters
and/or in a meeting with the buyers constitute a perfected and enforceable contract of sale over 101 hectares
of land in Sta. Rosa, Laguna? Does the doctrine of "apparent authority" apply in this case? If so, may the
Central Bank-appointed conservator of Producers Bank (now First Philippine International Bank) repudiate
such "apparent authority" after said contract has been deemed perfected? During the pendency of a suit for
specific performance, does the filing of a "derivative suit" by the majority shareholders and directors of the
distressed bank to prevent the enforcement or implementation of the sale violate the ban against forum-
shopping?
Simply stated, these are the major questions brought before this Court in the instant Petition for review
oncertiorari under Rule 45 of the Rules of Court, to set aside the Decision promulgated January 14, 1994 of
the respondent Court of Appeals1 in CA-G.R CV No. 35756 and the Resolution promulgated June 14, 1994
denying the motion for reconsideration. The dispositive portion of the said Decision reads:
WHEREFORE, the decision of the lower court is MODIFIED by the elimination of the damages awarded
under paragraphs 3, 4 and 6 of its dispositive portion and the reduction of the award in paragraph 5 thereof to
P75,000.00, to be assessed against defendant bank. In all other aspects, said decision is hereby AFFIRMED.
All references to the original plaintiffs in the decision and its dispositive portion are deemed, herein and
hereafter, to legally refer to the plaintiff-appellee Carlos C. Ejercito.
Costs against appellant bank.
2
The dispositive portion of the trial court's  decision dated July 10, 1991, on the other hand, is as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the
defendants as follows:
1. Declaring the existence of a perfected contract to buy and sell over the six (6) parcels of land situated at
Don Jose, Sta. Rosa, Laguna with an area of 101 hectares, more or less, covered by and embraced in Transfer
Certificates of Title Nos. T-106932 to T-106937, inclusive, of the Land Records of Laguna, between the
plaintiffs as buyers and the defendant Producers Bank for an agreed price of Five and One Half Million
(P5,500,000.00) Pesos;
2. Ordering defendant Producers Bank of the Philippines, upon finality of this decision and receipt from the
plaintiffs the amount of P5.5 Million, to execute in favor of said plaintiffs a deed of absolute sale over the
aforementioned six (6) parcels of land, and to immediately deliver to the plaintiffs the owner's copies of
T.C.T. Nos. T-106932 to T- 106937, inclusive, for purposes of registration of the same deed and transfer of
the six (6) titles in the names of the plaintiffs;
3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. Janolo and Demetrio Demetria the
sums of P200,000.00 each in moral damages;
9
4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of P100,000.00 as exemplary
damages ;
way of attorney's fees;
6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual and moderate damages in the
amount of P20,000.00;
With costs against the defendants.
After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to sur-rejoinder, the petition
was given due course in a Resolution dated January 18, 1995. Thence, the parties filed their respective
memoranda and reply memoranda. The First Division transferred this case to the Third Division per
resolution dated October 23, 1995. After carefully deliberating on the aforesaid submissions, the Court
assigned the case to the undersigned  ponente for the writing of this Decision.
The Parties
Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines; petitioner Bank,
for brevity) is a banking institution organized and existing under the laws of the Republic of the Philippines.
Petitioner Mercurio Rivera (petitioner Rivera, for brevity) is of legal age and was, at all times material to this
case, Head-Manager of the Property Management Department of the petitioner Bank.
Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the assignee of original
plaintiffs-appellees Demetrio Demetria and Jose Janolo.
Respondent Court of Appeals is the court which issued the Decision and Resolution sought to be set aside
through this petition.
The Facts
The facts of this case are summarized in the respondent Court's Decision3 as follows:
(1) In the course of its banking operations, the defendant Producer Bank of the Philippines acquired six
parcels of land with a total area of 101 hectares located at Don Jose, Sta. Rose, Laguna, and covered by
Transfer Certificates of Title Nos. T-106932 to T-106937. The property used to be owned by BYME
Investment and Development Corporation which had them mortgaged with the bank as collateral for a loan.
The original plaintiffs, Demetrio Demetria and Jose O. Janolo, wanted to purchase the property and thus
initiated negotiations for that purpose.
(2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME investment's legal counsel,
Jose Fajardo, met with defendant Mercurio Rivera, Manager of the Property Management Department of the
defendant bank. The meeting was held pursuant to plaintiffs' plan to buy the property (TSN of Jan. 16, 1990,
pp. 7-10). After the meeting, plaintiff Janolo, following the advice of defendant Rivera, made a formal
purchase offer to the bank through a letter dated August 30, 1987 (Exh. "B"), as follows:
August 30, 1987
The Producers Bank of the Philippines
Makati, Metro Manila
Attn. Mr. Mercurio Q. Rivera
Manager, Property Management Dept.
Gentleman:
I have the honor to submit my formal offer to purchase your properties covered by titles listed hereunder In reply to your letter regarding my proposal to purchase your 101-hectare lot located at Sta. Rosa, Laguna, I
located at Sta. Rosa, Laguna, with a total area of 101 hectares, more or less. would like to amend my previous offer and I now propose to buy the said lot at P4.250 million in CASH..

TCT NO. AREA Hoping that this proposal meets your satisfaction.

(5) There was no reply to Janolo's foregoing letter of September 17, 1987. What took place was a meeting on
T-106932 113,580 sq. m. September 28, 1987 between the plaintiffs and Luis Co, the Senior Vice-President of defendant bank. Rivera
as well as Fajardo, the BYME lawyer, attended the meeting. Two days later, or on September 30, 1987,
T-106933 70,899 sq. m. plaintiff Janolo sent to the bank, through Rivera, the following letter (Exh. "E"):

T-106934 52,246 sq. m. The Producers Bank of the Philippines

Paseo de Roxas, Makati
T-106935 96,768 sq. m. Metro Manila

Attention: Mr. Mercurio Rivera

T-106936 187,114 sq. m.
Re: 101 Hectares of Land
T-106937 481,481 sq. m. in Sta. Rosa, Laguna

My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3,500,000.00) PESOS, in Gentlemen:
cash.
Pursuant to our discussion last 28 September 1987, we are pleased to inform you that we are accepting your
Kindly contact me at Telephone Number 921-1344. offer for us to purchase the property at Sta. Rosa, Laguna, formerly owned by Byme Investment, for a total
price of PESOS: FIVE MILLION FIVE HUNDRED THOUSAND (P5,500,000.00).
(3) On September 1, 1987, defendant Rivera made on behalf of the bank a formal reply by letter which is
hereunder quoted (Exh. "C"): Thank you.

(6) On October 12, 1987, the conservator of the bank (which has been placed under conservatorship by the
September 1, 1987
Central Bank since 1984) was replaced by an Acting Conservator in the person of defendant Leonida T.
Encarnacion. On November 4, 1987, defendant Rivera wrote plaintiff Demetria the following letter (Exh.
JP M-P GUTIERREZ ENTERPRISES
"F"):
142 Charisma St., Doña Andres II
Rosario, Pasig, Metro Manila Attention: Atty. Demetrio Demetria
Attention: JOSE O. JANOLO Dear Sir:
Dear Sir: Your proposal to buy the properties the bank foreclosed from Byme investment Corp. located at Sta. Rosa,
Laguna is under study yet as of this time by the newly created committee for submission to the newly
Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta. Rosa, Laguna (formerly
designated Acting Conservator of the bank.
owned by Byme Industrial Corp.). Please be informed however that the bank's counter-offer is at P5.5
million for more than 101 hectares on lot basis. For your information.
We shall be very glad to hear your position on the on the matter. (7) What thereafter transpired was a series of demands by the plaintiffs for compliance by the bank with what
plaintiff considered as a perfected contract of sale, which demands were in one form or another refused by
Best regards.
the bank. As detailed by the trial court in its decision, on November 17, 1987, plaintiffs through a letter to
(4) On September 17, 1987, plaintiff Janolo, responding to Rivera's aforequoted reply, wrote (Exh. "D"): defendant Rivera (Exhibit "G") tendered payment of the amount of P5.5 million "pursuant to (our) perfected
sale agreement." Defendants refused to receive both the payment and the letter. Instead, the parcels of land
September 17, 1987 involved in the transaction were advertised by the bank for sale to any interested buyer (Exh, "H" and "H-1").
Plaintiffs demanded the execution by the bank of the documents on what was considered as a "perfected
Producers Bank agreement." Thus:
Paseo de Roxas
Mr. Mercurio Rivera
Makati, Metro Manila
Manager, Producers Bank
Attention: Mr. Mercurio Rivera Paseo de Roxas, Makati
Metro Manila
Gentlemen:

10
Dear Mr. Rivera:
This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase your 101-hectare lot located
in Sta. Rosa, Laguna, and which are covered by TCT No. T-106932 to 106937.
From the documents at hand, it appears that your counter-offer dated September 1, 1987 of this same lot in
the amount of P5.5 million was accepted by our client thru a letter dated September 30, 1987 and was
received by you on October 5, 1987.
In view of the above circumstances, we believe that an agreement has been perfected. We were also informed
that despite repeated follow-up to consummate the purchase, you now refuse to honor your commitment.
Instead, you have advertised for sale the same lot to others.
In behalf of our client, therefore, we are making this formal demand upon you to consummate and execute
the necessary actions/documentation within three (3) days from your receipt hereof. We are ready to remit
the agreed amount of P5.5 million at your advice. Otherwise, we shall be constrained to file the necessary
court action to protect the interest of our client.
We trust that you will be guided accordingly.
(8) Defendant bank, through defendant Rivera, acknowledged receipt of the foregoing letter and stated, in its
communication of December 2, 1987 (Exh. "I"), that said letter has been "referred . . . to the office of our
Conservator for proper disposition" However, no response came from the Acting Conservator. On December
14, 1987, the plaintiffs made a second tender of payment (Exh. "L" and "L-1"), this time through the Acting
Conservator, defendant Encarnacion. Plaintiffs' letter reads:
PRODUCERS BANK OF
THE PHILIPPINES
Paseo de Roxas,
Makati, Metro Manila
Attn.: Atty. NIDA ENCARNACION
Central Bank Conservator
We are sending you herewith, in - behalf of our client, Mr. JOSE O. JANOLO, MBTC Check No. 258387 in
the amount of P5.5 million as our agreed purchase price of the 101-hectare lot covered by TCT Nos. 106932,
106933, 106934, 106935, 106936 and 106937 and registered under Producers Bank.
This is in connection with the perfected agreement consequent from your offer of P5.5 Million as the
purchase price of the said lots. Please inform us of the date of documentation of the sale immediately.
Kindly acknowledge receipt of our payment.
(9) The foregoing letter drew no response for more than four months. Then, on May 3, 1988, plaintiff,
through counsel, made a final demand for compliance by the bank with its obligations under the considered
perfected contract of sale (Exhibit "N"). As recounted by the trial court (Original Record, p. 656), in a reply
letter dated May 12, 1988 (Annex "4" of defendant's answer to amended complaint), the defendants through
Acting Conservator Encarnacion repudiated the authority of defendant Rivera and claimed that his dealings
with the plaintiffs, particularly his counter-offer of P5.5 Million are unauthorized or illegal. On that basis, the
defendants justified the refusal of the tenders of payment and the non-compliance with the obligations under
what the plaintiffs considered to be a perfected contract of sale.
(10) On May 16, 1988, plaintiffs filed a suit for specific performance with damages against the bank, its
Manager Rivers and Acting Conservator Encarnacion. The basis of the suit was that the transaction had with
the bank resulted in a perfected contract of sale, The defendants took the position that there was no such
11
perfected sale because the defendant Rivera is not authorized to sell the property, and that there was no
meeting of the minds as to the price.
On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip Salazar Hernandez and
Gatmaitan, filed a motion to intervene in the trial court, alleging that as owner of 80% of the Bank's
outstanding shares of stock, he had a substantial interest in resisting the complaint. On July 8, 1991, the trial
court issued an order denying the motion to intervene on the ground that it was filed after trial had already
been concluded. It also denied a motion for reconsideration filed thereafter. From the trial court's decision,
the Bank, petitioner Rivera and conservator Encarnacion appealed to the Court of Appeals which
subsequently affirmed with modification the said judgment. Henry Co did not appeal the denial of his motion
for intervention.
In the course of the proceedings in the respondent Court, Carlos Ejercito was substituted in place of Demetria
and Janolo, in view of the assignment of the latters' rights in the matter in litigation to said private
respondent.
On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, Henry Co and several
other stockholders of the Bank, through counsel Angara Abello Concepcion Regala and Cruz, filed an action
(hereafter, the "Second Case") — purportedly a "derivative suit" — with the Regional Trial Court of Makati,
Branch 134, docketed as Civil Case No. 92-1606, against Encarnacion, Demetria and Janolo "to declare any
perfected sale of the property as unenforceable and to stop Ejercito from enforcing or implementing the
sale"4 In his answer, Janolo argued that the Second Case was barred by litis pendentia by virtue of the case
then pending in the Court of Appeals. During the pre-trial conference in the Second Case, plaintiffs filed a
Motion for Leave of Court to Dismiss the Case Without Prejudice. "Private respondent opposed this motion
on the ground, among others, that plaintiff's act of forum shopping justifies the dismissal of both cases, with
prejudice."5 Private respondent, in his memorandum, averred that this motion is still pending in the Makati
RTC.
In their Petition6 and Memorandum7, petitioners summarized their position as follows:
I.
The Court of Appeals erred in declaring that a contract of sale was perfected between Ejercito (in substitution
of Demetria and Janolo) and the bank.
II.
The Court of Appeals erred in declaring the existence of an enforceable contract of sale between the parties.
III.
The Court of Appeals erred in declaring that the conservator does not have the power to overrule or revoke
acts of previous management.
IV.
The findings and conclusions of the Court of Appeals do not conform to the evidence on record.
On the other hand, petitioners prayed for dismissal of the instant suit on the ground8 that:
I.
Petitioners have engaged in forum shopping.
II.
The factual findings and conclusions of the Court of Appeals are supported by the evidence on record and
may no longer be questioned in this case.
III.
The Court of Appeals correctly held that there was a perfected contract between Demetria and Janolo
(substituted by; respondent Ejercito) and the bank.
IV.
The Court of Appeals has correctly held that the conservator, apart from being estopped from repudiating the
agency and the contract, has no authority to revoke the contract of sale.
The Issues
From the foregoing positions of the parties, the issues in this case may be summed up as follows:
1) Was there forum-shopping on the part of petitioner Bank?
2) Was there a perfected contract of sale between the parties?
3) Assuming there was, was the said contract enforceable under the statute of frauds?
4) Did the bank conservator have the unilateral power to repudiate the authority of the bank officers and/or to
revoke the said contract?
5) Did the respondent Court commit any reversible error in its findings of facts?
The First Issue: Was There Forum-Shopping?
In order to prevent the vexations of multiple petitions and actions, the Supreme Court promulgated Revised
Circular No. 28-91 requiring that a party "must certify under oath . . . [that] (a) he has not (t)heretofore
commenced any other action or proceeding involving the same issues in the Supreme Court, the Court of
Appeals, or any other tribunal or agency; (b) to the best of his knowledge, no such action or proceeding is
pending" in said courts or agencies. A violation of the said circular entails sanctions that include the
summary dismissal of the multiple petitions or complaints. To be sure, petitioners have included a
VERIFICATION/CERTIFICATION in their Petition stating "for the record(,) the pendency of Civil Case
No. 92-1606 before the Regional Trial Court of Makati, Branch 134, involving a derivative suit filed by
stockholders of petitioner Bank against the conservator and other defendants but which is the subject of a
pending Motion to Dismiss Without Prejudice.9
Private respondent Ejercito vigorously argues that in spite of this verification, petitioners are guilty of actual
forum shopping because the instant petition pending before this Court involves "identical parties or interests
represented, rights asserted and reliefs sought (as that) currently pending before the Regional Trial Court,
Makati Branch 134 in the Second Case. In fact, the issues in the two cases are so interwined that a judgement
or resolution in either case will constitute res judicata in the other." 10
On the other hand, petitioners explain 11 that there is no forum-shopping because:
1) In the earlier or "First Case" from which this proceeding arose, the Bank was impleaded as a defendant,
whereas in the "Second Case" (assuming the Bank is the real party in interest in a derivative suit), it
wasplaintiff;
2) "The derivative suit is not properly a suit for and in behalf of the corporation under the circumstances";
12
3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank president and attached to
the Petition identifies the action as a "derivative suit," it "does not mean that it is one" and "(t)hat is a legal
question for the courts to decide";
4) Petitioners did not hide the Second Case at they mentioned it in the said
VERIFICATION/CERTIFICATION.
We rule for private respondent.
To begin with, forum-shopping originated as a concept in private international law.12, where non-resident
litigants are given the option to choose the forum or place wherein to bring their suit for various reasons or
excuses, including to secure procedural advantages, to annoy and harass the defendant, to avoid overcrowded
dockets, or to select a more friendly venue. To combat these less than honorable excuses, the principle
of forum non conveniens was developed whereby a court, in conflicts of law cases, may refuse impositions
on its jurisdiction where it is not the most "convenient" or available forum and the parties are not precluded
from seeking remedies elsewhere.
In this light, Black's Law Dictionary 13 says that forum shopping "occurs when a party attempts to have his
action tried in a particular court or jurisdiction where he feels he will receive the most favorable judgment or
verdict." Hence, according to Words and Phrases14, "a litigant is open to the charge of "forum shopping"
whenever he chooses a forum with slight connection to factual circumstances surrounding his suit, and
litigants should be encouraged to attempt to settle their differences without imposing undue expenses and
vexatious situations on the courts".
In the Philippines, forum shopping has acquired a connotation encompassing not only a choice of venues, as
it was originally understood in conflicts of laws, but also to a choice of remedies. As to the first (choice of
venues), the Rules of Court, for example, allow a plaintiff to commence personal actions "where the
defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs
resides, at the election of the plaintiff" (Rule 4, Sec, 2 [b]). As to remedies, aggrieved parties, for example,
are given a choice of pursuing civil liabilities independently of the criminal, arising from the same set of
facts. A passenger of a public utility vehicle involved in a vehicular accident may sue on culpa contractual,
culpa aquiliana or culpa criminal — each remedy being available independently of the others — although he
cannot recover more than once.
In either of these situations (choice of venue or choice of remedy), the litigant actually shops for a forum of
his action, This was the original concept of the term forum shopping.
Eventually, however, instead of actually making a choice of the forum of their actions, litigants, through the
encouragement of their lawyers, file their actions in all available courts, or invoke all relevant remedies
simultaneously. This practice had not only resulted to (sic) conflicting adjudications among different courts
and consequent confusion enimical (sic) to an orderly administration of justice. It had created extreme
inconvenience to some of the parties to the action.
Thus, "forum shopping" had acquired a different concept — which is unethical professional legal practice.
And this necessitated or had given rise to the formulation of rules and canons discouraging or altogether
prohibiting the practice. 15
What therefore originally started both in conflicts of laws and in our domestic law as a legitimate device for
solving problems has been abused and mis-used to assure scheming litigants of dubious reliefs.
To avoid or minimize this unethical practice of subverting justice, the Supreme Court, as already mentioned,
promulgated Circular 28-91. And even before that, the Court had prescribed it in the Interim Rules and
Guidelines issued on January 11, 1983 and had struck down in several cases 16 the inveterate use of this
insidious malpractice. Forum shopping as "the filing of repetitious suits in different courts" has been
condemned by Justice Andres R. Narvasa (now Chief Justice) in Minister of Natural Resources, et al., vs.
Heirs of Orval Hughes, et al.,"as a reprehensible manipulation of court processes and
proceedings . . ." 17 when does forum shopping take place?
There is forum-shopping whenever, as a result of an adverse opinion in one forum, a party seeks a favorable
opinion (other than by appeal or certiorari) in another. The principle applies not only with respect to suits
filed in the courts but also in connection with litigations commenced in the courts while an administrative
proceeding is pending, as in this case, in order to defeat administrative processes and in anticipation of an
unfavorable administrative ruling and a favorable court ruling. This is specially so, as in this case, where the
court in which the second suit was brought, has no jurisdiction.18
The test for determining whether a party violated the rule against forum shopping has been laid dawn in the
1986 case of Buan vs. Lopez 19, also by Chief Justice Narvasa, and that is, forum shopping exists where the
elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in
the other, as follows:
There thus exists between the action before this Court and RTC Case No. 86-36563 identity of parties, or at
least such parties as represent the same interests in both actions, as well as identity of rights asserted and
relief prayed for, the relief being founded on the same facts, and the identity on the two preceding particulars
is such that any judgment rendered in the other action, will, regardless of which party is successful, amount
to res adjudicata in the action under consideration: all the requisites, in fine, of auter action pendant.
xxx       xxx       xxx
As already observed, there is between the action at bar and RTC Case No. 86-36563, an identity as regards
parties, or interests represented, rights asserted and relief sought, as well as basis thereof, to a degree
sufficient to give rise to the ground for dismissal known as auter action pendant or lis pendens. That same
identity puts into operation the sanction of twin dismissals just mentioned. The application of this sanction
will prevent any further delay in the settlement of the controversy which might ensue from attempts to seek
reconsideration of or to appeal from the Order of the Regional Trial Court in Civil Case No. 86-36563
promulgated on July 15, 1986, which dismissed the petition upon grounds which appear persuasive.
Consequently, where a litigant (or one representing the same interest or person) sues the same party against
whom another action or actions for the alleged violation of the same right and the enforcement of the same
relief is/are still pending, the defense of litis pendencia in one case is bar to the others; and, a final judgment
in one would constitute res judicata and thus would cause the dismissal of the rest. In either case, forum
shopping could be cited by the other party as a ground to ask for summary dismissal of the two 20 (or more)
complaints or petitions, and for imposition of the other sanctions, which are direct contempt of court,
criminal prosecution, and disciplinary action against the erring lawyer.
Applying the foregoing principles in the case before us and comparing it with the Second Case, it is obvious
that there exist identity of parties or interests represented, identity of rights or causes and identity of reliefs
sought.
Very simply stated, the original complaint in the court a quo which gave rise to the instant petition was filed
by the buyer (herein private respondent and his predecessors-in-interest) against the seller (herein petitioners)
to enforce the alleged perfected sale of real estate. On the other hand, the complaint 21 in the Second Case
seeks to declare such purported sale involving the same real property "as unenforceable as against the Bank",
which is the petitioner herein. In other words, in the Second Case, the majority stockholders, in
representation of the Bank, are seeking to accomplish what the Bank itself failed to do in the original case in
the trial court. In brief, the objective or the relief being sought, though worded differently, is the same,
namely, to enable the petitioner Bank to escape from the obligation to sell the property to respondent. In
Danville Maritime, Inc. vs. Commission on Audit. 22, this Court ruled that the filing by a party of two
apparently different actions, but with the same objective,constituted forum shopping:
13
In the attempt to make the two actions appear to be different, petitioner impleaded different respondents
therein — PNOC in the case before the lower court and the COA in the case before this Court and sought
what seems to be different reliefs. Petitioner asks this Court to set aside the questioned letter-directive of the
COA dated October 10, 1988 and to direct said body to approve the Memorandum of Agreement entered into
by and between the PNOC and petitioner, while in the complaint before the lower court petitioner seeks to
enjoin the PNOC from conducting a rebidding and from selling to other parties the vessel "T/T Andres
Bonifacio", and for an extension of time for it to comply with the paragraph 1 of the memorandum of
agreement and damages. One can see that although the relief prayed for in the two (2) actions are ostensibly
different, the ultimate objective in both actions is the same, that is, approval of the sale of vessel in favor of
petitioner and to overturn the letter-directive of the COA of October 10, 1988 disapproving the
sale. (emphasis supplied).
In an earlier case 23 but with the same logic and vigor, we held:
In other words, the filing by the petitioners of the instant special civil action for certiorari and prohibition in
this Court despite the pendency of their action in the Makati Regional Trial Court, is a species of forum-
shopping. Both actions unquestionably involve the same transactions, the same essential facts and
circumstances. The petitioners' claim of absence of identity simply because the PCGG had not been
impleaded in the RTC suit, and the suit did not involve certain acts which transpired after its commencement,
is specious. In the RTC action, as in the action before this Court, the validity of the contract to purchase and
sell of September 1, 1986, i.e., whether or not it had been efficaciously rescinded, and the propriety of
implementing the same (by paying the pledgee banks the amount of their loans, obtaining the release of the
pledged shares, etc.) were the basic issues. So, too, the relief was the same: the prevention of such
implementation and/or the restoration of the status quo ante. When the acts sought to be restrained took place
anyway despite the issuance by the Trial Court of a temporary restraining order, the RTC suit did not
become  functus oficio. It remained an effective vehicle for obtention of relief; and petitioners' remedy in the
premises was plain and patent: the filing of an amended and supplemental pleading in the RTC suit, so as to
include the PCGG as defendant and seek nullification of the acts sought to be enjoined but nonetheless done.
The remedy was certainly not the institution of another action in another forum based on essentially the same
facts, The adoption of this latter recourse renders the petitioners amenable to disciplinary action and both
their actions, in this Court as well as in the Court a quo, dismissible.
In the instant case before us, there is also identity of parties, or at least, of interests represented. Although the
plaintiffs in the Second Case (Henry L. Co. et al.) are not name parties in the First Case, they represent the
same interest and entity, namely, petitioner Bank, because:
Firstly, they are not suing in their personal capacities, for they have no direct personal interest in the matter
in controversy. They are not principally or even subsidiarily liable; much less are they direct parties in the
assailed contract of sale; and
Secondly, the allegations of the complaint in the Second Case show that the stockholders are bringing a
"derivative suit". In the caption itself, petitioners claim to have brought suit "for and in behalf of the
Producers Bank of the Philippines" 24. Indeed, this is the very essence of a derivative suit:
An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he
holdsstock in order to protect or vindicate corporate rights, whenever the officials of the corporation refuse
to sue, or are the ones to be sued or hold the control of the corporation. In such actions, the suing stockholder
is regarded as a nominal party, with the corporation as the real party in interest. (Gamboa v. Victoriano, 90
SCRA 40, 47 [1979]; emphasis supplied).
In the face of the damaging admissions taken from the complaint in the Second Case, petitioners, quite
strangely, sought to deny that the Second Case was a derivative suit, reasoning that it was brought, not by the
minority shareholders, but by Henry Co et al., who not only own, hold or control over 80% of the
outstanding capital stock, but also constitute the majority in the Board of Directors of petitioner Bank. That
being so, then they really represent the Bank. So, whether they sued "derivatively" or directly, there is
undeniably an identity of interests/entity represented.
Petitioner also tried to seek refuge in the corporate fiction that the personality Of the Bank is separate and
distinct from its shareholders. But the rulings of this Court are consistent: "When the fiction is urged as a
means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the
circumvention of statutes, the achievement or perfection of a monopoly or generally the perpetration of
knavery or crime, the veil with which the law covers and isolates the corporation from the members or
stockholders who compose it will be lifted to allow for its consideration merely as an aggregation of
individuals." 25
In addition to the many cases 26 where the corporate fiction has been disregarded, we now add the instant
case, and declare herewith that the corporate veil cannot be used to shield an otherwise blatant violation of
the prohibition against forum-shopping. Shareholders, whether suing as the majority in direct actions or as
the minority in a derivative suit, cannot be allowed to trifle with court processes, particularly where, as in this
case, the corporation itself has not been remiss in vigorously prosecuting or defending corporate causes and
in using and applying remedies available to it. To rule otherwise would be to encourage corporate litigants to
use their shareholders as fronts to circumvent the stringent rules against forum shopping.
Finally, petitioner Bank argued that there cannot be any forum shopping, even assuming arguendo  that there
is identity of parties, causes of action and reliefs sought, "because it (the Bank) was the defendant in the
(first) case while it was the plaintiff in the other (Second Case)",citing as authority Victronics Computers,
Inc., vs. Regional Trial Court, Branch 63, Makati, etc. et al., 27 where Court held:
The rule has not been extended to a defendant who, for reasons known only to him, commences a new action
against the plaintiff — instead of filing a responsive pleading in the other case — setting forth therein, as
causes of action, specific denials, special and affirmative defenses or even counterclaims, Thus, Velhagen's
and King's motion to dismiss Civil Case No. 91-2069 by no means negates the charge of forum-shopping as
such did not exist in the first place. (emphasis supplied)
Petitioner pointed out that since it was merely the defendant in the original case, it could not have chosen the
forum in said case.
Respondent, on the other hand, replied that there is a difference in factual setting between Victronics and the
present suit. In the former, as underscored in the above-quoted Court ruling, the defendants did not file
anyresponsive pleading in the first case. In other words, they did not make any denial or raise any defense or
counter-claim therein In the case before us however, petitioners filed a responsive pleading to the complaint
— as a result of which, the issues were joined.
Indeed, by praying for affirmative reliefs and interposing counter–claims in their responsive pleadings, the
petitioners became plaintiffs themselves in the original case, giving unto themselves the very remedies they
repeated in the Second Case.
Ultimately, what is truly important to consider in determining whether forum-shopping exists or not is the
vexation caused the courts and parties-litigant by a party who asks different courts and/or administrative
agencies to rule on the same or related causes and/or to grant the same or substantially the same reliefs, in the
process creating the possibility of conflicting decisions being rendered by the different  fora upon the same
issue. In this case, this is exactly the problem: a decision recognizing the perfection and directing the
enforcement of the contract of sale will directly conflict with a possible decision in the Second Case barring
the parties front enforcing or implementing the said sale. Indeed, a final decision in one would constitute res
judicata in the other 28.
The foregoing conclusion finding the existence of forum-shopping notwithstanding, the only sanction
possible now is the dismissal of both cases with prejudice, as the other sanctions cannot be imposed because
petitioners' present counsel entered their appearance only during the proceedings in this Court, and the
14
Petition's VERIFICATION/CERTIFICATION contained sufficient allegations as to the pendency of the
Second Case to show good faith in observing Circular 28-91. The Lawyers who filed the Second Case are not
before us; thus the rudiments of due process prevent us from motu propio imposing disciplinary measures
against them in this Decision. However, petitioners themselves (and particularly Henry Co, et al.) as litigants
are admonished to strictly follow the rules against forum-shopping and not to trifle with court proceedings
and processes They are warned that a repetition of the same will be dealt with more severely.
Having said that, let it be emphasized that this petition should be dismissed not merely because of forum-
shopping but also because of the substantive issues raised, as will be discussed shortly.
The Second Issue: Was The Contract Perfected?
The respondent Court correctly treated the question of whether or not there was, on the basis of the facts
established, a perfected contract of sale as the ultimate issue. Holding that a valid contract has been
established, respondent Court stated:
There is no dispute that the object of the transaction is that property owned by the defendant bank as acquired
assets consisting of six (6) parcels of land specifically identified under Transfer Certificates of Title Nos. T-
106932 to T-106937. It is likewise beyond cavil that the bank intended to sell the property. As testified to by
the Bank's Deputy Conservator, Jose Entereso, the bank was looking for buyers of the property. It is definite
that the plaintiffs wanted to purchase the property and it was precisely for this purpose that they met with
defendant Rivera, Manager of the Property Management Department of the defendant bank, in early August
1987. The procedure in the sale of acquired assets as well as the nature and scope of the authority of Rivera
on the matter is clearly delineated in the testimony of Rivera himself, which testimony was relied upon by
both the bank and by Rivera in their appeal briefs. Thus (TSN of July 30, 1990. pp. 19-20):
A: The procedure runs this way: Acquired assets was turned over to me and then I published it in the form of
an inter-office memorandum distributed to all branches that these are acquired assets for sale. I was
instructed to advertise acquired assets for sale so on that basis, I have to entertain offer; to accept offer,
formal offer and upon having been offered, I present it to the Committee. I provide the Committee with
necessary information about the property such as original loan of the borrower, bid price during the
foreclosure, total claim of the bank, the appraised value at the time the property is being offered for sale and
then the information which are relative to the evaluation of the bank to buy which the Committee considers
and it is the Committee that evaluate as against the exposure of the bank and it is also the Committee that
submit to the Conservator for final approval and once approved, we have to execute the deed of sale and it is
the Conservator that sign the deed of sale, sir.
The plaintiffs, therefore, at that meeting of August 1987 regarding their purpose of buying the property, dealt
with and talked to the right person. Necessarily, the agenda was the price of the property, and plaintiffs were
dealing with the bank official authorized to entertain offers, to accept offers and to present the offer to the
Committee before which the said official is authorized to discuss information relative to price determination.
Necessarily, too, it being inherent in his authority, Rivera is the officer from whom official information
regarding the price, as determined by the Committee and approved by the Conservator, can be had. And
Rivera confirmed his authority when he talked with the plaintiff in August 1987. The testimony of plaintiff
Demetria is clear on this point (TSN of May 31,1990, pp. 27-28):
Q: When you went to the Producers Bank and talked with Mr. Mercurio Rivera, did you ask him point-blank
his authority to sell any property?
A: No, sir. Not point blank although it came from him, (W)hen I asked him how long it would take because
he was saying that the matter of pricing will be passed upon by the committee. And when I asked him how
long it will take for the committee to decide and he said the committee meets every week. If I am not
mistaken Wednesday and in about two week's (sic) time, in effect what he was saying he was not the one
who was to decide. But he would refer it to the committee and he would relay the decision of the committee
to me.
Q — Please answer the question.
A — He did not say that he had the authority (.) But he said he would refer the matter to the committee and
he would relay the decision to me and he did just like that.
"Parenthetically, the Committee referred to was the Past Due Committee of which Luis Co was the Head,
with Jose Entereso as one of the members.
What transpired after the meeting of early August 1987 are consistent with the authority and the duties of
Rivera and the bank's internal procedure in the matter of the sale of bank's assets. As advised by Rivera, the
plaintiffs made a formal offer by a letter dated August 20, 1987 stating that they would buy at the price of
P3.5 Million in cash. The letter was for the attention of Mercurio Rivera who was tasked to convey and
accept such offers. Considering an aspect of the official duty of Rivera as some sort of intermediary between
the plaintiffs-buyers with their proposed buying price on one hand, and the bank Committee, the Conservator
and ultimately the bank itself with the set price on the other, and considering further the discussion of price at
the meeting of August resulting in a formal offer of P3.5 Million in cash, there can be no other logical
conclusion than that when, on September 1, 1987, Rivera informed plaintiffs by letter that "the bank's
counter-offer is at P5.5 Million for more than 101 hectares on lot basis," such counter-offer price had been
determined by the Past Due Committee and approved by the Conservator after Rivera had duly presented
plaintiffs' offer for discussion by the Committee of such matters as original loan of borrower, bid price
during foreclosure, total claim of the bank, and market value. Tersely put, under the established facts, the
price of P5.5 Million was, as clearly worded in Rivera's letter (Exh. "E"), the official and definitive price at
which the bank was selling the property.
There were averments by defendants below, as well as before this Court, that the P5.5 Million price was not
discussed by the Committee and that price. As correctly characterized by the trial court, this is not credible.
The testimonies of Luis Co and Jose Entereso on this point are at best equivocal and considering the
gratuitous and self-serving character of these declarations, the bank's submission on this point does not
inspire belief. Both Co ad Entereso, as members of the Past Due Committee of the bank, claim that the offer
of the plaintiff was never discussed by the Committee. In the same vein, both Co and Entereso openly admit
that they seldom attend the meetings of the Committee. It is important to note that negotiations on the price
had started in early August and the plaintiffs had already offered an amount as purchase price, having been
made to understand by Rivera, the official in charge of the negotiation, that the price will be submitted for
approval by the bank and that the bank's decision will be relayed to plaintiffs. From the facts, the official
bank price. At any rate, the bank placed its official, Rivera, in a position of authority to accept offers to buy
and negotiate the sale by having the offer officially acted upon by the bank. The bank cannot turn around and
later say, as it now does, that what Rivera states as the bank's action on the matter is not in fact so. It is a
familiar doctrine, the doctrine of ostensible authority, that if a corporation knowingly permits one of its
officers, or any other agent, to do acts within the scope of an apparent authority, and thus holds him out to
the public as possessing power to do those acts, the corporation will, as against any one who has in good
faith dealt with the corporation through such agent, he estopped from denying his authority (Francisco v.
GSIS, 7 SCRA 577, 583-584; PNB v. Court of Appeals, 94 SCRA 357, 369-370; Prudential Bank v. Court of
Appeals, G.R. No. 103957, June 14, 1993). 29
Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract as follows: "(1)
Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of
the obligation which is established."
There is no dispute on requisite no. 2. The object of the questioned contract consists of the six (6) parcels of
land in Sta. Rosa, Laguna with an aggregate area of about 101 hectares, more or less, and covered by
Transfer Certificates of Title Nos. T-106932 to T-106937. There is, however, a dispute on the first and third
requisites.
Petitioners allege that "there is no counter-offer made by the Bank, and any supposed counter-offer which
Rivera (or Co) may have made is unauthorized. Since there was no counter-offer by the Bank, there was
15
nothing for Ejercito (in substitution of Demetria and Janolo) to accept." 30 They disputed the factual basis of
the respondent Court's findings that there was an offer made by Janolo for P3.5 million, to which the Bank
counter-offered P5.5 million. We have perused the evidence but cannot find fault with the said Court's
findings of fact. Verily, in a petition under Rule 45 such as this, errors of fact — if there be any - are, as a
rule, not reviewable. The mere fact that respondent Court (and the trial court as well) chose to believe the
evidence presented by respondent more than that presented by petitioners is not by itself a reversible error. In
fact, such findings merit serious consideration by this Court, particularly where, as in this case, said courts
carefully and meticulously discussed their findings. This is basic.
Be that as it may, and in addition to the foregoing disquisitions by the Court of Appeals, let us review the
question of Rivera's authority to act and petitioner's allegations that the P5.5 million counter-offer was
extinguished by the P4.25 million revised offer of Janolo. Here, there are questions of law which could be
drawn from the factual findings of the respondent Court. They also delve into the contractual elements of
consent and cause.
The authority of a corporate officer in dealing with third persons may be actual or apparent. The doctrine of
"apparent authority", with special reference to banks, was laid out in Prudential Bank vs. Court of Appeals31,
where it was held that:
Conformably, we have declared in countless decisions that the principal is liable for obligations contracted
by the agent. The agent's apparent representation yields to the principal's true representation and the contract
is considered as entered into between the principal and the third person (citing  National Food Authority vs.
Intermediate Appellate Court, 184 SCRA 166).
A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of dealings
of the officers in their representative capacity but not for acts outside the scape of their authority (9 C.J.S., p.
417). A bank holding out its officers and agents as worthy of confidence will not be permitted to profit by the
frauds they may thus be enabled to perpetrate in the apparent scope of their employment; nor will it be
permitted to shirk its responsibility for such frauds even though no benefit may accrue to the bank therefrom
(10 Am Jur 2d, p. 114). Accordingly, a banking corporation is liable to innocent third persons where the
representation is made in the course of its business by an agent acting within the general scope of his
authority even though, in the particular case, the agent is secretly abusing his authority and attempting to
perpetrate a fraud upon his principal or some other person, for his own ultimate benefit (McIntosh v. Dakota
Trust Co., 52 ND 752, 204 NW 818, 40 ALR 1021).
Application of these principles is especially necessary because banks have a fiduciary relationship with the
public and their stability depends on the confidence of the people in their honesty and efficiency. Such faith
will be eroded where banks do not exercise strict care in the selection and supervision of its employees,
resulting in prejudice to their depositors.
From the evidence found by respondent Court, it is obvious that petitioner Rivera has apparent or implied
authority to act for the Bank in the matter of selling its acquired assets. This evidence includes the following:
(a) The petition itself in par. II-i (p. 3) states that Rivera was "at all times material to this case, Manager of
the Property Management Department of the Bank". By his own admission, Rivera was already the person in
charge of the Bank's acquired assets (TSN, August 6, 1990, pp. 8-9);
(b) As observed by respondent Court, the land was definitely being sold by the Bank. And during the initial
meeting between the buyers and Rivera, the latter suggested that the buyers' offer should be no less than P3.3
million (TSN, April 26, 1990, pp. 16-17);
(c) Rivera received the buyers' letter dated August 30, 1987 offering P3.5 million (TSN, 30 July 1990, p.11);
(d) Rivera signed the letter dated September 1, 1987 offering to sell the property for P5.5 million (TSN, July
30, p. 11);
(e) Rivera received the letter dated September 17, 1987 containing the buyers' proposal to buy the property
for P4.25 million (TSN, July 30, 1990, p. 12);
(f) Rivera, in a telephone conversation, confirmed that the P5.5 million was the final price of the Bank (TSN,
January 16, 1990, p. 18);
(g) Rivera arranged the meeting between the buyers and Luis Co on September 28, 1994, during which the
Bank's offer of P5.5 million was confirmed by Rivera (TSN, April 26, 1990, pp. 34-35). At said meeting, Co,
a major shareholder and officer of the Bank, confirmed Rivera's statement as to the finality of the Bank's
counter-offer of P5.5 million (TSN, January 16, 1990, p. 21; TSN, April 26, 1990, p. 35);
(h) In its newspaper advertisements and announcements, the Bank referred to Rivera as the officer acting for
the Bank in relation to parties interested in buying assets owned/acquired by the Bank. In fact, Rivera was
the officer mentioned in the Bank's advertisements offering for sale the property in question (cf. Exhs. "S"
and "S-1").
In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals, et. al.32, the Court, through
Justice Jose A. R. Melo, affirmed the doctrine of apparent authority as it held that the apparent authority of
the officer of the Bank of P.I. in charge of acquired assets is borne out by similar circumstances surrounding
his dealings with buyers.
To be sure, petitioners attempted to repudiate Rivera's apparent authority through documents and testimony
which seek to establish Rivera's actual  authority. These pieces of evidence, however, are inherently weak as
they consist of Rivera's self-serving testimony and various inter-office memoranda that purport to show
his limited actual authority, of which private respondent cannot be charged with knowledge. In any event,
since the issue is apparent authority, the existence of which is borne out by the respondent Court's findings,
the evidence of actual authority is immaterial insofar as the liability of a corporation is concerned 33.
Petitioners also argued that since Demetria and Janolo were experienced lawyers and their "law firm" had
once acted for the Bank in three criminal cases, they should be charged with actual knowledge of Rivera's
limited authority. But the Court of Appeals in its Decision (p. 12) had already made a factual finding that the
buyers had no notice of Rivera's actual authority prior to the sale. In fact, the Bank has not shown that they
acted as its counsel in respect to any acquired assets; on the other hand, respondent has proven that Demetria
and Janolo merely associated with a loose aggrupation of lawyers (not a professional partnership), one of
whose members (Atty. Susana Parker) acted in said criminal cases.
Petitioners also alleged that Demetria's and Janolo's P4.25 million counter-offer in the letter dated September
17, 1987 extinguished the Bank's offer of P5.5 million 34 .They disputed the respondent Court's finding that
"there was a meeting of minds when on 30 September 1987 Demetria and Janolo through Annex "L" (letter
dated September 30, 1987) "accepted" Rivera's counter offer of P5.5 million under Annex "J" (letter dated
September 17, 1987)", citing the late Justice Paras35, Art. 1319 of the Civil Code 36 and related Supreme
Court rulings starting with Beaumont vs. Prieto 37.
However, the above-cited authorities and precedents cannot apply in the instant case because, as found by the
respondent Court which reviewed the testimonies on this point, what was "accepted" by Janolo in his letter
dated September 30, 1987 was the Bank's offer of P5.5 million as confirmed and reiterated to Demetria and
Atty. Jose Fajardo by Rivera and Co during their meeting on September 28, 1987. Note that the said letter of
September 30, 1987 begins with"(p)ursuant to our discussion last 28 September 1987 . . .
Petitioners insist that the respondent Court should have believed the testimonies of Rivera and Co that the
September 28, 1987 meeting "was meant to have the offerors improve on their position of P5.5.
million."38However, both the trial court and the Court of Appeals found petitioners' testimonial evidence "not
credible", and we find no basis for changing this finding of fact.
16
Indeed, we see no reason to disturb the lower courts' (both the RTC and the CA) common finding that private
respondents' evidence is more in keeping with truth and logic — that during the meeting on September 28,
1987, Luis Co and Rivera "confirmed that the P5.5 million price has been passed upon by the Committee and
could no longer be lowered (TSN of April 27, 1990, pp. 34-35)"39. Hence, assuming arguendo that the
counter-offer of P4.25 million extinguished the offer of P5.5 million, Luis Co's reiteration of the said P5.5
million price during the September 28, 1987 meeting revived the said offer. And by virtue of the September
30, 1987 letter accepting thisrevived  offer, there was a meeting of the minds, as the acceptance in said letter
was absolute and unqualified.
We note that the Bank's repudiation, through Conservator Encarnacion, of Rivera's authority and action,
particularly the latter's counter-offer of P5.5 million, as being "unauthorized and illegal" came only on May
12, 1988 or more than seven (7) months after Janolo' acceptance. Such delay, and the absence of any
circumstance which might have justifiably prevented the Bank from acting earlier, clearly characterizes the
repudiation as nothing more than a last-minute attempt on the Bank's part to get out of a binding contractual
obligation.
Taken together, the factual findings of the respondent Court point to an implied admission on the part of the
petitioners that the written offer made on September 1, 1987 was carried through during the meeting of
September 28, 1987. This is the conclusion consistent with human experience, truth and good faith.
It also bears noting that this issue of extinguishment of the Bank's offer of P5.5 million was raised for the
first time on appeal and should thus be disregarded.
This Court in several decisions has repeatedly adhered to the principle that points of law, theories, issues of
fact and arguments not adequately brought to the attention of the trial court need not be, and ordinarily will
not be, considered by a reviewing court, as they cannot be raised for the first time on appeal (Santos vs. IAC,
No. 74243, November 14, 1986, 145 SCRA 592).40
. . . It is settled jurisprudence that an issue which was neither averred in the complaint nor raised during the
trial in the court below cannot be raised for the first time on appeal as it would be offensive to the basic rules
of fair play, justice and due process (Dihiansan vs. CA, 153 SCRA 713 [1987]; Anchuelo vs. IAC, 147
SCRA 434 [1987]; Dulos Realty & Development Corp. vs. CA, 157 SCRA 425 [1988]; Ramos vs. IAC, 175
SCRA 70 [1989]; Gevero vs. IAC, G.R. 77029, August 30, 1990).41
Since the issue was not raised in the pleadings as an affirmative defense, private respondent was not given an
opportunity in the trial court to controvert the same through opposing evidence. Indeed, this is a matter of
due process. But we passed upon the issue anyway, if only to avoid deciding the case on purely procedural
grounds, and we repeat that, on the basis of the evidence already in the record and as appreciated by the
lower courts, the inevitable conclusion is simply that there was a perfected contract of sale.
The Third Issue: Is the Contract Enforceable?
The petition alleged42:
Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5 million during the meeting of 28
September 1987, and it was this verbal offer that Demetria and Janolo accepted with their letter of 30
September 1987, the contract produced thereby would be unenforceable by action — there being no note,
memorandum or writing subscribed by the Bank to evidence such contract. (Please see article 1403[2], Civil
Code.)
Upon the other hand, the respondent Court in its Decision (p, 14) stated:
. . . Of course, the bank's letter of September 1, 1987 on the official price and the plaintiffs' acceptance of the
price on September 30, 1987, are not, in themselves, formal contracts of sale. They are however clear
embodiments of the fact that a contract of sale was perfected between the parties, such contract being binding
in whatever form it may have been entered into (case citations omitted). Stated simply, the banks' letter of
September 1, 1987, taken together with plaintiffs' letter dated September 30, 1987, constitute in law a
sufficient memorandum of a perfected contract of sale.
The respondent Court could have added that the written communications commenced not only from
September 1, 1987 but from Janolo's August 20, 1987 letter. We agree that, taken together, these letters
constitute sufficient memoranda — since they include the names of the parties, the terms and conditions of
the contract, the price and a description of the property as the object of the contract.
But let it be assumed arguendo that the counter-offer during the meeting on September 28, 1987 did
constitute a "new" offer which was accepted by Janolo on September 30, 1987. Still, the statute of frauds will
not apply by reason of the failure of petitioners to object to oral testimony proving petitioner Bank's counter-
offer of P5.5 million. Hence, petitioners — by such utter failure to object — are deemed to have waived any
defects of the contract under the statute of frauds, pursuant to Article 1405 of the Civil Code:
Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of article 1403, are ratified by the
failure to object to the presentation of oral evidence to prove the same, or by the acceptance of benefits under
them.
As private respondent pointed out in his Memorandum, oral testimony on the reaffirmation of the counter-
offer of P5.5 million is a plenty — and the silence of petitioners all throughout the presentation makes the
evidence binding on them thus;
A Yes, sir, I think it was September 28, 1987 and I was again present because Atty. Demetria told me to
accompany him we were able to meet Luis Co at the Bank.
xxx       xxx       xxx
Q Now, what transpired during this meeting with Luis Co of the Producers Bank?
A Atty. Demetria asked Mr. Luis Co whether the price could be reduced, sir.
Q What price?
A The 5.5 million pesos and Mr. Luis Co said that the amount cited by Mr. Mercurio Rivera is the final price
and that is the price they intends (sic) to have, sir.
Q What do you mean?.
A That is the amount they want, sir.
Q What is the reaction of the plaintiff Demetria to Luis Co's statement (sic) that the defendant Rivera's
counter-offer of 5.5 million was the defendant's bank (sic) final offer?
A He said in a day or two, he will make final acceptance, sir.
Q What is the response of Mr. Luis Co?.
A He said he will wait for the position of Atty. Demetria, sir.
[Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp. 18-21.]
Q What transpired during that meeting between you and Mr. Luis Co of the defendant Bank?
A We went straight to the point because he being a busy person, I told him if the amount of P5.5 million
could still be reduced and he said that was already passed upon by the committee. What the bank expects
17
which was contrary to what Mr. Rivera stated. And he told me that is the final offer of the bank P5.5 million
and we should indicate our position as soon as possible.
Q What was your response to the answer of Mr. Luis Co?
A I said that we are going to give him our answer in a few days and he said that was it. Atty. Fajardo and I
and Mr. Mercurio [Rivera] was with us at the time at his office.
Q For the record, your Honor please, will you tell this Court who was with Mr. Co in his Office in Producers
Bank Building during this meeting?
A Mr. Co himself, Mr. Rivera, Atty. Fajardo and I.
Q By Mr. Co you are referring to?
A Mr. Luis Co.
Q After this meeting with Mr. Luis Co, did you and your partner accede on (sic) the counter offer by the
bank?
A Yes, sir, we did.? Two days thereafter we sent our acceptance to the bank which offer we accepted, the
offer of the bank which is P5.5 million.
[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.]
Q According to Atty. Demetrio Demetria, the amount of P5.5 million was reached by the Committee and it is
not within his power to reduce this amount. What can you say to that statement that the amount of P5.5
million was reached by the Committee?
A It was not discussed by the Committee but it was discussed initially by Luis Co and the group of Atty.
Demetrio Demetria and Atty. Pajardo (sic) in that September 28, 1987 meeting, sir.
[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.]
The Fourth Issue: May the Conservator Revoke
the Perfected and Enforceable Contract.
It is not disputed that the petitioner Bank was under a conservator placed by the Central Bank of the
Philippines during the time that the negotiation and perfection of the contract of sale took place. Petitioners
energetically contended that the conservator has the power to revoke or overrule actions of the management
or the board of directors of a bank, under Section 28-A of Republic Act No. 265 (otherwise known as the
Central Bank Act) as follows:
Whenever, on the basis of a report submitted by the appropriate supervising or examining department, the
Monetary Board finds that a bank or a non-bank financial intermediary performing quasi-banking functions
is in a state of continuing inability or unwillingness to maintain a state of liquidity deemed adequate to
protect the interest of depositors and creditors, the Monetary Board may appoint a conservator to take charge
of the assets, liabilities, and the management of that institution, collect all monies and debts due said
institution and exercise all powers necessary to preserve the assets of the institution, reorganize the
management thereof, and restore its viability. He shall have the power to overrule or revoke the actions of the
previous management and board of directors of the bank or non-bank financial intermediary performing
quasi-banking functions, any provision of law to the contrary notwithstanding, and such other powers as the
Monetary Board shall deem necessary.
In the first place, this issue of the Conservator's alleged authority to revoke or repudiate the perfected
contract of sale was raised for the first time in this Petition — as this was not litigated in the trial court or
Court of Appeals. As already stated earlier, issues not raised and/or ventilated in the trial court, let alone in
the Court of Appeals, "cannot be raised for the first time on appeal as it would be offensive to the basic rules
of fair play, justice and due process."43
In the second place, there is absolutely no evidence that the Conservator, at the time the contract was
perfected, actually repudiated or overruled said contract of sale. The Bank's acting conservator at the time,
Rodolfo Romey, never objected to the sale of the property to Demetria and Janolo. What petitioners are
really referring to is the letter of Conservator Encarnacion, who took over from Romey after the sale was
perfected on September 30, 1987 (Annex V, petition) which unilaterally repudiated — not the contract — but
the authority of Rivera to make a binding offer — and which unarguably came months after the perfection of
the contract. Said letter dated May 12, 1988 is reproduced hereunder:
May 12, 1988
Atty. Noe C. Zarate
Zarate Carandang Perlas & Ass.
Suite 323 Rufino Building
Ayala Avenue, Makati, Metro-Manila
Dear Atty. Zarate:
This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo and Demetria regarding the six (6)
parcels of land located at Sta. Rosa, Laguna.
We deny that Producers Bank has ever made a legal counter-offer to any of your clients nor perfected a
"contract to sell and buy" with any of them for the following reasons.
In the "Inter-Office Memorandum" dated April 25, 1986 addressed to and approved by former Acting
Conservator Mr. Andres I. Rustia, Producers Bank Senior Manager Perfecto M. Pascua detailed the functions
of Property Management Department (PMD) staff and officers (Annex A.), you will immediately read that
Manager Mr. Mercurio Rivera or any of his subordinates has no authority, power or right to make any
alleged counter-offer. In short, your lawyer-clients did not deal with the authorized officers of the bank.
Moreover, under Sec. 23 and 36 of the Corporation Code of the Philippines (Bates Pambansa Blg. 68.) and
Sec. 28-A of the Central Bank Act (Rep. Act No. 265, as amended), only the Board of Directors/Conservator
may authorize the sale of any property of the corportion/bank..
Our records do not show that Mr. Rivera was authorized by the old board or by any of the bank conservators
(starting January, 1984) to sell the aforesaid property to any of your clients. Apparently, what took place
were just preliminary discussions/consultations between him and your clients, which everyone
knows cannot bind the Bank's Board or Conservator.
We are, therefore, constrained to refuse any tender of payment by your clients, as the same is patently
violative of corporate and banking laws. We believe that this is more than sufficient legal justification for
refusing said alleged tender.
Rest assured that we have nothing personal against your clients. All our acts are official, legal and in
accordance with law. We also have no personal interest in any of the properties of the Bank.
Please be advised accordingly.
Very truly yours,
(Sgd.) Leonida T. Encarnacion
LEONIDA T. EDCARNACION
Acting Conservator
18
In the third place, while admittedly, the Central Bank law gives vast and far-reaching powers to the
conservator of a bank, it must be pointed out that such powers must be related to the "(preservation of) the
assets of the bank, (the reorganization of) the management thereof and (the restoration of) its viability." Such
powers, enormous and extensive as they are, cannot extend to the  post-facto repudiation of perfected
transactions, otherwise they would infringe against the non-impairment clause of the Constitution 44. If the
legislature itself cannot revoke an existing valid contract, how can it delegate such non-existent powers to the
conservator under Section 28-A of said law?
Obviously, therefore, Section 28-A merely gives the conservator power to revoke contracts that are, under
existing law, deemed to be defective — i.e., void, voidable, unenforceable or rescissible. Hence, the
conservator merely takes the place of a bank's board of directors. What the said board cannot do — such as
repudiating a contract validly entered into under the doctrine of implied authority — the conservator cannot
do either. Ineluctably, his power is not unilateral and he cannot simply repudiate valid obligations of the
Bank. His authority would be only to bring court actions to assail such contracts — as he has already done so
in the instant case. A contrary understanding of the law would simply not be permitted by the Constitution.
Neither by common sense. To rule otherwise would be to enable a failing bank to become solvent, at the
expense of third parties, by simply getting the conservator to unilaterally revoke all previous dealings which
had one way or another or come to be considered unfavorable to the Bank, yielding nothing to perfected
contractual rights nor vested interests of the third parties who had dealt with the Bank.
The Fifth Issue: Were There Reversible Errors of Facts?
Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court, findings of fact by the
Court of Appeals are not reviewable by the Supreme Court. In Andres vs. Manufacturers Hanover & Trust
Corporation, 45, we held:
. . . The rule regarding questions of fact being raised with this Court in a petition for certiorari under Rule 45
of the Revised Rules of Court has been stated in Remalante vs. Tibe, G.R. No. 59514, February 25, 1988,
158 SCRA 138, thus:
The rule in this jurisdiction is that only questions of law may be raised in a petition for certiorari under Rule
45 of the Revised Rules of Court. "The jurisdiction of the Supreme Court in cases brought to it from the
Court of Appeals is limited to reviewing and revising the errors of law imputed to it, its findings of the fact
being conclusive " [Chan vs. Court of Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737, reiterating
a long line of decisions]. This Court has emphatically declared that "it is not the function of the Supreme
Court to analyze or weigh such evidence all over again, its jurisdiction being limited to reviewing errors of
law that might have been committed by the lower court" (Tiongco v. De la Merced, G. R. No. L-24426, July
25, 1974, 58 SCRA 89; Corona vs. Court of Appeals, G.R. No. L-62482, April 28, 1983, 121 SCRA 865;
Baniqued vs. Court of Appeals, G. R. No. L-47531, February 20, 1984, 127 SCRA 596). "Barring, therefore,
a showing that the findings complained of are totally devoid of support in the record, or that they are so
glaringly erroneous as to constitute serious abuse of discretion, such findings must stand, for this Court is not
expected or required to examine or contrast the oral and documentary evidence submitted by the parties"
[Santa Ana, Jr. vs. Hernandez, G. R. No. L-16394, December 17, 1966, 18 SCRA 973] [at pp. 144-145.]
Likewise, in Bernardo vs. Court of Appeals 46, we held:
The resolution of this petition invites us to closely scrutinize the facts of the case, relating to the sufficiency
of evidence and the credibility of witnesses presented. This Court so held that it is not the function of the
Supreme Court to analyze or weigh such evidence all over again. The Supreme Court's jurisdiction is limited
to reviewing errors of law that may have been committed by the lower court. The Supreme Court is not a
trier of facts. . . .
As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and
Development Corp. 47:
The Court has consistently held that the factual findings of the trial court, as well as the Court of Appeals, are
final and conclusive and may not be reviewed on appeal. Among the exceptional circumstances where a
reassessment of facts found by the lower courts is allowed are when the conclusion is a finding grounded
entirely on speculation, surmises or conjectures; when the inference made is manifestly absurd, mistaken or
impossible; when there is grave abuse of discretion in the appreciation of facts; when the judgment is
premised on a misapprehension of facts; when the findings went beyond the issues of the case and the same
are contrary to the admissions of both appellant and appellee. After a careful study of the case at bench, we
find none of the above grounds present to justify the re-evaluation of the findings of fact made by the courts
below.
In the same vein, the ruling of this Court in the recent case of South Sea Surety and Insurance Company
Inc. vs.Hon. Court of Appeals, et al. 48 is equally applicable to the present case:
We see no valid reason to discard the factual conclusions of the appellate court, . . . (I)t is not the function of
this Court to assess and evaluate all over again the evidence, testimonial and documentary, adduced by the
parties, particularly where, such as here, the findings of both the trial court and the appellate court on the
matter coincide. (emphasis supplied)
Petitioners, however, assailed the respondent Court's Decision as "fraught with findings and conclusions
which were not only contrary to the evidence on record but have no bases at all," specifically the findings
that (1) the "Bank's counter-offer price of P5.5 million had been determined by the past due committee and
approved by conservator Romey, after Rivera presented the same for discussion" and (2) "the meeting with
Co was not to scale down the price and start negotiations anew, but a meeting on the already determined
price of P5.5 million" Hence, citing Philippine National Bank vs. Court of Appeals 49, petitioners are asking
us to review and reverse such factual findings.
The first point was clearly passed upon by the Court of Appeals 50, thus:
There can be no other logical conclusion than that when, on September 1, 1987, Rivera informed plaintiffs
by letter that "the bank's counter-offer is at P5.5 Million for more than 101 hectares on lot basis, "such
counter-offer price had been determined by the Past Due Committee and approved by the Conservator after
Rivera had duly presented plaintiffs' offer for discussion by the Committee . . . Tersely put, under the
established fact, the price of P5.5 Million was, as clearly worded in Rivera's letter (Exh. "E"), the official and
definitive price at which the bank was selling the property. (p. 11, CA Decision)
xxx       xxx       xxx
. . . The argument deserves scant consideration. As pointed out by plaintiff, during the meeting of September
28, 1987 between the plaintiffs, Rivera and Luis Co, the senior vice-president of the bank, where the topic
was the possible lowering of the price, the bank official refused it and confirmed that the P5.5 Million price
had been passed upon by the Committee and could no longer be lowered (TSN of April 27, 1990, pp. 34-35)
(p. 15, CA Decision).
The respondent Court did not believe the evidence of the petitioners on this point, characterizing it as "not
credible" and "at best equivocal and considering the gratuitous and self-serving character of these
declarations, the bank's submissions on this point do not inspire belief."
To become credible and unequivocal, petitioners should have presented then Conservator Rodolfo Romey to
testify on their behalf, as he would have been in the best position to establish their thesis. Under the rules on
evidence 51, such suppression gives rise to the presumption that his testimony would have been adverse, if
produced.
The second point was squarely raised in the Court of Appeals, but petitioners' evidence was deemed
insufficient by both the trial court and the respondent Court, and instead, it was respondent's submissions that
were believed and became bases of the conclusions arrived at.
19
In fine, it is quite evident that the legal conclusions arrived at from the findings of fact by the lower courts
are valid and correct. But the petitioners are now asking this Court to disturb these findings to fit the
conclusion they are espousing, This we cannot do.
To be sure, there are settled exceptions where the Supreme Court may disregard findings of fact by the Court
of Appeals 52. We have studied both the records and the CA Decision and we find no such exceptions in this
case. On the contrary, the findings of the said Court are supported by a preponderance of competent and
credible evidence. The inferences and conclusions are seasonably based on evidence duly identified in the
Decision. Indeed, the appellate court patiently traversed and dissected the issues presented before it, lending
credibility and dependability to its findings. The best that can be said in favor of petitioners on this point is
that the factual findings of respondent Court did not correspond to petitioners' claims, but were closer to the
evidence as presented in the trial court by private respondent. But this alone is no reason to reverse or ignore
such factual findings, particularly where, as in this case, the trial court and the appellate court were in
common agreement thereon. Indeed, conclusions of fact of a trial judge — as affirmed by the Court of
Appeals — are conclusive upon this Court, absent any serious abuse or evident lack of basis or
capriciousness of any kind, because the trial court is in a better position to observe the demeanor of the
witnesses and their courtroom manner as well as to examine the real evidence presented.
Epilogue.
In summary, there are two procedural issues involved forum-shopping and the raising of issues for the first
time on appeal [viz., the extinguishment of the Bank's offer of P5.5 million and the conservator's powers to
repudiate contracts entered into by the Bank's officers] — which per se could justify the dismissal of the
present case. We did not limit ourselves thereto, but delved as well into the substantive issues — the
perfection of the contract of sale and its enforceability, which required the determination of questions of fact.
While the Supreme Court is not a trier of facts and as a rule we are not required to look into the factual bases
of respondent Court's decisions and resolutions, we did so just the same, if only to find out whether there is
reason to disturb any of its factual findings, for we are only too aware of the depth, magnitude and vigor by
which the parties through their respective eloquent counsel, argued their positions before this Court.
We are not unmindful of the tenacious plea that the petitioner Bank is operating abnormally under a
government-appointed conservator and "there is need to rehabilitate the Bank in order to get it back on its
feet . . . as many people depend on (it) for investments, deposits and well as employment. As of June 1987,
the Bank's overdraft with the Central Bank had already reached P1.023 billion . . . and there were (other)
offers to buy the subject properties for a substantial amount of money." 53
While we do not deny our sympathy for this distressed bank, at the same time, the Court cannot emotionally
close its eyes to overriding considerations of substantive and procedural law, like respect for perfected
contracts, non-impairment of obligations and sanctions against forum-shopping, which must be upheld under
the rule of law and blind justice.
This Court cannot just gloss over private respondent's submission that, while the subject properties may
currently command a much higher price, it is equally true that at the time of the transaction in 1987, the price
agreed upon of P5.5 million was reasonable, considering that the Bank acquired these properties at a
foreclosure sale for no more than P3.5 million 54. That the Bank procrastinated and refused to honor its
commitment to sell cannot now be used by it to promote its own advantage, to enable it to escape its binding
obligation and to reap the benefits of the increase in land values. To rule in favor of the Bank simply because
the property in question has algebraically accelerated in price during the long period of litigation is to reward
lawlessness and delays in the fulfillment of binding contracts. Certainly, the Court cannot stamp its
imprimatur on such outrageous proposition.
WHEREFORE, finding no reversible error in the questioned Decision and Resolution, the Court hereby
DENIES the petition. The assailed Decision is AFFIRMED. Moreover, petitioner Bank is REPRIMANDED
for engaging in forum-shopping and WARNED that a repetition of the same or similar acts will be dealt with
more severely. Costs against petitioners.
SO ORDERED.

Narvasa, C.J., Davide Jr., Melo and Francisco, JJ., concur.

Footnotes
22
 175 SCRA 701 (July 28, 1989). In this case, petitioner filed with the Supreme Court a petition
forcertiorari questioning a letter-directive of the Commission on Audit ordering the re-bidding of a vessel,
the "T/T Andres Bonifacio", being sold by the Philippine National Oil Company (PNOC), Simultaneously, a
separate complaint for injunction and damages was filed by the same petitioner before the Makati RTC to
enjoin PNOC from conducting such a rebidding.
26
 This court has pierced the veil of corporate fiction in numerous cases where it was used, among others, to
avoid a judgment credit (Sibagat Timber Corp. vs. Garcia, 216 SCRA 470 [December 11, 1992]; Tan Boon
Bee & Co., Inc, vs. Jarencio, 163 SCRA 205 [June 30, 1988]); to avoid inclusion of corporate assets as part
of the estate of a decedent (Cease vs. CA, 93 SCRA 483 [October 18, 1979]); to avoid liability arising from
debt (Arcilla vs. CA, 215 SCRA 120 [0ctober 23, 1992]; Philippine Bank of Communications vs. CA, 195
SCRA 567 [March 22, 1991]); or when made use of as a shield to perpetrate fraud and/or confuse legitimate
issues (Jacinto vs. CA, 198 SCRA 211 [June 6, 1991]); or to promote unfair objectives or otherwise to shield
them (Villanueva vs. Adre, 172 SCRA 876 [April 27, 1989]).
36
 Art. 1319 of Civil Code reads as follows:

"Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the
cause which are to constitute the contract. The offer must be certain acid the acceptance absolute. A qualified
acceptance constitutes a counter-offer.

Acceptance made by letter or telegram does not bind the offerer except from the time it came to his
knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer
was made".
54
 In his Memorandum, private respondent alleged (and petitioners have not denied) that (a) the property was
sold at foreclosure for only P3,033,264.00 and (b) in a suit for deficiency judgment against the property's
former owner and mortgage debtor, the petitioner Bank maintained that the value of the property was only P3
million.

20
[G.R. No. 112830.  February 1, 1996]
JERRY ONG, petitioner, vs. COURT OF APPEALS and RURAL BANK OF OLONGAPO, INC.,
represented by its Liquidator, GUILLERMO G. REYES, JR. and Deputy Liquidator ABEL
ALLANIGUE, respondents.
DECISION
BELLOSILLO, J.:
The jurisdiction of a regular court over a bank undergoing liquidation is the issue in this petition for review
of the decision of the Court of Appeals.[1]
On 5 February 1991 Jerry Ong filed with the Regional Trial Court of Quezon City a petition for the surrender
of TCT Nos. 13769 and 13770 pursuant to the provisions of Secs. 63(b) and 107 of P.D. 1529[2] against Rural
Bank of Olongapo, Inc. (RBO), represented by its liquidator Guillermo G. Reyes, Jr. and deputy liquidator
Abel Allanigue.[3] The petition averred inter aliathat -
2. The RBO was the owner in fee simple of two parcels of land including the improvements thereon situated
in Tagaytay City x x x particularly described in TCT Nos. 13769 and 13770 x x x
3. Said parcels of land were duly mortgaged by RBO in favor of petitioner on December 29, 1983 to
guarantee the payment of Omnibus Finance, Inc., which is likewise now undergoing liquidation proceedings
of its money market obligations to petitioner in the principal amount of P863,517.02 x x x
4.       Omnibus Finance, Inc., not having seasonably settled its obligations to petitioner, the latter proceeded
to effect the extrajudicial foreclosure of said mortgages, such that on March 23, 1984, the City Sheriff of
Tagaytay City issued a Certificate of Sale in favor of petitioner xxx
5.       Said Certificate of Sale x x x was duly registered with the Registry of Deeds of Tagaytay City on July
16, 1985, as shown in the certified true copies of the aforementioned titles x x x
6. Respondents failed to seasonably redeem said parcels of land, for which reason, petitioner has executed an
Affidavit of Consolidation of Ownership which, to date, 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.
7. 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 respondents, despite demand, to surrender RBO’s copies of its owner’s certificates of
title for the parcels of land covered by TCT Nos. 13769 and 13770.[4]
Respondent RBO filed a motion to dismiss on the ground of res judicata alleging that petitioner had earlier
sought a similar relief from Br. 18 of the Regional Trial Court of Tagaytay City, which case was dismissed
with finality on appeal before the Court of Appeals.
In a supplemental motion to dismiss, respondent RBO contended that it was undergoing liquidation and,
pursuant to prevailing jurisprudence, it is the liquidation court which has exclusive jurisdiction to take
cognizance of petitioner’s claim.
On 7 May 1991 the trial court denied the motion to dismiss because it found that the causes of action in the
previous and present cases were different although it was silent on the jurisdictional issue.  Accordingly,
respondent RBO filed a motion for reconsideration but the same was similarly rejected in the order of June
11, 1991 holding that: (a) subject parcels of land were sold to petitioner through public bidding on 23 March
1984 and, consequently, said pieces of realty were no longer part of the assets of respondent RBO; and, (b) in
the same token, subject lots were no longer considered assets of respondent RBO when its liquidation was
21
commenced by the Central Bank on 9 November 1984 and when the petition for assistance in its liquidation
was approved by the Regional Trial Court of Olongapo City on 30 May 1985.
On 5 July 1991 respondent RBO filed a manifestation and urgent motion for reconsideration arguing that the
validity of the certificate of sale issued to petitioner was still at issue in another case between them and
therefore the properties covered by said certificate were still part and parcel of its assets.
Still unpersuaded by respondent RBO’s arguments, the trial court denied reconsideration in its order of 18
September 1991 prompting the bank to elevate the case to respondent Court of Appeals by way of a petition
for certiorari and prohibition.  On 12 February 1992 respondent court rendered a decision annulling the
challenged order of the court a quo dated 19 June 1991 which sustained the jurisdiction of the trial court as
well as the order of 18 September 1991 denying reconsideration thereof.  Moreover, the trial judge was
ordered to dismiss Civil Case No. Q-91-8019 without prejudice to the right of petitioner to file his claim in
the liquidation proceedings (Sp. Proc. No. 170-0-85) pending before Br. 73 of
the Regional Trial Court ofOlongapo City.[5]
In reversing the trial court the appellate court noted that Sec. 29, par. 3, of R.A. 265 as amended by P.D.
1827[6] does not limit the jurisdiction of the liquidation court to claims against the assets of the insolvent
bank.  The provision is general in that it clearly and unqualifiedly states that the liquidation court shall have
jurisdiction to adjudicate disputed claims against the bank.  “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.  To limit the jurisdiction of the liquidation court to those claims against the assets of the bank is to
remove significantly and without basis the cases that may be brought against a bank in case of insolvency.
Respondent court also noted that the certificates of title are still in the name of respondent RBO.  As far as
third persons are concerned (and these include claimants in the liquidation court), registration is the operative
act which would convey title to the property.
Petitioner submits that Civil Case No. Q-91-8019 may proceed independently of Sp. Proc. No. 170-0-85.  He
argues that the disputed parcels of land have been extrajudicially foreclosed and the corresponding certificate
of sale issued in his favor; that considering that respondent RBO failed to redeem said properties he should
now be allowed to consolidate his title thereto; that respondent RBO’s mortgage of TCT Nos. 13769 and
13770 in favor of petitioner and its subsequent foreclosure are presumed valid and regular; and, that the
liquidation court has no jurisdiction over subject parcels of land since they are no longer assets of
respondent RBO.
We find no merit in the petition. 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 (italics
supplied).
Applying the aforequoted provision in Hernandez v. Rural Bank of Lucena, Inc.,[8]  this Court ruled –
The fact that the insolvent bank is forbidden to do business, that its assets are turned over to the
Superintendent of Banks, as a receiver, for conversion into cash, and that its liquidation is undertaken with
judicial intervention means that, as far as lawful and practicable, all claims against the insolvent bank should
be filed in the liquidation proceeding (italics supplied).
We explained therein the rationale behind the provision, i.e., 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.  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 Superintendent of Banks and regulate his operations.

The phrase “(T)he court shall have jurisdiction in the same proceedings to adjudicate disputed claims against
the bank” appears to have misled petitioner.  He argues that to the best of his personal knowledge there is no
pending action filed before any court or agency which contests his right over subject properties.  Thus his
petition before the Regional Trial Court of Quezon City cannot be considered a “disputed claim” as
contemplated by law.

It is not necessary that a claim be initially disputed in a court or agency before it is filed with the liquidation
court.  As may be gleaned in the Hernandez case, the term “disputed claim” in the provision simply connotes
that –

[n] the course of the liquidation, contentious cases might arise wherein a full-dress hearing would be required
and legal issues would have to be resolved. Hence, it would be necessary injustice to all concerned that a
Court of First Instance (now Regional Trial Court) x x x assist and supervise the liquidation and x x x act as
umpire or arbitrator in the allowance and disallowance of claims.

Petitioner must have overlooked the fact that since respondent RBO is insolvent other claimants not privy to
their transaction may be involved.  As far as those claimants are concerned, in the absence of certificates of
title in the name of petitioner, subject lots still form part of the assets of the insolvent bank.

On the basis of the Hernandez  case as well as Sec. 29, par. 3, of R.A. 265 as amended by P.D. 1827,
respondent Court of Appeals was correct in holding that the Regional Trial Court of Quezon City, Br. 79, did
not have jurisdiction over the petition, much less in ordering the dismissal of Civil Case No. Q-91-8019,
without prejudice to petitioner’s right to file his claim in Sp. Proc. No. 170-0-85 before the Regional Trial
Court of Olongapo City, Br. 73.

WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals dated 12 February
1992 is AFFIRMED. Costs against petitioner.

SO ORDERED.

22
G.R. No. 109373 March 20, 1995
PACIFIC BANKING CORPORATION EMPLOYEES ORGANIZATION, PAULA S. PAUG, and its
officers and members, petitioners,  1992, he granted the Union's Motion for issuance of a writ of Execution.
vs.
THE HONORABLE COURT OF APPEALS and VITALIANO N. NAÑAGAS II, as Liquidator of
Pacific Banking Corporation, respondents.
G.R. No. 112991 March 20, 1995
THE PRESIDENT OF THE PHILIPPINE DEPOSIT INSURANCE CORPORATION, as Liquidator
of the Pacific Banking Corporation , petitioner,  In his order dated September 11, 1992, respondent judge of the RTC directed the Liquidator to pay private
vs.
COURT OF APPEALS, HON. JUDGE REGINO T. VERIDIANO II, DEPUTY SHERIFF RAMON
ENRIQUEZ and ANG ENG JOO, ANG KEONG LAN and E.J ANG INT'L. LTD., represented by
their Attorney-in-fact, GONZALO C. SY, respondents.
 
MENDOZA, J.:
These cases have been consolidated because the principal question involved is the same: whether a petition
for liquidation under §29 of Rep. Act No. 265, otherwise known as the Central Bank Act, is a special
proceeding or an ordinary civil action. The Fifth and the Fourteenth Divisions of the Court of Appeals
reached opposite results on this question and consequently applied different periods for appealing.
The facts are as follows:
I.
Proceedings in the CB and the RTC
On July 5, 1985, the Pacific Banking Corporation (PaBC) was placed under receivership by the Central Bank
of the Philippines pursuant to Resolution No. 699 of its Monetary Board. A few months later, it was placed
under liquidation 1 and a Liquidator was appointed. 2
On April 7, 1986, the Central Bank filed with the Regional Trial Court of Manila Branch 31, a petition
entitled "Petition for Assistance in the Liquidation of Pacific Banking Corporation." 3 The petition was
approved, after which creditors filed their claims with the court.
On May 17, 1991, a new Liquidator, Vitaliano N. Nañagas, 4 President of the Philippine Deposit Insurance
Corporation (PDIC), was appointed by the Central Bank.
On March 13, 1989 the Pacific Banking Corporation Employees Organization (Union for short), petitioner in
G.R. No. 109373, filed a complaint-in-intervention seeking payment of holiday pay, 13th month pay
differential, salary increase differential, Christmas bonus, and cash equivalent of Sick Leave Benefit due its
members as employees of PaBC. In its order dated September 13, 1991, the trial court ordered payment of
the principal claims of the Union. 5
The Liquidator received a copy of the order on September 16, 1991. On October 16, 1991, he filed a Motion
for Reconsideration and Clarification of the order. In his order of December 6, 1991, the judge modified his
September 13, 1991 6 but in effect denied the Liquidator's motion for reconsideration. This order was
received by the Liquidator on December 9, 1991. The following day, December 10, 1991, he filed a Notice
of Appeal and a Motion for Additional Time to Submit Record on Appeal. On December 23, 1991, another
Notice of Appeal was filed by the Office of the Solicitor General in behalf of Nañagas.
23
In his order of February 10, 1992, respondent judge disallowed the Liquidator's Notice of Appeal on the
ground that it was late, i.e., more than 15 days after receipt of the decision. The judge declared his September
13, 1991 order and subsequent orders to be final and executory and denied reconsideration. On March 27,
Ang Keong Lan and E.J. Ang Int'l., private respondents in G.R. No. 112991, likewise filed claims for the
payment of investment in the PaBC allegedly in the form of shares of stocks amounting to US$2,531,632.18.
The shares of stocks, consisting of 154,462 common shares, constituted 11% of the total subscribed capital
stock of the PaBC. They alleged that their claim constituted foreign exchange capital investment entitled to
preference in payment under the Foreign Investments Law.
respondents the total amount of their claim as preferred creditors. 7
The Liquidator received the order on September 16, 1992. On September 30, 1992 he moved for
reconsideration, but his motion was denied by the court on October 2, 1992. He received the order denying
his Motion for Reconsideration on October 5, 1992. On October 14, 1992 he filed a Notice of Appeal from
the orders of September 16, 1992 and October 2, 1992. As in the case of the Union, however, the judge
ordered the Notice of Appeal stricken off the record on the ground that it had been filed without authority of
the Central Bank and beyond 15 days. In his order of October 28, 1992, the judge directed the execution of
his September 11, 1992 order granting the Stockholders/ Investors' claim.
II.
Proceedings in the Court of Appeals
The Liquidator filed separate Petitions for Certiorari, Prohibition and Mandamus in the Court of Appeals to
set aside the orders of the trial court denying his appeal from the orders granting the claims of Union and of
the Stockholders/Investors. The two Divisions of the Court of Appeals, to which the cases were separately
raffled, rendered conflicting rulings.
In its decision of November 17, 1992 in CA-G.R. SP No. 27751 (now G.R. No. 09373) the Fifth
Division 8 held in the case of the Union that the proceeding before the trial court was a special proceeding
and, therefore, the period for appealing from any decision or final order rendered therein is 30 days. Since the
notice of appeal of the Liquidator was filed on the 30th day of his receipt of the decision granting the Union's
claims, the appeal was brought on time. The Fifth Division, therefore, set aside the orders of the lower court
and directed the latter to give due course to the appeal of the Liquidator and set the Record on Appeal he had
filed for hearing.
On the other hand, on December 16, 1993, the Fourteenth Division 9 ruled in CA-G.R. SP No. 29351 (now
G.R. No. 112991) in the case of the Stockholders/Investors that a liquidation proceeding is an ordinary
action. Therefore, the period for appealing from any decision or final order rendered therein is 15 days and
that since the Liquidator's appeal notice was filed on the 23rd day of his receipt of the order appealed from,
deducting the period during which his motion for reconsideration was pending, the notice of appeal was filed
late. Accordingly, the Fourteenth Division dismissed the Liquidator's petition.
III.
Present Proceedings
The Union and the Liquidator then separately filed petitions before this Court.
In G.R. No. 109373 the Union contends that:
1. The Court of Appeals acted without jurisdiction over the subject matter or nature of the suit.
2. The Court of Appeals gravely erred in taking cognizance of the petition for certiorari filed by Nañagas
who was without any legal authority to file it.
3. The Court of Appeals erred in concluding that the case is a special proceeding governed by Rules 72 to
109 of the Revised Rules of Court.
4. The Court of Appeals erred seriously in concluding that the notice of appeal filed by Nañagas was filed on
time.
5. The Court of Appeals erred seriously in declaring that the second notice of appeal filed on December 23,
1991 by the Solicitor General is a superfluity.
On the other hand, in G.R. No. 112991 the Liquidator contends that:
1. The Petition for Assistance in the Liquidation of the Pacific Banking Corporation s a Special Proceeding
case and/or one which allows multiple appeals, in which case the period of appeal is 30 days and not 15 days
from receipt of the order/judgment appealed from.
2. Private respondents are not creditors of PaBC but are plain stockholders whose right to receive payment as
such would accrue only after all the creditors of the insolvent bank have been paid.
3. The claim of private respondents in the amount of US$22,531,632.18 is not in the nature of foreign
investment as it is understood in law.
4. The claim of private respondents has not been clearly established and proved.
5. The issuance of a writ of execution against the assets of PaBC was made with grave abuse of discretion.
The petitions in these cases must be dismissed.
First. As stated in the beginning, the principal question in these cases is whether a petition for liquidation
under §29 of Rep. Act No. 265 is in the nature of a special proceeding. If it is, then the period of appeal is 30
days and the party appealing must, in addition to a notice of appeal, file with the trial court a record on
appeal in order to perfect his appeal. Otherwise, if a liquidation proceeding is an ordinary action, the period
of appeal is 15 days from notice of the decision or final order appealed from.
BP Blg. 129 provides:
§39. Appeals. — The period for appeal from final orders, resolutions, awards, judgments, or decisions of any
court in all cases shall be fifteen (15) days counted from the notice of the final order, resolution, award,
judgment or decision appealed from: Provided, however, that in habeas corpuscases the period for appeal
shall be forty-eight (48) hours from the notice of the judgment appealed from.
No record on appeal shall be required to take an appeal. In lieu thereof, the entire record shall be transmitted
with all the pages prominently numbered consecutively, together with an index of the contents thereof.
This section shall not apply in appeals in special proceedings and in other cases wherein multiple appeals are
allowed under applicable provisions of the Rules of Court.
The Interim Rules and Guidelines to implement BP Blg. 129 provides:
19. Period of Appeals. —
(a) All appeals, except in habeas corpus cases and in the cases referred to in paragraph (b) hereof, must be
taken within fifteen (15) days from notice of the judgment, order, resolution or award appealed from.
24
(b) In appeals in special proceedings in accordance with Rule 109 of the Rules of Court and other cases
wherein multiple appeals are allowed, the period of appeals shall be thirty (30) days, a record on appeal
being required.
The Fourteenth Division of the Court of Appeals held that the proceeding is an ordinary action similar to an
action for interpleader under Rule 63. 10 The Fourteenth Division stated:
The petition filed is akin to an interpleader under Rule 63 of the Rules of Court where there are conflicting
claimants or several claims upon the same subject matter, a person who claims no interest thereon may file
an action for interpleader to compel the claimants to "interplead" and litigate their several claims among
themselves. (Section I Rule 63).
An interpleader is in the category of a special civil action under Rule 62 which, like an ordinary action, may
be appealed only within fifteen (15) days from notice of the judgment or order appealed from. Under Rule
62, the preceding rules covering ordinary civil actions which are not inconsistent with or may serve to
supplement the provisions of the rule relating to such civil actions are applicable to special civil actions. This
embraces Rule 41 covering appeals from the regional trial court to the Court of Appeals.
xxx xxx xxx
Thus, under Section 1 Rule 2 of the Rules of Court, an action is defined as "an ordinary suit in a court of
justice by which one party prosecutes another for the enforcement or protection of a right or the prevention
or redress of a wrong." On the other hand, Section 2 of the same Rule states that "every other remedy
including one to establish the status or right of a party or a particular fact shall be by special proceeding."
To our mind, from the aforequoted definitions of an action and a special proceeding, the petition for
assistance of the court in the liquidation of an asset of a bank is not "one to establish the status or right of a
party or a particular fact." Contrary to the submission of the petitioner, the petition is not intended to
establish the fact of insolvency of the bank. The insolvency of the bank had already been previously
determined by the Central Bank in accordance with Section 9 of the CB Act before the petition was filed. All
that needs to be done is to liquidate the assets of the bank and thus the assistance of the respondent court is
sought for that purpose.
It should be pointed out that this petition filed is not among the cases categorized as a special proceeding
under Section 1, Rule 72 of the Rules of Court, nor among the special proceedings that may be appealed
under Section 1, Rule 109 of the Rules.
We disagree with the foregoing view of the Fourteenth Division. Rule 2 of the Rules of Court provide:
§1. Action defined. — Action means an ordinary suit in a court of justice, by which the party prosecutes
another for the enforcement or protection of a right, or the prevention or redress of a wrong.
§2. Special Proceeding Distinguished. — Every other remedy, including one to establish the status or right of
a party or a particular fact, shall be by special proceeding.
Elucidating the crucial distinction between an ordinary action and a special proceeding, Chief Justice Moran
states:" 11
Action is the act by which one sues another in a court of justice for the enforcement or protection of a right,
or the prevention or redress of a wrong while special proceeding is the act by which one seeks to establish
the status or right of a party, or a particular fact. Hence, action is distinguished from special proceeding in
that the former is a formal demand of a right by one against another, while the latter is but a petition for a
declaration of a status, right or fact. Where a party litigant seeks to recover property from another, his
remedy is to file an action. Where his purpose is to seek the appointment of a guardian for an insane, his
remedy is a special proceeding to establish the fact or status of insanity calling for an appointment of
guardianship.
Considering this distinction, a petition for liquidation of an insolvent corporation should be classified a
special proceeding and not an ordinary action. Such petition does not seek the enforcement or protection of a
right nor the prevention or redress of a wrong against a party. It does not pray for affirmative relief for injury
arising from a party's wrongful act or omission nor state a cause of action that can be enforced against any
person.
What it seeks is merely a declaration by the trial court of the corporation's insolvency so that its creditors
may be able to file their claims in the settlement of the corporation's debts and obligations. Put in another
way, the petition only seeks a declaration of the corporation's debts and obligations. Put in another way, the
petition only seeks a declaration of the corporation's state of insolvency and the concomitant right of
creditors and the order of payment of their claims in the disposition of the corporation's assets.
Contrary to the rulings of the Fourteenth Division, liquidation proceedings do not resemble petitions for
interpleader. For one, an action for interpleader involves claims on a subject matter against a person who has
no interest therein. 12 This is not the case in a liquidation proceeding where the Liquidator, as representative
of the corporation, takes charge of its assets and liabilities for the benefit of the creditors. 13 He is thus
charged with insuring that the assets of the corporation are paid only to rightful claimants and in the order of
payment provided by law.
Rather, a liquidation proceeding resembles the proceeding for the settlement of state of deceased persons
under Rules 73 to 91 of the Rules of Court. The two have a common purpose: the determination of all the
assets and the payment of all the debts and liabilities of the insolvent corporation or the estate. The
Liquidator and the administrator or executor are both charged with the assets for the benefit of the claimants.
In both instances, the liability of the corporation and the estate is not disputed. The court's concern is with the
declaration of creditors and their rights and the determination of their order of payment.
Furthermore, as in the settlement of estates, multiple appeals are allowed in proceedings for liquidation of an
insolvent corporation. As the Fifth Division of the Court of Appeals, quoting the Liquidator, correctly noted:
A liquidation proceeding is a single proceeding which consists of a number of cases properly classified as
"claims." It is basically a two-phased proceeding. The first phase is concerned with the approval and
disapproval of claims. Upon the approval of the petition seeking the assistance of the proper court in the
liquidation of a close entity, all money claims against the bank are required to be filed with the liquidation
court. This phase may end with the declaration by the liquidation court that the claim is not proper or without
basis. On the other hand, it may also end with the liquidation court allowing the claim. In the latter case, the
claim shall be classified whether it is ordinary or preferred, and thereafter included Liquidator. In either case,
the order allowing or disallowing a particular claim is final order, and may be appealed by the party
aggrieved thereby.
The second phase involves the approval by the Court of the distribution plan prepared by the duly appointed
liquidator. The distribution plan specifies in detail the total amount available for distribution to creditors
whose claim were earlier allowed. The Order finally disposes of the issue of how much property is available
for disposal. Moreover, it ushers in the final phase of the liquidation proceeding — payment of all allowed
claims in accordance with the order of legal priority and the approved distribution plan.
Verily, the import of the final character of an Order of allowance or disallowance of a particular claim cannot
be overemphasized. It is the operative fact that constitutes a liquidation proceeding a "case where multiple
appeals are allowed by law." The issuance of an Order which, by its nature, affects only the particular claims
involved, and which may assume finality if no appeal is made therefrom,ipso facto creates a situation where
multiple appeals are allowed.
A liquidation proceeding is commenced by the filing of a single petition by the Solicitor General with a court
of competent jurisdiction entitled, "Petition for Assistance in the Liquidation of e.g., Pacific Banking
Corporation. All claims against the insolvent are required to be filed with the liquidation court. Although the
claims are litigated in the same proceeding, the treatment is individual. Each claim is heard separately. And
25
the Order issued relative to a particular claim applies only to said claim, leaving the other claims unaffected,
as each claim is considered separate and distinct from the others. Obviously, in the event that an appeal from
an Order allowing or disallowing a particular claim is made, only said claim is affected, leaving the others to
proceed with their ordinary course. In such case, the original records of the proceeding are not elevated to the
appellate court. They remain with the liquidation court. In lieu of the original record, a record of appeal is
instead required to be prepared and transmitted to the appellate court.
Inevitably, multiple appeals are allowed in liquidation proceedings. Consequently, a record on appeal is
necessary in each and every appeal made. Hence, the period to appeal therefrom should be thirty (30) days, a
record on appeal being required. (Record pp. 162-164).
In G.R. No. 112991 (the case of the Stockholders/Investors), the Liquidator's notice of appeal was filed on
time, having been filed on the 23rd day of receipt of the order granting the claims of the
Stockholders/Investors. However, the Liquidator did not file a record on appeal with the result that he failed
to perfect his appeal. As already stated a record on appeal is required under the Interim Rules and Guidelines
in special proceedings and for cases where multiple appeals are allowed. The reason for this is that the
several claims are actually separate ones and a decision or final order with respect to any claim can be
appealed. Necessarily the original record on appeal must remain in the trial court where other claims may
still be pending.
Because of the Liquidator's failure to perfect his appeal, the order granting the claims of the
Stockholders/Investors became final. Consequently. the Fourteenth Division's decision dismissing the
Liquidator's Petition for Certiorari, Prohibition and Mandamus must be affirmed albeit for a different
reason.
On the other hand, in G.R. No. 109373 (case of the Labor Union), we find that the Fifth Division correctly
granted the Liquidator's Petition for Certiorari. Prohibition and Mandamus. As already noted, the Liquidator
filed a notice of appeal and a motion for extension to file a record on appeal on December 10, 1991, i.e.,
within 30 days of his receipt of the order granting the Union's claim. Without waiting for the resolution of his
motion for extension, he filed on December 20, 1991 within the extension sought a record on appeal.
Respondent judge thus erred in disallowing the notice on appeal and denying the Liquidator's motion for
extension to file a record on appeal.
The Fifth Division of the Court of Appeals correctly granted the Liquidator's Petition for Certiorari,
Prohibition andMandamus and its decision should, therefore, be affirmed.
Second. In G.R. No. 109373, The Union claims that under §29 of Rep. Act No. 265, the court
merely assists  in adjudicating the claims of creditors, preserves the assets of the institution,
and implements the liquidation plan approved by the Monetary Board and that, therefore, as representative of
the Monetary Board, the Liquidator cannot question the order of the court or appeal from it. It contends that
since the Monetary Board had previously admitted PaBC's liability to the laborers by in fact setting aside the
amount of P112,234,292.44 for the payment of their claims, there was nothing else for the Liquidator to do
except to comply with the order of the court.
The Union's contention is untenable. In liquidation proceedings, the function of the trial court is not limited
to assisting in the implementation of the orders of the Monetary Board. Under the same section (§29) of the
law invoked by the Union, the court has authority to set aside the decision of the Monetary Board "if there is
a convincing proof that the action is plainly arbitrary and made in bad faith." 14 As this Court held in Rural
Bank of Buhi, Inc. v.  Court of Appeals: 15
There is no question, that the action of the monetary Board in this regard may be subject to judicial review.
Thus, it has been held that the Court's may interfere with the Central Bank's exercise of discretion in
determining whether or not a distressed bank shall be supported or liquidated. Discretion has its limits and
has never been held to include arbitrariness, discrimination or bad faith (Ramos v. Central Bank of the
Philippines, 41 SCRA 567 [1971]).
In truth, the Liquidator is the representative not only of the Central Bank but also of the insolvent bank.
Under §§28A-29 of Rep. Act No. 265 he acts in behalf of the bank "personally or through counsel as he may
retain, in all actions or proceedings or against the corporation" and he has authority "to do whatever may be
necessary for these purposes." This authority includes the power to appeal from the decisions or final orders
of the court which he believes to be contrary to the interest of the bank.

Finally the Union contends that the notice of appeal and motion for extension of time to file the record on
appeal filed in behalf of the Central Bank was not filed by the office of the Solicitor General as counsel for
the Central Bank. This contention has no merit. On October 22, 1992, as Assistant Solicitor General Cecilio
O. Estoesta informed the trial court in March 27, 1992, the OSG had previously authorized lawyers of the
PDIC to prepare and sign pleadings in the case. 16 Conformably thereto the Notice of Appeal and the Motion
for Additional Time to submit Record on Appeal filed were jointly signed by Solicitor Reynaldo I. Saludares
in behalf of the OSG and by lawyers of the PDIC. 17

WHEREFORE, in G.R. No. 109373 and G.R. No 112991, the decisions appealed from are AFFIRMED.

SO ORDERED.

Narvasa, C.J., Bidin, Regalado and Puno, JJ. concur.

26
G.R. No. 94723 August 21, 1997
KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr., father and Natural Guardian, and
Spouses FEDERICO N. SALVACION, JR., and EVELINA E. SALVACION, petitioners, 
vs.
CENTRAL BANK OF THE PHILIPPINES, CHINA BANKING CORPORATION and GREG
BARTELLI y NORTHCOTT, respondents.
 
TORRES, JR., J.:
In our predisposition to discover the "original intent" of a statute, courts become the unfeeling pillars of
the status quo. Ligle do we realize that statutes or even constitutions are bundles of compromises thrown our
way by their framers. Unless we exercise vigilance, the statute may already be out of tune and irrelevant to
our day.
The petition is for declaratory relief. It prays for the following reliefs:
a.) Immediately upon the filing of this petition, an Order be issued restraining the respondents from applying
and enforcing Section 113 of Central Bank Circular No. 960;
b.) After hearing, judgment be rendered:
1.) Declaring the respective rights and duties of petitioners and respondents;
2.) Adjudging Section 113 of Central Bank Circular No. 960 as contrary to the provisions of the Constitution,
hence void; because its provision that "Foreign currency deposits shall be exempt from attachment,
garnishment, or any other order or process of any court, legislative body, government agency or any
administrative body whatsoever
i.) has taken away the right of petitioners to have the bank deposit of defendant Greg Bartelli y Northcott
garnished to satisfy the judgment rendered in petitioners' favor in violation of substantive due process
guaranteed by the Constitution;
ii.) has given foreign currency depositors an undue favor or a class privilege in violation of the equal
protection clause of the Constitution;
iii.) has provided a safe haven for criminals like the herein respondent Greg Bartelli y Northcott since
criminals could escape civil liability for their wrongful acts by merely converting their money to a foreign
currency and depositing it in a foreign currency deposit account with an authorized bank.
The antecedent facts:
On February 4, 1989, Greg Bartelli y Northcott, an American tourist, coaxed and lured petitioner Karen
Salvacion, then 12 years old to go with him to his apartment. Therein, Greg Bartelli detained Karen
Salvacion for four days, or up to February 7, 1989 and was able to rape the child once on February 4, and
three times each day on February 5, 6, and 7, 1989. On February 7, 1989, after policemen and people living
nearby, rescued Karen, Greg Bartelli was arrested and detained at the Makati Municipal Jail. The policemen
recovered from Bartelli the following items: 1.) Dollar Check No. 368, Control No. 021000678-1166111303,
US 3,903.20; 2.) COCOBANK Bank Book No. 104-108758-8 (Peso Acct.); 3.) Dollar Account — China
Banking Corp., US$/A#54105028-2; 4.) ID-122-30-8877; 5.) Philippine Money (P234.00) cash; 6.) Door
Keys 6 pieces; 7.) Stuffed Doll (Teddy Bear) used in seducing the complainant.
On February 16, 1989, Makati Investigating Fiscal Edwin G. Condaya filed against Greg Bartelli, Criminal
Case No. 801 for Serious Illegal Detention and Criminal Cases Nos. 802, 803, 804, and 805 for four (4)
27
counts of Rape. On the same day, petitioners filed with the Regional Trial Court of Makati Civil Case No.
89-3214 for damages with preliminary attachment against Greg Bartelli. On February 24, 1989, the day there
was a scheduled hearing for Bartelli's petition for bail the latter escaped from jail.
On February 28, 1989, the court granted the fiscal's Urgent Ex-Parte Motion for the Issuance of Warrant of
Arrest and Hold Departure Order. Pending the arrest of the accused Greg Bartelli y Northcott, the criminal
cases were archived in an Order dated February 28, 1989.
Meanwhile, in Civil Case No. 89-3214, the Judge issued an Order dated February 22, 1989 granting the
application of herein petitioners, for the issuance of the writ of preliminary attachment. After petitioners gave
Bond No. JCL (4) 1981 by FGU Insurance Corporation in the amount of P100,000.00, a Writ of Preliminary
Attachment was issued by the trial court on February 28, 1989.
On March 1, 1989, the Deputy Sheriff of Makati served a Notice of Garnishment on China Banking
Corporation. In a letter dated March 13, 1989 to the Deputy Sheriff of Makati, China Banking Corporation
invoked Republic Act No. 1405 as its answer to the notice of garnishment served on it. On March 15, 1989,
Deputy Sheriff of Makati Armando de Guzman sent his reply to China Banking Corporation saying that the
garnishment did not violate the secrecy of bank deposits since the disclosure is merely incidental to a
garnishment properly and legally made by virtue of a court order which has placed the subject deposits
in custodia legis. In answer to this letter of the Deputy Sheriff of Makati, China Banking Corporation, in a
letter dated March 20, 1989, invoked Section 113 of Central Bank Circular No. 960 to the effect that the
dollar deposits or defendant Greg Bartelli are exempt from attachment, garnishment, or any other order or
process of any court, legislative body, government agency or any administrative body, whatsoever.
This prompted the counsel for petitioners to make an inquiry with the Central Bank in a letter dated April 25,
1989 on whether Section 113 of CB Circular No. 960 has any exception or whether said section has been
repealed or amended since said section has rendered nugatory the substantive right of the plaintiff to have the
claim sought to be enforced by the civil action secured by way of the writ of preliminary attachment as
granted to the plaintiff under Rule 57 of the Revised Rules of Court. The Central Bank responded as follows:
May 26, 1989
Ms. Erlinda S. Carolino
12 Pres. Osmena Avenue
South Admiral Village
Paranaque, Metro Manila
Dear Ms. Carolino:
This is in reply to your letter dated April 25, 1989 regarding your inquiry on Section 113, CB Circular No.
960 (1983).
The cited provision is absolute in application. It does not admit of any exception, nor has the same been
repealed nor amended.
The purpose of the law is to encourage dollar accounts within the country's banking system which would
help in the development of the economy. There is no intention to render futile the basic rights of a person as
was suggested in your subject letter. The law may be harsh as some perceive it, but it is still the law.
Compliance is, therefore, enjoined.
Very truly yours,
(SGD) AGAPITO S. FAJARDO
Director 1
Meanwhile, on April 10, 1989, the trial court granted petitioners' motion for leave to serve summons by
publication in the Civil Case No. 89-3214 entitled "Karen Salvacion, et al. vs. Greg Bartelli y Northcott."
Summons with the complaint was a published in the Manila Times once a week for three consecutive weeks.
Greg Bartelli failed to file his answer to the complaint and was declared in default on August 7, 1989. After
hearing the case ex-parte, the court rendered judgment in favor of petitioners on March 29, 1990, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against defendant, ordering the latter:
1. To pay plaintiff Karen E. Salvacion the amount of P500,000.00 as moral damages;
2. To pay her parents, plaintiffs spouses Federico N. Salvacion, Jr., and Evelina E. Salvacion the amount of
P150,000.00 each or a total of P300,000.00 for both of them;
3. To pay plaintiffs exemplary damages of P100,000.00; and
4. To pay attorney's fees in an amount equivalent to 25% of the total amount of damages herein awarded;
5. To pay litigation expenses of P10,000.00; plus
6. Costs of the suit.
SO ORDERED.
The heinous acts of respondent Greg Bartelli which gave rise to the award were related in graphic detail by
the trial court in its decision as follows:
The defendant in this case was originally detained in the municipal jail of Makati but was able to escape
therefrom on February 24, 1989 as per report of the Jail Warden of Makati to the Presiding Judge, Honorable
Manuel M. Cosico of the Regional Trial Court of Makati, Branch 136, where he was charged with four
counts of Rape and Serious Illegal Detention (Crim. Cases Nos. 802 to 805). Accordingly, upon motion of
plaintiffs, through counsel, summons was served upon defendant by publication in the Manila Times, a
newspaper of general circulation as attested by the Advertising Manager of the Metro Media Times, Inc., the
publisher of the said newspaper. Defendant, however, failed to file his answer to the complaint despite the
lapse of the period of sixty (60) days from the last publication; hence, upon motion of the plaintiffs, through
counsel, defendant was declared in default and plaintiffs were authorized to present their evidence ex parte.
In support of the complaint, plaintiffs presented as witnesses the minor Karen E. Salvacion, her father,
Federico N. Salvacion, Jr., a certain Joseph Aguilar and a certain Liberato Madulio, who gave the following
testimony:
Karen took her first year high school in St. Mary's Academy in Pasay City but has recently transferred to
Arellano University for her second year.
In the afternoon of February 4, 1989, Karen was at the Plaza Fair Makati Cinema Square, with her friend
Edna Tangile whiling away her free time. At about 3:30 p.m. while she was finishing her snack on a concrete
bench in front of Plaza Fair, an American approached her. She was then alone because Edna Tangile had
already left, and she was about to go home. (TSN, Aug. 15, 1989, pp. 2 to 5)
The American asked her name and introduced himself as Greg Bartelli. He sat beside her when he talked to
her. He said he was a Math teacher and told her that he has a sister who is a nurse in New York. His sister
allegedly has a daughter who is about Karen's age and who was with him in his house along Kalayaan
Avenue. (TSN, Aug. 15, 1989, pp. 4-5)
28
The American asked Karen what was her favorite subject and she told him it's Pilipino. He then invited her to
go with him to his house where she could teach Pilipino to his niece. He even gave her a stuffed toy to
persuade her to teach his niece. (Id., pp. 5-6)
They walked from Plaza Fair along Pasong Tamo, turning right to reach the defendant's house along
Kalayaan Avenue. (Id., p. 6)
When they reached the apartment house, Karen noticed that defendant's alleged niece was not outside the
house but defendant told her maybe his niece was inside. When Karen did not see the alleged niece inside the
house, defendant told her maybe his niece was upstairs, and invited Karen to go upstairs. (Id., p. 7)
Upon entering the bedroom defendant suddenly locked the door. Karen became nervous because his niece
was not there. Defendant got a piece of cotton cord and tied Karen's hands with it, and then he undressed her.
Karen cried for help but defendant strangled her. He took a packing tape and he covered her mouth with it
and he circled it around her head. (Id., p. 7)
Then, defendant suddenly pushed Karen towards the bed which was just near the door. He tied her feet and
hands spread apart to the bed posts. He knelt in front of her and inserted his finger in her sex organ. She felt
severe pain. She tried to shout but no sound could come out because there were tapes on her mouth. When
defendant withdrew his finger it was full of blood and Karen felt more pain after the withdrawal of the
finger. (Id., p. 8)
He then got a Johnson's Baby Oil and he applied it to his sex organ as well as to her sex organ. After that he
forced his sex organ into her but he was not able to do so. While he was doing it, Karen found it difficult to
breathe and she perspired a lot while feeling severe pain. She merely presumed that he was able to insert his
sex organ a little, because she could not see. Karen could not recall how long the defendant was in that
position. (Id. pp. 8-9)
After that, he stood up and went to the bathroom to wash. He also told Karen to take a shower and he untied
her hands. Karen could only hear the sound of the water while the defendant, she presumed, was in the
bathroom washing his sex organ. When she took a shower more blood came out from her. In the meantime,
defendant changed the mattress because it was full of blood. After the shower, Karen was allowed by
defendant to sleep. She fell asleep because she got tired crying. The incident happened at about 4:00 p.m.
Karen had no way of determining the exact time because defendant removed her watch. Defendant did not
care to give her food before she went to sleep. Karen woke up at about 8:00 o'clock the following morning.
(Id., pp. 9-10)
The following day, February 5, 1989, a Sunday, after a breakfast of biscuit and coke at about 8:30 to 9:00
a.m. defendant raped Karen while she was still bleeding. For lunch, they also took biscuit and coke. She was
raped for the second time at about 12:00 to 2:00 p.m. In the evening, they had rice for dinner which
defendant had stored downstairs; it was he who cooked the rice that is why it looks like "lugaw". For the
third time, Karen was raped again during the night. During those three times defendant succeeded in
inserting his sex organ but she could not say whether the organ was inserted wholly.
Karen did not see any firearm or any bladed weapon. The defendant did not tie her hands and feet nor put a
tape on her mouth anymore but she did not cry for help for fear that she might be killed; besides, all the
windows and doors were closed. And even if she shouted for help, nobody would hear her. She was so afraid
that if somebody would hear her and would be able to call the police, it was still possible that as she was still
inside the house, defendant might kill her. Besides, the defendant did not leave that Sunday, ruling out her
chance to call for help. At nighttime he slept with her again. (TSN, Aug. 15, 1989, pp. 12-14)
On February 6, 1989, Monday, Karen was raped three times, once in the morning for thirty minutes after a
breakfast of biscuits; again in the afternoon; and again in the evening. At first, Karen did not know that there
was a window because everything was covered by a carpet, until defendant opened the window for around
fifteen minutes or less to let some air in, and she found that the window was covered by styrofoam and
plywood. After that, he again closed the window with a hammer and he put the styrofoam, plywood, and
carpet back. (Id., pp. 14-15)
That Monday evening, Karen had a chance to call for help, although defendant left but kept the door closed.
She went to the bathroom and saw a small window covered by styrofoam and she also spotted a small hole.
She stepped on the bowl and she cried for help through the hole. She cried: "Maawa no po kayo so
akin. Tulungan n'yo akong makalabas dito. Kinidnap ako!" Somebody heard her. It was a woman, probably a
neighbor, but she got angry and said she was "istorbo". Karen pleaded for help and the woman told her to
sleep and she will call the police. She finally fell asleep but no policeman came. (TSN, Aug. 15, 1989, pp.
15-16)
She woke up at 6:00 o'clock the following morning, and she saw defendant in bed, this time sleeping. She
waited for him to wake up. When he woke up, he again got some food but he always kept the door locked.
As usual, she was merely fed with biscuit and coke. On that day, February 7, 1989, she was again raped three
times. The first at about 6:30 to 7:00 a.m., the second at about 8:30 — 9:00, and the third was after lunch at
12:00 noon. After he had raped her for the second time he left but only for a short while. Upon his return, he
caught her shouting for help but he did not understand what she was shouting about. After she was raped the
third time, he left the house. (TSN, Aug. 15, 1989, pp. 16-17) She again went to the bathroom and shouted
for help. After shouting for about five minutes, she heard many voices. The voices were asking for her name
and she gave her name as Karen Salvacion. After a while, she heard a voice of a woman saying they will just
call the police. They were also telling her to change her clothes. She went from the bathroom to the room but
she did not change her clothes being afraid that should the neighbors call for the police and the defendant see
her in different clothes, he might kill her. At that time she was wearing a T-shirt of the American because the
latter washed her dress. (Id., p. 16)
Afterwards, defendant arrived and he opened the door. He asked her if she had asked for help because there
were many policemen outside and she denied it. He told her to change her clothes, and she did change to the
one she was wearing on Saturday. He instructed her to tell the police that she left home and willingly; then he
went downstairs but he locked the door. She could hear people conversing but she could not understand what
they were saying. (Id., p. 19)
When she heard the voices of many people who were conversing downstairs, she knocked repeatedly at the
door as hard as she could. She heard somebody going upstairs and when the door was opened, she saw a
policeman. The policeman asked her name and the reason why she was there. She told him she was
kidnapped. Downstairs, he saw about five policemen in uniform and the defendant was talking to them.
"Nakikipag-areglo po sa mga pulis," Karen added. "The policeman told him to just explain at the precinct.
(Id., p. 20)
They went out of the house and she saw some of her neighbors in front of the house. They rode the car of a
certain person she called Kuya Boy together with defendant, the policeman, and two of her neighbors whom
she called Kuya Bong Lacson and one Ate Nita. They were brought to Sub-Station I and there she was
investigated by a policeman. At about 2:00 a.m., her father arrived, followed by her mother together with
some of their neighbors. Then they were brought to the second floor of the police headquarters. (Id., p. 21)
At the headquarters, she was asked several questions by the investigator. The written statement she gave to
the police was marked as Exhibit A. Then they proceeded to the National Bureau of Investigation together
with the investigator and her parents. At the NBI, a doctor, a medico-legal officer, examined her private
parts. It was already 3:00 in the early morning of the following day when they reached the NBI. (TSN, Aug.
15, 1989, p. 22) The findings of the medico-legal officer has been marked as Exhibit B.
She was studying at the St. Mary's Academy in Pasay City at the time of the incident but she subsequently
transferred to Apolinario Mabini, Arellano University, situated along Taft Avenue, because she was ashamed
to be the subject of conversation in the school. She first applied for transfer to Jose Abad Santos, Arellano
University along Taft Avenue near the Light Rail Transit Station but she was denied admission after she told
29
the school the true reason for her transfer. The reason for their denial was that they might be implicated in the
case. (TSN, Aug. 15, 1989, p. 46)
xxx xxx xxx
After the incident, Karen has changed a lot. She does not play with her brother and sister anymore, and she is
always in a state of shock; she has been absent-minded and is ashamed even to go out of the house. (TSN,
Sept. 12, 1989, p. 10) She appears to be restless or sad, (Id., p. 11) The father prays for P500,000.00 moral
damages for Karen for this shocking experience which probably, she would always recall until she reaches
old age, and he is not sure if she could ever recover from this experience. (TSN, Sept. 24, 1989, pp. 10-11)
Pursuant to an Order granting leave to publish notice of decision, said notice was published in the Manila
Bulletin once a week for three consecutive weeks. After the lapse of fifteen (15) days from the date of the
last publication of the notice of judgment and the decision of the trial court had become final, petitioners
tried to execute on Bartelli's dollar deposit with China Banking Corporation. Likewise, the bank invoked
Section 113 of Central Bank Circular No. 960.
Thus, petitioners decided to seek relief from this Court.
The issues raised and the arguments articulated by the parties boil down to two:
May this Court entertain the instant petition despite the fact that original jurisdiction in petitions for
declaratory relief rests with the lower court? Should Section 113 of Central Bank Circular No. 960 and
Section 8 of R.A. 6426, as amended by P.D. 1246, otherwise known as the Foreign Currency Deposit Act be
made applicable to a foreign transient?
Petitioners aver as heretofore stated that Section 113 of Central Bank Circular No. 960 providing that
"Foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of
any court, legislative body, government agency or any administrative body whatsoever." should be adjudged
as unconstitutional on the grounds that: 1.) it has taken away the right of petitioners to have the bank deposit
of defendant Greg Bartelli y Northcott garnished to satisfy the judgment rendered in petitioners' favor in
violation of substantive due process guaranteed by the Constitution; 2.) it has given foreign currency
depositors an undue favor or a class privilege in violation of the equal protection clause of the Constitution;
3.) it has provided a safe haven for criminals like the herein respondent Greg Bartelli y Northcott since
criminals could escape civil liability for their wrongful acts by merely converting their money to a foreign
currency and depositing it in a foreign currency deposit account with an authorized bank; and 4.) The
Monetary Board, in issuing Section 113 of Central Bank Circular No. 960 has exceeded its delegated quasi-
legislative power when it took away: a.) the plaintiffs substantive right to have the claim sought to be
enforced by the civil action secured by way of the writ of preliminary attachment as granted by Rule 57 of
the Revised Rules of Court; b.) the plaintiffs substantive right to have the judgment credit satisfied by way of
the writ of execution out of the bank deposit of the judgment debtor as granted to the judgment creditor by
Rule 39 of the Revised Rules of Court, which is beyond its power to do so.
On the other hand, respondent Central Bank, in its Comment alleges that the Monetary Board in issuing
Section 113 of CB Circular No. 960 did not exceed its power or authority because the subject Section is
copied verbatim from a portion of R.A. No. 6426 as amended by P.D. 1246. Hence, it was not the Monetary
Board that grants exemption from attachment or garnishment to foreign currency deposits, but the law (R.A.
6426 as amended) itself; that it does not violate the substantive due process guaranteed by the Constitution
because a.) it was based on a law; b.) the law seems to be reasonable; c.) it is enforced according to regular
methods of procedure; and d.) it applies to all members of a class.
Expanding, the Central Bank said; that one reason for exempting the foreign currency deposits from
attachment, garnishment or any other order or process of any court, is to assure the development and speedy
growth of the Foreign Currency Deposit System and the Offshore Banking System in the Philippines; that
another reason is to encourage the inflow of foreign currency deposits into the banking institutions thereby
placing such institutions more in a position to properly channel the same to loans and investments in the
Philippines, thus directly contributing to the economic development of the country; that the subject section is
being enforced according to the regular methods of procedure; and that it applies to all foreign currency
deposits made by any person and therefore does not violate the equal protection clause of the Constitution.
Respondent Central Bank further avers that the questioned provision is needed to promote the public interest
and the general welfare; that the State cannot just stand idly by while a considerable segment of the society
suffers from economic distress; that the State had to take some measures to encourage economic
development; and that in so doing persons and property may be subjected to some kinds of restraints or
burdens to secure the general welfare or public interest. Respondent Central Bank also alleges that Rule 39
and Rule 57 of the Revised Rules of Court provide that some properties are exempted from
execution/attachment especially provided by law and R.A. No. 6426 as amended is such a law, in that it
specifically provides, among others, that foreign currency deposits shall be exempted from attachment,
garnishment, or any other order or process of any court, legislative body, government agency or any
administrative body whatsoever.
For its part, respondent China Banking Corporation, aside from giving reasons similar to that of respondent
Central Bank, also stated that respondent China Bank is not unmindful of the inhuman sufferings
experienced by the minor Karen E. Salvacion from the beastly hands of Greg Bartelli; that it is only too
willing to release the dollar deposit of Bartelli which may perhaps partly mitigate the sufferings petitioner
has undergone; but it is restrained from doing so in view of R.A. No. 6426 and Section 113 of Central Bank
Circular No. 960; and that despite the harsh effect of these laws on petitioners, CBC has no other alternative
but to follow the same.
This Court finds the petition to be partly meritorious.
Petitioner deserves to receive the damages awarded to her by the court. But this petition for declaratory relief
can only be entertained and treated as a petition for mandamus to require respondents to honor and comply
with the writ of execution in Civil Case No. 89-3214.
This Court has no original and exclusive jurisdiction over a petition for declaratory relief. 2 However,
exceptions to this rule have been recognized. Thus, where the petition has far-reaching implications and
raises questions that should be resolved, it may be treated as one for mandamus. 3
Here is a child, a 12-year old girl, who in her belief that all Americans are good and in her gesture of
kindness by teaching his alleged niece the Filipino language as requested by the American, trustingly went
with said stranger to his apartment, and there she was raped by said American tourist Greg Bartelli. Not once,
but ten times. She was detained therein for four (4) days. This American tourist was able to escape from the
jail and avoid punishment. On the other hand, the child, having received a favorable judgment in the Civil
Case for damages in the amount of more than P1,000,000.00, which amount could alleviate the humiliation,
anxiety, and besmirched reputation she had suffered and may continue to suffer for a long, long time; and
knowing that this person who had wronged her has the money, could not, however get the award of damages
because of this unreasonable law. This questioned law, therefore makes futile the favorable judgment and
award of damages that she and her parents fully deserve. As stated by the trial court in its decision,
Indeed, after hearing the testimony of Karen, the Court believes that it was undoubtedly a shocking and
traumatic experience she had undergone which could haunt her mind for a long, long time, the mere recall of
which could make her feel so humiliated, as in fact she had been actually humiliated once when she was
refused admission at the Abad Santos High School, Arellano University, where she sought to transfer from
another school, simply because the school authorities of the said High School learned about what happened
to her and allegedly feared that they might be implicated in the case.
xxx xxx xxx
30
The reason for imposing exemplary or corrective damages is due to the wanton and bestial manner defendant
had committed the acts of rape during a period of serious illegal detention of his hapless victim, the minor
Karen Salvacion whose only fault was in her being so naive and credulous to believe easily that defendant,
an American national, could not have such a bestial desire on her nor capable of committing such a heinous
crime. Being only 12 years old when that unfortunate incident happened, she has never heard of an old
Filipino adage that in every forest there is a
snake, . . . . 4
If Karen's sad fate had happened to anybody's own kin, it would be difficult for him to fathom how the
incentive for foreign currency deposit could be more important than his child's rights to said award of
damages; in this case, the victim's claim for damages from this alien who had the gall to wrong a child of
tender years of a country where he is a mere visitor. This further illustrates the flaw in the questioned
provisions.
It is worth mentioning that R.A. No. 6426 was enacted in 1983 or at a time when the country's economy was
in a shambles; when foreign investments were minimal and presumably, this was the reason why said statute
was enacted. But the realities of the present times show that the country has recovered economically; and
even if not, the questioned law still denies those entitled to due process of law for being unreasonable and
oppressive. The intention of the questioned law may be good when enacted. The law failed to anticipate the
iniquitous effects producing outright injustice and inequality such as the case before us.
It has thus been said that —
But I also know, 5 that laws and institutions must go hand in hand with the progress of the human mind. As
that becomes more developed, more enlightened, as new discoveries are made, new truths are disclosed and
manners and opinions change with the change of circumstances, institutions must advance also, and keep
pace with the times. . . We might as well require a man to wear still the coat which fitted him when a boy, as
civilized society to remain ever under the regimen of their barbarous ancestors.
In his Comment, the Solicitor General correctly opined, thus:
The present petition has far-reaching implications on the right of a national to obtain redress for a wrong
committed by an alien who takes refuge under a law and regulation promulgated for a purpose which does
not contemplate the application thereof envisaged by the alien. More specifically, the petition raises the
question whether the protection against attachment, garnishment or other court process accorded to foreign
currency deposits by PD No. 1246 and CB Circular No. 960 applies when the deposit does not come from a
lender or investor but from a mere transient or tourist who is not expected to maintain the deposit in the bank
for long.
The resolution of this question is important for the protection of nationals who are victimized in the forum by
foreigners who are merely passing through.
xxx xxx xxx
. . . Respondents China Banking Corporation and Central Bank of the Philippines refused to honor the writ of
execution issued in Civil Case No. 89-3214 on the strength of the following provision of Central Bank
Circular No. 960:
Sec. 113. Exemption from attachment. — Foreign currency deposits shall be exempt from attachment,
garnishment, or any other order or process of any court, legislative body, government agency or any
administrative body whatsoever.
Central Bank Circular No. 960 was issued pursuant to Section 7 of Republic Act No. 6426:
Sec. 7. Rules and Regulations. The Monetary Board of the Central Bank shall promulgate such rules and
regulations as may be necessary to carry out the provisions of this Act which shall take effect after the
publication of such rules and regulations in the Official Gazette and in a newspaper of national circulation for
at least once a week for three consecutive weeks. In case the Central Bank promulgates new rules and
regulations decreasing the rights of depositors, the rules and regulations at the time the deposit was made
shall govern.
The aforecited Section 113 was copied from Section 8 of Republic Act NO. 6426, as amended by P.D. 1246,
thus:
Sec. 8. Secrecy of Foreign Currency Deposits. — All foreign currency deposits authorized under this Act, as
amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential
Decree No. 1034, are hereby declared as and considered of an absolutely confidential nature and, except
upon the written permission of the depositor, in no instance shall such foreign currency deposits be
examined, inquired or looked into by any person, government official, bureau or office whether judicial or
administrative or legislative or any other entity whether public or private: Provided, however, that said
foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of
any court, legislative body, government agency or any administrative body whatsoever.
The purpose of PD 1246 in according protection against attachment, garnishment and other court process to
foreign currency deposits is stated in its whereases, viz.:
WHEREAS, under Republic Act No. 6426, as amended by Presidential Decree No. 1035, certain Philippine
banking institutions and branches of foreign banks are authorized to accept deposits in foreign currency;
WHEREAS, under the provisions of Presidential Decree No. 1034 authorizing the establishment of an
offshore banking system in the Philippines, offshore banking units are also authorized to receive foreign
currency deposits in certain cases;
WHEREAS, in order to assure the development and speedy growth of the Foreign Currency Deposit System
and the Offshore Banking System in the Philippines, certain incentives were provided for under the two
Systems such as confidentiality of deposits subject to certain exceptions and tax exemptions on the interest
income of depositors who are nonresidents and are not engaged in trade or business in the Philippines;
WHEREAS, making absolute the protective cloak of confidentiality over such foreign currency deposits,
exempting such deposits from tax, and guaranteeing the vested rights of depositors would better encourage
the inflow of foreign currency deposits into the banking institutions authorized to accept such deposits in the
Philippines thereby placing such institutions more in a position to properly channel the same to loans and
investments in the Philippines, thus directly contributing to the economic development of the country;
Thus, one of the principal purposes of the protection accorded to foreign currency deposits is "to assure the
development and speedy growth of the Foreign Currency Deposit system and the Offshore Banking in the
Philippines" (3rd Whereas).
The Offshore Banking System was established by PD No. 1034. In turn, the purposes of PD No. 1034 are as
follows:
WHEREAS, conditions conducive to the establishment of an offshore banking system, such as political
stability, a growing economy and adequate communication facilities, among others, exist in the Philippines;
WHEREAS, it is in the interest of developing countries to have as wide access as possible to the sources of
capital funds for economic development;
WHEREAS, an offshore banking system based in the Philippines will be advantageous and beneficial to the
country by increasing our links with foreign lenders, facilitating the flow of desired investments into the
Philippines, creating employment opportunities and expertise in international finance, and contributing to the
national development effort.
31
WHEREAS, the geographical location, physical and human resources, and other positive factors provide the
Philippines with the clear potential to develop as another financial center in Asia;
On the other hand, the Foreign Currency Deposit system was created by PD. No. 1035. Its purposes are as
follows:
WHEREAS, the establishment of an offshore banking system in the Philippines has been authorized under a
separate decree;
WHEREAS, a number of local commercial banks, as depository bank under the Foreign Currency Deposit
Act (RA No. 6426), have the resources and managerial competence to more actively engage in foreign
exchange transactions and participate in the grant of foreign currency loans to resident corporations and
firms;
WHEREAS, it is timely to expand the foreign currency lending authority of the said depository banks under
RA 6426 and apply to their transactions the same taxes as would be applicable to transaction of the proposed
offshore banking units;
It is evident from the above [Whereas clauses] that the Offshore Banking System and the Foreign Currency
Deposit System were designed to draw deposits from foreign lenders and investors (Vide second Whereas of
PD No. 1034; third Whereas of PD No. 1035). It is these deposits that are induced by the two laws and given
protection and incentives by them.
Obviously, the foreign currency deposit made by a transient or a tourist is not the kind of deposit encouraged
by PD Nos. 1034 and 1035 and given incentives and protection by said laws because such depositor stays
only for a few days in the country and, therefore, will maintain his deposit in the bank only for a short time.
Respondent Greg Bartelli, as stated, is just a tourist or a transient. He deposited his dollars with respondent
China Banking Corporation only for safekeeping during his temporary stay in the Philippines.
For the reasons stated above, the Solicitor General thus submits that the dollar deposit of respondent Greg
Bartelli is not entitled to the protection of Section 113 of Central Bank Circular No. 960 and PD No. 1246
against attachment, garnishment or other court processes. 6
In fine, the application of the law depends on the extent of its justice. Eventually, if we rule that the
questioned Section 113 of Central Bank Circular No. 960 which exempts from attachment, garnishment, or
any other order or process of any court, legislative body, government agency or any administrative body
whatsoever, is applicable to a foreign transient, injustice would result especially to a citizen aggrieved by a
foreign guest like accused Greg Bartelli. This would negate Article 10 of the New Civil Code which provides
that "in case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body
intended right and justice to prevail. "Ninguno non deue enriquecerse tortizeramente con dano de otro."
Simply stated, when the statute is silent or ambiguous, this is one of those fundamental solutions that would
respond to the vehement urge of conscience. (Padilla vs. Padilla, 74 Phil. 377).
It would be unthinkable, that the questioned Section 113 of Central Bank No. 960 would be used as a device
by accused Greg Bartelli for wrongdoing, and in so doing, acquitting the guilty at the expense of the
innocent.
Call it what it may — but is there no conflict of legal policy here? Dollar against Peso? Upholding the final
and executory judgment of the lower court against the Central Bank Circular protecting the foreign
depositor? Shielding or protecting the dollar deposit of a transient alien depositor against injustice to a
national and victim of a crime? This situation calls for fairness against legal tyranny.
We definitely cannot have both ways and rest in the belief that we have served the ends of justice.
IN VIEW WHEREOF, the provisions of Section 113 of CB Circular No. 960 and PD No. 1246, insofar as it
amends Section 8 of R.A. No. 6426 are hereby held to be INAPPLICABLE to this case because of its
peculiar circumstances. Respondents are hereby REQUIRED to COMPLY with the writ of execution issued
in Civil Case No. 89-3214, "Karen Salvacion, et al. vs. Greg Bartelli y Northcott, by Branch CXLIV, RTC
Makati and to RELEASE to petitioners the dollar deposit of respondent Greg Bartelli y Northcott in such
amount as would satisfy the judgment.

SO ORDERED.

32
ANTHONY S. YU, ROSITA G. YU and JASON G. YU, Petitioners, versus JOSEPH S.
YUKAYGUAN, NANCY L. YUKAYGUAN, JERALD NERWIN L. YUKAYGUAN, and JILL
NESLIE L. YUKAYGUAN, [on their own behalf and on behalf of] WINCHESTER INDUSTRIAL
SUPPLY, INC., Respondents.
G.R. No. 177549 | 2009-06-18
Winchester, Inc., still in petitioner Anthony's name. 
Respondents then alleged that on 30 June 1985, Winchester, Inc. bought from its incorporators, excluding
petitioner Anthony, their accumulated 8,500 shares in the corporation.[11] Subsequently, on 7 November
1995, Winchester, Inc. sold the same 8,500 shares to other persons, who included respondents Nancy, Jerald,
and Jill; and petitioners Rosita and Jason.[12] 

Respondents further averred that although respondent Joseph appeared as the Secretary and Treasurer in the
corporate records of Winchester, Inc., petitioners actually controlled and ran the said corporation as if it were
their own family business. Petitioner Rosita handled the money market placements of the corporation to the
Discussions citing this case are available. exclusion of respondent Joseph, the designated Treasurer of Winchester, Inc. Petitioners were also
misappropriating the funds and properties of Winchester, Inc. by understating the sales, charging their
Derivative suit  personal and family expenses to the said corporation, and withdrawing stocks for their personal use without
Liquidation  paying for the same. Respondents attached to the Complaint various receipts[13] to prove the personal and
family expenses charged by petitioners to Winchester, Inc. 
D E C I S I O N 
Respondents, therefore, prayed that respondent Joseph be declared the owner of the 200 shares of stock in
petitioner Anthony's name. Respondents also prayed that petitioners be ordered to: (1) deposit the corporate
CHICO-NAZARIO, J.: 
books and records of Winchester, Inc. with the Branch Clerk of Court of the RTC for respondents'
inspection; (2) render an accounting of all the funds of Winchester, Inc. which petitioners misappropriated;
Before Us is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court, which seeks to
(3) reimburse the personal and family expenses which petitioners charged to Winchester, Inc., as well as the
reverse and set aside the Resolutions dated 18 July 2006[2] and 19 April 2007[3] of the Court of Appeals in
properties of the corporation which petitioners withheld without payment; and (4) pay respondents' attorney's
CA-G.R. SP No. 00185. Upon herein respondents' motion, the Court of Appeals rendered the assailed
fees and litigation expenses. In the meantime, respondents sought the appointment of a Management
Resolution dated 18 July 2006, reconsidering its Decision[4] dated 15 February 2006; and remanding the
Committee and the freezing of all corporate funds by the trial court. 
case to the Regional Trial Court (RTC) of Cebu City, Branch 11, for necessary proceedings, in effect,
reversing the Decision[5] dated 10 November 2004 of the RTC which dismissed respondents' Complaint in
On 13 November 2002, petitioners filed an Answer with Compulsory Counterclaim,[14] attached to which
SRC Case No. 022-CEB. Herein petitioners' Motion for Reconsideration of the Resolution dated 18 July
was petitioner Anthony's Affidavit.[15] Petitioners vehemently denied the allegation that petitioner Anthony
2006 was denied by the appellate court in the other assailed Resolution dated 19 April 2007. 
was a mere trustee for respondent Joseph of the 1,000 shares of stock in Winchester, Inc. in petitioner
Anthony's name. For the incorporation of Winchester, Inc., petitioner Anthony contributed P25,000.00 paid-
Herein petitioners are members of the Yu Family, particularly, the father, Anthony S. Yu (Anthony); the
up capital, representing 25% of the total par value of the 1,000 shares he subscribed to, the said amount being
wife, Rosita G. Yu (Rosita); and their son, Jason G. Yu (Jason). 
paid out of petitioner Anthony's personal savings and petitioners Anthony and Rosita's conjugal funds.
Winchester, Inc. was being co-managed by petitioners and respondents, and the attached receipts, allegedly
Herein respondents composed the Yukayguan Family, namely, the father, Joseph S. Yukayguan (Joseph); the
evidencing petitioners' use of corporate funds for personal and family expenses, were in fact signed and
wife, Nancy L. Yukayguan (Nancy); and their children Jerald Nerwin L. Yukayguan (Jerald) and Jill Neslie
approved by respondent Joseph. 
Yukayguan (Jill). 
By way of special and affirmative defenses, petitioners contended in their Answer with Compulsory
Petitioner Anthony is the older half-brother of respondent Joseph. 
Counterclaim that respondents had no cause of action against them. Respondents' Complaint was purely
intended for harassment. It should be dismissed under Section 1(j), Rule 16[16] of the Rules of Court for
Petitioners and the respondents were all stockholders of Winchester Industrial Supply, Inc. (Winchester,
failure to comply with conditions precedent before its filing. First, there was no allegation in respondents'
Inc.), a domestic corporation engaged in the operation of a general hardware and industrial supply and
Complaint that earnest efforts were exerted to settle the dispute between the parties. Second, since
equipment business. 
respondents' Complaint purportedly constituted a derivative suit, it noticeably failed to allege that
respondents exerted effort to exhaust all available remedies in the Articles of Incorporation and By-Laws of
On 15 October 2002, respondents filed against petitioners a verified Complaint for Accounting, Inspection of
Winchester, Inc., as well as in the Corporation Code. And third, given that respondents' Complaint was also
Corporate Books and Damages through Embezzlement and Falsification of Corporate Records and
for inspection of corporate books, it lacked the allegation that respondents made a previous demand upon
Accounts[6] before the RTC of Cebu. The said Complaint was filed by respondents, in their own behalf and
petitioners to inspect the corporate books but petitioners refused. Prayed for by petitioners, in addition to the
as a derivative suit on behalf of Winchester, Inc., and was docketed as SRC Case No. 022-CEB. The factual
dismissal of respondents' Complaint, was payment of moral and exemplary damages, attorney's fees,
background of the Complaint was stated in the attached Affidavit executed by respondent Joseph. 
litigation expenses, and cost of suit. 
According to respondents,[7] Winchester, Inc. was established and incorporated on 12 September 1977, with
On 30 October 2002, the hearing on the application for the appointment of a Management Committee was
petitioner Anthony as one of the incorporators, holding 1,000 shares of stock worth P100,000.00.[8]
commenced. Respondent Joseph submitted therein, as his direct testimony, the same Affidavit that he
Petitioner Anthony paid for the said shares of stock with respondent Joseph's money, thus, making the former
executed, which was attached to the respondents' Complaint. On 4 November 2002, respondent Joseph was
a mere trustee of the shares for the latter. On 14 November 1984, petitioner Anthony ceded 800 of his 1,000
cross-examined by the counsel for petitioners. Thereafter, the continuation of the hearing was set for 29
shares of stock in Winchester, Inc. to respondent Joseph, as well as Yu Kay Guan,[9] Siao So Lan, and John
November 2002, in order for petitioners to adduce evidence in support of their opposition to the application
S. Yu.[10] Petitioner Anthony remained as trustee for respondent Joseph of the 200 shares of stock in
33
for the appointment of a Management Committee.[17]  personal expenses to the corporate funds. 

During the hearing on 29 November 2002, the parties manifested before the RTC that there was an ongoing The RTC subsequently promulgated its Decision on 10 November 2004 dismissing SRC Case No. 022-CEB.
mediation between them, and so the hearing on the appointment of a Management Committee was reset to The dispositive portion of said Decision reads: 
another date. 
WHEREFORE, in view of the foregoing premises and for lack of merit, this Court hereby renders judgment
In amicable settlement of their dispute, the petitioners and respondents agreed to a division of the stocks in in this case DISMISSING the complaint filed by the [herein respondents]. 
trade,[18] the real properties, and the other assets of Winchester, Inc. In partial implementation of the afore-
mentioned amicable settlement, the stocks in trade and real properties in the name of Winchester, Inc. were The Court also hereby dismisses the [herein petitioners'] counterclaim because it has not been indubitably
equally distributed among petitioners and respondents. As a result, the stockholders and members of the shown that the filing by the [respondents] of the latter's complaint was done in bad faith and with malice.
Board of Directors of Winchester, Inc. passed, on 4 January 2003, a unanimous Resolution[19] dissolving the [27] 
corporation as of said date. 
The RTC declared that respondents failed to show that they had complied with the essential requisites for
On 22 February 2004, respondents filed their pre-trial brief.[20]  filing a derivative suit as set forth in Rule 8 of the Interim Rules of Procedure Governing Intra-Corporate
Controversies: 
On 25 June 2004, petitioners filed a Manifestation[21] informing the RTC of the existence of their amicable
settlement with respondents. Respondents, however, made their own manifestation before the RTC that they (1) He was a stockholder or member at the time the acts or transactions subject of the action occurred and at
were repudiating said settlement, in view of the failure of the parties thereto to divide the remaining assets of the time the action was filed; 
Winchester, Inc. Consequently, respondents moved to have SRC Case No. 022-CEB set for pre-trial. 
(2) He exerted all reasonable efforts, and alleges the same with particularity in the complaint, to exhaust all
On 23 August 2004, petitioners filed their pre-trial brief.[22]  remedies available under the articles of incorporation, by-laws, laws or rules governing the corporation or
partnership to obtain the relief he desires; 
On 26 August 2004, instead of holding a formal pre-trial conference and resuming the hearing on the
application for the appointment of a Management Committee, petitioners and respondents agreed that the (3) No appraisal rights are available for the act or acts complained of; and 
RTC may already render a judgment based on the pleadings. In accordance with the agreement of the parties,
the RTC issued, on even date, an Order[23] which stated:  (4) The suit is not a nuisance or harassment suit. 

ORDER  As to respondents' prayer for the inspection of corporate books and records, the RTC adjudged that they had
likewise failed to comply with the requisites entitling them to the same. Section 2, Rule 7 of the Interim
During the pre-trial conference held on August 26, 2004, counsels of the parties manifested, agreed and Rules of Procedure Governing Intra-Corporate Controversies requires that the complaint for inspection of
suggested that a judgment may be rendered by the Court in this case based on the pleadings, affidavits, and corporate books or records must state that: 
other evidences on record, or to be submitted by them, pursuant to the provision of Rule 4, Section 4 of the
Rule on Intra-Corporate Controversies. The suggestion of counsels was approved by the Court.  (1) The case is for the enforcement of plaintiff's right of inspection of corporate orders or records and/or to be
furnished with financial statements under Sections 74 and 75 of the Corporation Code of the Philippines; 
Accordingly, the Court hereby orders the counsels of the parties to file simultaneously their respective
memoranda within a non-extendible period of twenty (20) days from notice hereof. Thereafter, the instant (2) A demand for inspection and copying of books and records and/or to be furnished with financial
case will be deemed submitted for resolution.  statements made by the plaintiff upon defendant; 

x x x x  (3) The refusal of defendant to grant the demands of the plaintiff and the reasons given for such refusals, if
any; and 
Cebu City, August 26, 2004. 
(4) The reasons why the refusal of defendant to grant the demands of the plaintiff is unjustified and illegal,
(signed)  stating the law and jurisprudence in support thereof. 
SILVESTRE A. MAAMO, JR. 
Acting Presiding Judge  The RTC further noted that respondent Joseph was the corporate secretary of Winchester, Inc. and, as such,
he was supposed to be the custodian of the corporate books and records; therefore, a court order for
Petitioners and respondents duly filed their respective Memoranda,[24] discussing the arguments already set respondents' inspection of the same was no longer necessary. The RTC similarly denied respondents' demand
forth in the pleadings they had previously submitted to the RTC. Respondents, though, attached to their for accounting as it was clear that Winchester, Inc. had been engaging the services of an audit firm.
Memorandum a Supplemental Affidavit[25] of respondent Joseph, containing assertions that refuted the Respondent Joseph himself described the audit firm as competent and independent, and believed that the
allegations in petitioner Anthony's Affidavit, which was earlier submitted with petitioners' Answer with audited financial statements the said audit firm prepared were true, faithful, and correct. 
Compulsory Counterclaim. Respondents also appended to their Memorandum additional documentary
evidence,[26] consisting of original and duplicate cash invoices and cash disbursement receipts issued by Finding the claims of the parties for damages against each other to be unsubstantiated, the RTC thereby
Winchester, Inc., to further substantiate their claim that petitioners were understating sales and charging their dismissed the same. 

34

Respondents challenged the foregoing RTC Decision before the Court of Appeals via a Petition for Review
under Rule 43 of the Rules of Court, docketed as CA-G.R. SP No. 00185. 
On 15 February 2006, the Court of Appeals rendered its Decision, affirming the 10 December 2004 Decision
of the RTC. Said the appellate court: 
After a careful and judicious scrutiny of the extant records of the case, together with the applicable laws and
jurisprudence, WE see no reason or justification for granting the present appeal. 
x x x x  stating the law and jurisprudence in support thereof.
and/or to be furnished with financial statements under Section 74 and 75 of the Corporation Code of the
Philippines; 
(2) A demand for inspection and copying of books [and/or] to be furnished with financial statements made by
the plaintiffs upon defendant; 
(3) The refusal of the defendant to grant the demands of the plaintiff and the reasons given for such refusal, if
any; and 
(4) The reasons why the refusal of defendant to grant the demands of the plaintiff is unjustified and illegal,
 

x x x [T]his Court sees that the instant petition would still fail taking into consideration all the pleadings and x x x x 
evidence of the parties except the supplemental affidavit of [herein respondent] Joseph and its corresponding
annexes appended in [respondents'] memorandum before the Court a quo. The Court a quo have (sic) A perusal of the extant record shows that [herein respondents] have not complied with the above quoted
outrightly dismissed the complaint for its failure to comply with the mandatory provisions of the Interim provisions. [Respondents] should be mindful that in filing their complaint which, as admitted by them, is a
Rules of Procedure for Intra-Corporate Controversies particularly Rule 2, Section 4(3), Rule 8, Section [1(2)] derivative suit, should have first exhausted all available remedies under its (sic) Articles of Incorporation, or
and Rule 7, Section 2 thereof, which reads as follows:  its by-laws, or any laws or rules governing the corporation. The contention of [respondent Joseph] that he
had indeed made several talks to (sic) his brother [herein petitioner Anthony] to settle their differences is not
RULE 2  tantamount to exhaustion of remedies. What the law requires is to bring the grievance to the Board of
Directors or Stockholders for the latter to take the opportunity to settle whatever problem in its regular
COMMENCEMENT OF ACTION AND PLEADINGS  meeting or special meeting called for that purpose which [respondents] failed to do. x x x The requirements
laid down by the Interim Rules of Procedure for Intra-Corporate Controversies are mandatory which cannot
Sec. 4. Complaint. - The complaint shall state or contain:  be dispensed with by any stockholder of a corporation before filing a derivative suit.[28] (Emphasis ours.) 

x x x x  The Court of Appeals likewise sustained the refusal by the RTC to consider respondent Joseph's
Supplemental Affidavit and other additional evidence, which respondents belatedly submitted with their
(3) the law, rule, or regulation relied upon, violated, or sought to be enforced;  Memorandum to the said trial court. The appellate court ratiocinated that: 

x x x x  With regard to the claim of [herein respondents] that the supplemental affidavit of [respondent] Joseph and
its annexes appended to their memorandum should have been taken into consideration by the Court a quo to
RULE 8  support the reliefs prayed [for] in their complaint. (sic) This Court rules that said supplemental affidavit and
its annexes is (sic) inadmissible. 
DERIVATIVE SUITS 
A second hard look of (sic) the extant records show that during the pre-trial conference conducted on August
Sec. 1. Derivative action. - x x x  26, 2004, the parties through their respective counsels had come up with an agreement that the lower court
would render judgment based on the pleadings and evidence submitted. This agreement is in accordance with
x x x x  Rule 4, Sec. 4 of the Interim Rules of Procedure for Intra-Corporate Controversies which explicitly states: 

(2) He exerted all reasonable efforts, and alleges the same with particularity in the complaint, to exhaust all SECTION. 4. Judgment before pre-trial. - If, after submission of the pre-trial briefs, the court determines
remedies available under the articles of incorporation, by-laws, laws or rules governing the corporation or that, upon consideration of the pleadings, the affidavits and other evidence submitted by the parties, a
partnership to obtain the relief he desires.  judgment may be rendered, the court may order the parties to file simultaneously their respective memoranda
within a non-extendible period of twenty (20) days from receipt of the order. Thereafter, the court shall
x x x x  render judgment, either full or otherwise, not later than ninety (90) days from the expiration of the period to
file the memoranda. 
RULE 7 
x x x x 
INSPECTION OF CORPORATE BOOKS AND RECORDS 
Clearly, the supplemental affidavit and its appended documents which were submitted only upon the filing of
Sec. 2. Complaint - In addition to the requirements in section 4, Rule 2 of these Rules, the complaint must the memorandum for the [respondents] were not submitted in the pre-trial briefs for the stipulation of the
state the following:  parties during the pre-trial, hence, it cannot be accepted pursuant to Rule 2, Sec. 8 of the same rules which
reads as follows: 
(1) The case is set (sic) for the enforcement of plaintiff's right of inspection of corporate orders or records

35
SEC. 8. Affidavits, documentary and other evidence. - Affidavits shall be based on personal knowledge, shall Magpale, however, still called on the parties to talk about the possible settlement of the case considering their
set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is familial relationship. Independent of the resolution of respondents' Motion for Reconsideration, the parties
competent to testify on the matters stated therein. The affidavits shall be in question and answer form, and were agreeable to pursue a settlement for the dissolution of the corporation, which they had actually already
shall comply with the rules on admissibility of evidence.  started. 

Affidavits of witnesses as well as documentary and other evidence shall be attached to the appropriate In a Resolution[35] dated 11 April 2006, the Court of Appeals ordered the parties to submit, within 10 days
pleading; Provided, however, that affidavits, documentary and other evidence not so submitted may be from notice, their intended amicable settlement, since the same would undeniably affect the resolution of
attached to the pre-trial brief required under these Rules. Affidavits and other evidence not so submitted shall respondents' pending Motion for Reconsideration. If the said period should lapse without the parties
not be admitted in evidence, except in the following cases:  submitting an amicable settlement, then they were directed by the appellate court to file within 10 days
thereafter their position papers instead. 
(1) Testimony of unwilling, hostile, or adverse party witnesses. A witness is presumed prima facie hostile if
he fails or refuses to execute an affidavit after a written request therefor;  On 5 May 2006, respondents submitted to the Court of Appeals their Position Paper,[36] stating that the
parties did not reach an amicable settlement. Respondents informed the appellate court that prior to the filing
(2) If the failure to submit the evidence is for meritorious and compelling reasons; and  with the Securities and Exchange Commission (SEC) of a petition for dissolution of Winchester, Inc., the
parties already divided the stocks in trade and the real assets of the corporation among themselves.
(3) Newly discovered evidence.  Respondents posited, though, that the afore-mentioned distribution of the assets of Winchester, Inc. among
the parties was null and void, as it violated the last paragraph of Section 122 of the Corporation Code, which
In case of (2) and (3) above, the affidavit and evidence must be submitted not later than five (5) days prior to provides that, "[e]xcept by a decrease of capital stock and as otherwise allowed by the Corporation Code, no
its introduction in evidence.  corporation shall distribute any of its assets or property except upon lawful dissolution and after payment of
all its debts and liabilities." At the same time, however, respondents brought to the attention of the Court of
There is no showing in the case at bench that the supplemental affidavit and its annexes falls (sic) within one Appeals that the parties did eventually file with the SEC a petition for dissolution of Winchester, Inc., which
of the exceptions of the above quoted proviso, hence, inadmissible.  the SEC approved.[37] 

It must be noted that in the case at bench, like any other civil cases, "the party making an allegation in a civil Respondents no longer discussed in their Position Paper the grounds they previously invoked in their Motion
case has the burden of proving it by preponderance of evidence." Differently stated, upon the plaintiff in [a] for Reconsideration of the Court of Appeals Decision dated 15 February 2006, affirming in toto the RTC
civil case, the burden of proof never parts. That is, appellants must adduce evidence that has greater weight Decision dated 10 November 2004. They instead argued that the RTC Decision in question was null and void
or is more convincing that (sic) which is offered to oppose it. In the case at bar, no one should be blamed for as it did not clearly state the facts and the law on which it was based. Respondents sought the remand of the
the dismissal of the complaint but the [respondents] themselves for their lackadaisical attitude in setting forth case to the RTC for further proceedings on their derivative suit and completion of the dissolution of
and appending their defences belatedly. To admit them would be a denial of due process for the opposite Winchester, Inc., including the legalization of the prior partial distribution among the parties of the assets of
party which this Court cannot allow.[29]  said corporation. 

Ultimately, the Court of Appeals decreed:  Petitioners filed their Position Paper[38] on 23 May 2006, wherein they accused respondents of attempting to
incorporate extraneous matters into the latter's Motion for Reconsideration. Petitioners pointed out that the
WHEREFORE, judgment is hereby rendered DISMISSING the instant petition and the assailed Decision of issue before the Court of Appeals was not the dissolution and division of assets of Winchester, Inc., thus, a
the Regional Trial Court (RTC), 7th Judicial Region, Branch II, Cebu City, dated November 10, 2004, in remand of the case to the RTC was not necessary. 
SRC Case No. 022-CEB is AFFIRMED in toto. Cost against the [herein respondents].[30] 
On 18 July 2006, the Court of Appeals rendered the assailed Resolution, granting respondents' Motion for
Unperturbed, respondents filed before the Court of Appeals, on 23 February 2006, a Motion for Reconsideration. The Court of Appeals reasoned in this wise: 
Reconsideration and Motion to Set for Oral Arguments the Motion for Reconsideration,[31] invoking the
following grounds:  After a second look and appreciation of the facts of the case, vis-á -vis the issues raised by the [herein
respondents'] motion for reconsideration and in view of the formal dissolution of the corporation which
(1) The [herein respondents] have sufficiently exhausted all remedies before filing the present action; and  leaves unresolved up to the present the settlement of the properties and assets which are now in danger of
dissipation due to the unending litigation, this Court finds the need to remand the instant case to the lower
(2) [The] Honorable Court erred in holding that the supplemental affidavit and its annexes is (sic) court (commercial court) as the proper forum for the adjudication, disposition, conveyance and distribution
inadmissible because the rules and the lower court expressly allowed the submission of the same in its order of said properties and assets between and amongst its stockholders as final settlement pursuant to Sec. 122 of
dated August 26, 2004 x x x.[32]  the Corporation Code after payment of all its debts and liabilities as provided for under the same proviso.
This is in accord with the pronouncement of the Supreme Court in the case of Clemente et. al. vs. Court of
In a Resolution[33] dated 8 March 2006, the Court of Appeals granted respondents' Motion to Set for Oral Appeals, et. al. where the high court ruled and which WE quote, viz: 
Arguments the Motion for Reconsideration. 
"the corporation continues to be a body corporate for three (3) years after its dissolution for purposes of
On 4 April 2006, the Court of Appeals issued a Resolution[34] setting forth the events that transpired during prosecuting and defending suits by and against it and for enabling it to settle and close its affairs, culminating
the oral arguments, which took place on 30 March 2006. Counsels for the parties manifested before the in the disposition and distribution of its remaining assets. It may, during the three-year term, appoint a trustee
appellate court that they were submitting respondents' Motion for Reconsideration for resolution. Justice or a receiver who may act beyond that period. The termination of the life of a juridical entity does not by

36
itself cause the extinction or diminution of the rights and liabilities of such entity x x x nor those of its Remanding the case to the RTC, petitioners maintain, will violate the very essence of the summary nature of
owners and creditors. If the three-year extended life has expired without a trustee or receiver having been the Interim Rules of Procedure Governing Intra-Corporate Controversies, as this will just entail delay,
expressly designated by the corporation within that period, the board of directors (or trustees) xxx may be protract litigation, and revert the case to square one. 
permitted to so continue as "trustees" by legal implication to complete the corporate liquidation. Still in the
absence of a board of directors or trustees, those having any pecuniary interest in the assets, including not The Court finds the instant Petition meritorious. 
only the shareholders but likewise the creditors of the corporation, acting for and in its behalf, might make
proper representation with the Securities and Exchange Commission, which has primary and sufficiently To recapitulate, the case at bar was initiated before the RTC by respondents as a derivative suit, on their own
broad jurisdiction in matters of this nature, for working out a final settlement of the corporate concerns."  behalf and on behalf of Winchester, Inc., primarily in order to compel petitioners to account for and
reimburse to the said corporation the corporate assets and funds which the latter allegedly misappropriated
In the absence of a trustee or board of director in the case at bar for purposes above mentioned, the lower for their personal benefit. During the pendency of the proceedings before the court a quo, the parties were
court under Republic Act No. [8799] (otherwise known as the Securities and Exchange Commission) as able to reach an amicable settlement wherein they agreed to divide the assets of Winchester, Inc. among
implemented by A.M. No. 00-8-10-SC (Transfer of Cases from the Securities and Exchange Commission to themselves. This amicable settlement was already partially implemented by the parties, when respondents
the Regional Trial Courts) which took effect on October 1, 2001, is the proper forum for working out the repudiated the same, for which reason the RTC proceeded with the case on its merits. On 10 November 2004,
final settlement of the corporate concern.[39]  the RTC promulgated its Decision dismissing respondents' Complaint for failure to comply with essential
pre-requisites before they could avail themselves of the remedies under the Interim Rules of Procedure
Hence, the Court of Appeals ruled:  Governing Intra-Corporate Controversies; and for inadequate substantiation of respondents' allegations in
said Complaint after consideration of the pleadings and evidence on record. 
WHEREFORE, premises considered, the motion for reconsideration is GRANTED. The order dated
February 15, 2006 is hereby SET ASIDE and the instant case is REMANDED to the lower court to take the In its Decision dated 15 February 2006, the Court of Appeals affirmed, on appeal, the findings of the RTC
necessary proceedings in resolving with deliberate dispatch any and all corporate concerns towards final that respondents did not abide by the requirements for a derivative suit, nor were they able to prove their case
settlement.[40]  by a preponderance of evidence. Respondents filed a Motion for Reconsideration of said judgment of the
appellate court, insisting that they were able to meet all the conditions for filing a derivative suit. Pending
Petitioners filed a Motion for Reconsideration[41] of the foregoing Resolution, but it was denied by the resolution of respondents' Motion for Reconsideration, the Court of Appeals urged the parties to again strive
Court of Appeals in its other assailed Resolution dated 19 April 2007.  to reach an amicable settlement of their dispute, but the parties were unable to do so. The parties were not
able to submit to the appellate court, within the given period, any amicable settlement; and filed, instead,
In the Petition at bar, petitioners raise the following issues:  their Position Papers. This effectively meant that the parties opted to submit respondents' Motion for
Reconsideration of the 15 February 2006 Decision of the Court of Appeals, and petitioners' opposition to the
I. WHETHER OR NOT THE ASSAILED RESOLUTIONS[,] WHICH VIOLATED THE CONSTITUTION same, for resolution by the appellate court on the merits. 
OF THE PHILIPPINES, JURISPRUDENCE AND THE LAW[,] ARE NULL AND VOID[.] 
It was at this point that the case took an unexpected turn. 
II. WHETHER OR NOT THE ASSAILED RESOLUTIONS WAS (sic) ISSUED WITHOUT
JURISDICTION[.]  In accordance with respondents' allegation in their Position Paper that the parties subsequently filed with the
SEC, and the SEC already approved, a petition for dissolution of Winchester, Inc., the Court of Appeals
III. WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN remanded the case to the RTC so that all the corporate concerns between the parties regarding Winchester,
REMANDING THIS CASE TO THE LOWER COURT FOR THE REASON CITED IN THE ASSAILED Inc. could be resolved towards final settlement. 
RESOLUTIONS, AND WITHOUT RESOLVING THE GROUNDS FOR THE [RESPONDENTS']
MOTION FOR RECONSIDERATION. (sic) INASMUCH AS [THE] REASON CITED WAS A NON- In one stroke, with the use of sweeping language, which utterly lacked support, the Court of Appeals
ISSUE IN THE CASE.  converted the derivative suit between the parties into liquidation proceedings. 

IV. WHETHER OR NOT REMANDING THIS CASE TO THE REGIONAL TRIAL COURT VIOLATES
THE SUMMARY PROCEDURE FOR INTRA-CORPORATE CASES.[42]  directors or trustees. Nonetheless, an individual stockholder is permitted to institute a derivative suit on
The crux of petitioners' contention is that the Court of Appeals committed grievous error in reconsidering its
Decision dated 15 February 2006 on the basis of extraneous matters, which had not been previously raised in
respondents' Complaint before the RTC, or in their Petition for Review and Motion for Reconsideration
before the appellate court; i.e., the adjudication, disposition, conveyance, and distribution of the properties
and assets of Winchester, Inc. among its stockholders, allegedly pursuant to the amicable settlement of the
parties. The fact that the parties were able to agree before the Court of Appeals to submit for resolution
respondents' Motion for Reconsideration of the 15 February 2006 Decision of the same court, independently
of any intended settlement between the parties as regards the dissolution of the corporation and distribution
of its assets, only proves the distinction and independence of these matters from one another. Petitioners also
contend that the assailed Resolution dated 18 July 2006 of the Court of Appeals, granting respondents'
Motion for Reconsideration, failed to clearly and distinctly state the facts and the law on which it was based.
The general rule is that where a corporation is an injured party, its power to sue is lodged with its board of
behalf of the corporation wherein he holds stocks in order to protect or vindicate corporate rights, whenever
the officials of the corporation refuse to sue, or are the ones to be sued, or hold the control of the corporation.
In such actions, the suing stockholder is regarded as a nominal party, with the corporation as the real party in
interest. A derivative action is a suit by a shareholder to enforce a corporate cause of action. The corporation
is a necessary party to the suit. And the relief which is granted is a judgment against a third person in favor of
the corporation. Similarly, if a corporation has a defense to an action against it and is not asserting it, a
stockholder may intervene and defend on behalf of the corporation.[43] By virtue of Republic Act No. 8799,
otherwise known as the Securities Regulation Code, jurisdiction over intra-corporate disputes, including
derivative suits, is now vested in the Regional Trial Courts designated by this Court pursuant to A.M. No.
00-11-03-SC promulgated on 21 November 2000. 
In contrast, liquidation is a necessary consequence of the dissolution of a corporation. It is specifically

37
governed by Section 122 of the Corporation Code, which reads:  notes, however, that there is absolute lack of evidence on record to prove said allegation. Respondents failed
to submit copies of such petition for dissolution of Winchester, Inc. and the SEC Certification approving the
SEC. 122. Corporate liquidation. - Every corporation whose charter expires by its own limitation or is same. It is a basic rule in evidence that each party must prove his affirmative allegation. Since it was
annulled by forfeiture or otherwise, or whose corporate existence for other purposes is terminated in any respondents who alleged the voluntary dissolution of Winchester, Inc., respondents must, therefore, prove it.
other manner, shall nevertheless be continued as a body corporate for three (3) years after the time when it [47] This respondents failed to do. 
would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and
enabling it to settle and close its affairs, to dispose of and convey its property and to distribute its assets, but Even assuming arguendo that the parties did submit a petition for the dissolution of Winchester, Inc. and the
not for the purpose of continuing the business for which it was established.  same was approved by the SEC, the Court of Appeals was still without jurisdiction to order the final
settlement by the RTC of the remaining corporate concerns. It must be remembered that the Complaint filed
At any time during said three (3) years, said corporation is authorized and empowered to convey all of its by respondents before the RTC essentially prayed for the accounting and reimbursement by petitioners of the
property to trustees for the benefit of stockholders, members, creditors, and other persons in interest. From corporate funds and assets which they purportedly misappropriated for their personal use; surrender by the
and after any such conveyance by the corporation of its property in trust for the benefit of its stockholders, petitioners of the corporate books for the inspection of respondents; and payment by petitioners to
members, creditors and others in interest, all interest which the corporation had in the property terminates, respondents of damages. There was nothing in respondents' Complaint which sought the dissolution and
the legal interest vests in the trustees, and the beneficial interest in the stockholders, members, creditors or liquidation of Winchester, Inc. Hence, the supposed dissolution of Winchester, Inc. could not have resulted
other persons in interest.  in the conversion of respondents' derivative suit to a proceeding for the liquidation of said corporation, but
only in the dismissal of the derivative suit based on either compromise agreement or mootness of the issues. 
Upon winding up of the corporate affairs, any asset distributable to any creditor or stockholder or member
who is unknown or cannot be found shall be escheated to the city or municipality where such assets are Clearly, in issuing its assailed Resolutions dated 18 July 2006 and 19 April 2007, the Court of Appeals
located.  already went beyond the issues raised in respondents' Motion for Reconsideration. Instead of focusing on
whether it erred in affirming, in its 15 February 2006 Decision, the dismissal by the RTC of respondents'
Except by decrease of capital stock and as otherwise allowed by this Code, no corporation shall distribute Complaint due to respondents' failure to comply with the requirements for a derivative suit and submit
any of its assets or property except upon lawful dissolution and after payment of all its debts and liabilities.  evidence to support their allegations, the Court of Appeals unduly concentrated on respondents'
unsubstantiated allegation that Winchester, Inc. was already dissolved and speciously ordered the remand of
Following the voluntary or involuntary dissolution of a corporation, liquidation is the process of settling the the case to the RTC for proceedings so vitally different from that originally instituted by respondents. 
affairs of said corporation, which consists of adjusting the debts and claims, that is, of collecting all that is
due the corporation, the settlement and adjustment of claims against it and the payment of its just debts.[44] Despite the foregoing, the Court still deems it appropriate to already look into the merits of respondents'
More particularly, it entails the following:  Motion for Reconsideration of the 15 February 2006 Decision of the Court of Appeals, for the sake of finally
putting an end to the case at bar.
Winding up the affairs of the corporation means the collection of all assets, the payment of all its creditors,
and the distribution of the remaining assets, if any among the stockholders thereof in accordance with their In their said Motion for Reconsideration, respondents argued that: (1) they had sufficiently exhausted all
contracts, or if there be no special contract, on the basis of their respective interests. The manner of remedies before filing the derivative suit; and (2) respondent Joseph's Supplemental Affidavit and its annexes
liquidation or winding up may be provided for in the corporate by-laws and this would prevail unless it is should have been taken into consideration, since the submission thereof was allowed by the rules of
inconsistent with law.[45]  procedure, as well as by the RTC in its Order dated 26 August 2004. 

It may be undertaken by the corporation itself, through its Board of Directors; or by trustees to whom all As regards the first ground of sufficient exhaustion by respondents of all remedies before filing a derivative
corporate assets are conveyed for liquidation; or by a receiver appointed by the SEC upon its decree suit, the Court subscribes to the ruling to the contrary of the Court of Appeals in its Decision dated 16
dissolving the corporation.[46]  February 2006. 

Glaringly, a derivative suit is fundamentally distinct and independent from liquidation proceedings. They are
neither part of each other nor the necessary consequence of the other. There is totally no justification for the
Court of Appeals to convert what was supposedly a derivative suit instituted by respondents, on their own
behalf and on behalf of Winchester, Inc. against petitioners, to a proceeding for the liquidation of
Winchester, Inc.  or dissipation of corporate assets because of a special injury to him for which he is otherwise without redress.
While it may be true that the parties earlier reached an amicable settlement, in which they agreed to already
distribute the assets of Winchester, Inc., and in effect liquidate said corporation, it must be pointed out that
respondents themselves repudiated said amicable settlement before the RTC, even after the same had been
partially implemented; and moved that their case be set for pre-trial. Attempts to again amicably settle the
dispute between the parties before the Court of Appeals were unsuccessful. 
Moreover, the decree of the Court of Appeals to remand the case to the RTC for the "final settlement of
corporate concerns" was solely grounded on respondents' allegation in its Position Paper that the parties had
already filed before the SEC, and the SEC approved, the petition to dissolve Winchester, Inc. The Court
The Court has recognized that a stockholder's right to institute a derivative suit is not based on any express
provision of the Corporation Code, or even the Securities Regulation Code, but is impliedly recognized when
the said laws make corporate directors or officers liable for damages suffered by the corporation and its
stockholders for violation of their fiduciary duties. Hence, a stockholder may sue for mismanagement, waste
In effect, the suit is an action for specific performance of an obligation owed by the corporation to the
stockholders to assist its rights of action when the corporation has been put in default by the wrongful refusal
of the directors or management to make suitable measures for its protection. The basis of a stockholder's suit
is always one in equity. However, it cannot prosper without first complying with the legal requisites for its
institution.[48] 
Section 1, Rule 8 of the Interim Rules of Procedure Governing Intra-Corporate Controversies lays down the
following requirements which a stockholder must comply with in filing a derivative suit: 
Sec. 1. Derivative action. - A stockholder or member may bring an action in the name of a corporation or

38
association, as the case may be, provided, that:  complained of, as well as a categorical statement that the suit was not a nuisance or a harassment suit. 

(1) He was a stockholder or member at the time the acts or transactions subject of the action occurred and at As to respondents' second ground in their Motion for Reconsideration, the Court agrees with the ruling of the
the time the action was filed;  Court of Appeals, in its 15 February 2006 Decision, that respondent Joseph's Supplemental Affidavit and
additional evidence were inadmissible since they were only appended by respondents to their Memorandum
(2) He exerted all reasonable efforts, and alleges the same with particularity in the complaint, to exhaust all before the RTC. Section 8, Rule 2 of the Interim Rules of Procedure Governing Intra-Corporate
remedies available under the articles of incorporation, by-laws, laws or rules governing the corporation or Controversies is crystal clear that: 
partnership to obtain the relief he desires; 
Sec. 8. Affidavits, documentary and other evidence. - Affidavits shall be based on personal knowledge, shall
(3) No appraisal rights are available for the act or acts complained of; and  set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is
competent to testify on the matters stated therein. The affidavits shall be in question and answer form, and
(4) The suit is not a nuisance or harassment suit.  shall comply with the rules on admissibility of evidence. 

A perusal of respondents' Complaint before the RTC would reveal that the same did not allege with Affidavits of witnesses as well as documentary and other evidence shall be attached to the appropriate
particularity that respondents exerted all reasonable efforts to exhaust all remedies available under the pleading, Provided, however, that affidavits, documentary and other evidence not so submitted may be
articles of incorporation, by-laws, laws or rules governing Winchester, Inc. to obtain the relief they desire.  attached to the pre-trial brief required under these Rules. Affidavits and other evidence not so submitted shall
not be admitted in evidence, except in the following cases: 
Respondents assert that their compliance with said requirement was contained in respondent Joseph's
Affidavit, which was attached to respondents' Complaint. Respondent Joseph averred in his Affidavit that he (1) Testimony of unwilling, hostile, or adverse party witnesses. A witness is presumed prima facie hostile if
tried for a number of times to talk to petitioner Anthony to settle their differences, but the latter would not he fails or refuses to execute an affidavit after a written request therefor; 
listen. Respondents additionally claimed that taking further remedies within the corporation would have been
idle ceremony, considering that Winchester, Inc. was a family corporation and it was impossible to expect (2) If the failure to submit the evidence is for meritorious and compelling reasons; and 
petitioners to take action against themselves who were the ones accused of wrongdoing. 
(3) Newly discovered evidence. 
The Court is not persuaded. 
In case of (2) and (3) above, the affidavit and evidence must be submitted not later than five (5) days prior to
The wordings of Section 1, Rule 8 of the Interim Rules of Procedure Governing Intra-Corporate its introduction in evidence. (Emphasis ours.) 
Controversies are simple and do not leave room for statutory construction. The second paragraph thereof
requires that the stockholder filing a derivative suit should have exerted all reasonable efforts to exhaust all According to the afore-quoted provision, the parties should attach the affidavits of witnesses and other
remedies available under the articles of incorporation, by-laws, laws or rules governing the corporation or documentary evidence to the appropriate pleading, which generally should mean the complaint for the
partnership to obtain the relief he desires; and to allege such fact with particularity in the complaint. The plaintiff and the answer for the respondent. Affidavits and documentary evidence not so submitted must
obvious intent behind the rule is to make the derivative suit the final recourse of the stockholder, after all already be attached to the respective pre-trial briefs of the parties. That the parties should have already
other remedies to obtain the relief sought had failed.  identified and submitted to the trial court the affidavits of their witnesses and documentary evidence by the
time of pre-trial is strengthened by the fact that Section 1, Rule 4 of the Interim Rules of Procedure
The allegation of respondent Joseph in his Affidavit of his repeated attempts to talk to petitioner Anthony Governing Intra-Corporate Controversies require that the following matters should already be set forth in the
regarding their dispute hardly constitutes "all reasonable efforts to exhaust all remedies available." parties' pre-trial briefs: 
Respondents did not refer to or mention at all any other remedy under the articles of incorporation or by-laws
of Winchester, Inc., available for dispute resolution among stockholders, which respondents unsuccessfully Section 1. Pre-trial conference, mandatory nature. - Within five (5) days after the period for availment of, and
availed themselves of. And the Court is not prepared to conclude that the articles of incorporation and by- compliance with, the modes of discovery prescribed in Rule 3 hereof, whichever comes later, the court shall
laws of Winchester, Inc. absolutely failed to provide for such remedies.  issue and serve an order immediately setting the case for pre-trial conference, and directing the parties to
submit their respective pre-trial briefs. The parties shall file with the court and furnish each other copies of
Neither can this Court accept the reasons proffered by respondents to excuse themselves from complying their respective pre-trial brief in such manner as to ensure its receipt by the court and the other party at least
with the second requirement under Section 1, Rule 8 of the Interim Rules of Procedure Governing Intra- five (5) days before the date set for the pre-trial. 
Corporate Controversies. They are flimsy and insufficient, compared to the seriousness of respondents'
accusations of fraud, misappropriation, and falsification of corporate records against the petitioners. The fact The parties shall set forth in their pre-trial briefs, among other matters, the following: 
that Winchester, Inc. is a family corporation should not in any way exempt respondents from complying with
the clear requirements and formalities of the rules for filing a derivative suit. There is nothing in the pertinent x x x x 
laws or rules supporting the distinction between, and the difference in the requirements for, family
corporations vis-á -vis other types of corporations, in the institution by a stockholder of a derivative suit.  (4) Documents not specifically denied under oath by either or both parties; 

The Court further notes that, with respect to the third and fourth requirements of Section 1, Rule 8 of the x x x x 
Interim Rules of Procedure Governing Intra-Corporate Controversies, the respondents' Complaint failed to
allege, explicitly or otherwise, the fact that there were no appraisal rights available for the acts of petitioners (7) Names of witnesses to be presented and the summary of their testimony as contained in their affidavits

39
supporting their positions on each of the issues; 

(8) All other pieces of evidence, whether documentary or otherwise and their respective purposes. 

Also, according to Section 2, Rule 4 of the Interim Rules of Procedure Governing Intra-Corporate
Controversies,[49] it is the duty of the court to ensure during the pre-trial conference that the parties consider
in detail, among other things, objections to the admissibility of testimonial, documentary, and other evidence,
as well as objections to the form or substance of any affidavit, or part thereof. 

Obviously, affidavits of witnesses and other documentary evidence are required to be attached to a party's
pre-trial brief, at the very last instance, so that the opposite party is given the opportunity to object to the
form and substance, or the admissibility thereof. This is, of course, to prevent unfair surprises and/or to avoid
the granting of any undue advantage to the other party to the case. 

True, the parties in the present case agreed to submit the case for judgment by the RTC, even before pre-trial,
in accordance with Section 4, Rule 4 of the Interim Rules of Procedure Governing Intra-Corporate
Controversies: 

Sec. 4. Judgment before pre-trial. - If after submission of the pre-trial briefs, the court determines that, upon
consideration of the pleadings, the affidavits and other evidence submitted by the parties, a judgment may be
rendered, the court may order the parties to file simultaneously their respective memoranda within a non-
extendible period of twenty (20) days from receipt of the order. Thereafter, the court shall render judgment,
either full or otherwise, not later than ninety (90) days from the expiration of the period to file the
memoranda. 

Even then, the afore-quoted provision still requires, before the court makes a determination that it can render
judgment before pre-trial, that the parties had submitted their pre-trial briefs and the court took into
consideration the pleadings, affidavits and other evidence submitted by the parties. Hence, cases wherein the
court can render judgment prior to pre-trial, do not depart from or constitute an exception to the requisite that
affidavits of witnesses and documentary evidence should be submitted, at the latest, with the parties' pre-trial
briefs. Taking further into account that under Section 4, Rule 4 of the Interim Rules of Procedure Governing
Intra-Corporate Controversies parties are required to file their memoranda simultaneously, the same would
mean that a party would no longer have any opportunity to dispute or rebut any new affidavit or evidence
attached by the other party to its memorandum. To violate the above-quoted provision would, thus,
irrefragably run afoul the former party's constitutional right to due process. 

In the instant case, therefore, respondent Joseph's Supplemental Affidavit and the additional documentary
evidence, appended by respondents only to their Memorandum submitted to the RTC, were correctly
adjudged as inadmissible by the Court of Appeals in its 15 February 2006 Decision for having been belatedly
submitted. Respondents neither alleged nor proved that the documents in question fall under any of the three
exceptions to the requirement that affidavits and documentary evidence should be attached to the appropriate
pleading or pre-trial brief of the party, which is particularly recognized under Section 8, Rule 2 of the Interim
Rules of Procedure Governing Intra-Corporate Controversies. 

WHEREFORE, premises considered, the Petition for Review under Rule 45 of the Rules of Court is hereby
GRANTED. The assailed Resolutions dated 18 July 2006 and 19 April 2007 of the Court of Appeals in CA-
G.R. SP No. 00185 are hereby REVERSED AND SET ASIDE. The Decision dated 15 February 2006 of the
Court of Appeals is hereby AFFIRMED. No costs. 

SO ORDERED.

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