G.R. No.
118917 December 22, 1997 the certificates was returned by the drawee bank for having been drawn against insufficient
PHILIPPINE DEPOSIT INSURANCE CORPORATION, petitioner,
vs.
COURT OF APPEALS, ROSA AQUERO, GERARD YU, ERIC YU, MINA YU,
ELIZABETH NGKAION, MERLY CUESCANO, LETICIA TAN, FELY RUMBANA, LORNA
ACUB, represented by their Attorney-in-Fact, JOHN FRANCIS
COTAOCO, respondents.
KAPUNAN, J.:
Plaintiffs-appellees invested in money market placements with the Premiere Financing
Corporation (PFC) in the sum of P10,000.00 each for which they were issued by the PFC
corresponding promissory notes and checks.
John Francis Cotaoco, for and in behalf of plaintiffs-appellees, went to the PFC to encash
the promissory notes and checks, but the PFC referred him to the Regent Saving Bank
(RSB).
Instead of paying the promissory notes and checks, the RSB, upon agreement of Cotaoco,
issued the subject 13 certificates of time deposit, each stating that the same certifies that
the bearer thereof has deposited with the RSB the sum of P10,000.00; that the certificate
shall bear 14% interest per annum; that the certificate is insured up to P15,000.00 with the
PDIC; and that the maturity date thereof is on November 3, 1983
On the said maturity date, Cotaoco went to the RSB to encash the said certificates.
Thereat, RSB Executive Vice President Jose M. Damian requested Cotaoco for a
deferment or an extension of a few days to enable the RSB to raise the amount to pay for
the same. Cotaoco agreed. Despite said extension, the RSB still failed to pay the value of
the certificates. Instead, RSB advised Cotaoco to file a claim with the PDIC.
Meanwhile, the Monetary Board of the Central Bank issued Resolution No. 788
suspending the operations of the RSB. Eventually, the records of RSB were secured and
its deposit liabilities were eventually determined. Then, the Monetary Board issued
Resolution No. 1496 liquidating the RSB. Subsequently, a masterlist or inventory of the
RSB assets and liabilities was prepared. However, the certificates of time deposit of
plaintiffs-appellees were not included in the list on the ground that the certificates were not
funded by the PFC or duly recorded as liabilities of RSB.
Plaintiffs-appellees filed with the PDIC their respective claims for the amount of the
certificates. Sabina Yu, and the others, who have similar claims on their certificates of time
deposit with the RSB, likewise filed their claims with the PDIC. To their dismay, PDIC
refused their claims on the ground that the Traders Royal Bank Check issued by PFC for
funds; and said check was not replaced by the PFC, resulting in the cancellation of the
certificates as indebtedness or liabilities of RSB.
Consequently, private respondents filed an action for collection against PDIC, RSB and the
Central Bank. the trial court, declared the Central Bank in default for failing to file an
answer.
Then, the trial court rendered its decision ordering the defendants therein to pay plaintiffs,
jointly and severally, the amount corresponding to the latter's certificates of time deposit.
Both PDIC and RSB appealed. The Central Bank, on the other hand, filed a petition
for certiorari, prohibition and mandamus before the Court of Appeals praying that the writ
of execution issued by the trial court against it be set aside.
Court of Appeals rendered its decision granting the Central Bank's petition but dismissing
the appeals of PDIC and RSB.
Hence, this petition by PDIC.
.WHETHER PDIC IS LIABLE? Negative
Whether the CTDs in question are negotiable or not is, however, immaterial in the present
case. The Philippine Deposit Insurance Corporation was created by law and, as such, is
governed primarily by the provisions of the special law creating it.  The liability of the PDIC
for insured deposits therefore is statutory and, under Republic Act No. 3591, as amended,
such liability rests upon the existence of deposits with the insured bank, not on the
negotiability or non-negotiability of the certificates evidencing these deposits.
The authority for this conclusion finds support in decisions by American state courts
applying their respective bank guaranty laws. Invariably, the plaintiffs in these cases
argued that the negotiability of the certificates of deposit in their possession entitled them
to be paid out of the bank guaranty fund, a contention that the courts uniformly rejected.
In the case at bar, the Court of Appeals initially found the subject CTDs to be negotiable.
We disagree with respondent court's rationale. The fact that the certificates state that the
certificates are insured by PDIC does not ipso facto make the latter liable for the same
should the contingency insured against arise. As stated earlier, the deposit liability of PDIC
is determined by the provisions of R.A. No. 3519, and statements in the certificates that the
same are insured by PDIC are not binding upon the latter.
. . . The mere fact that a certificate recites on its face that a certain sum has been ACCORDINGLY, the instant petition is hereby GRANTED and the decision of the
deposited, or that officers of the bank may have stated that the deposit is protected by the Court of Appeals REVERSED. Petitioner is absolved from any liability to private
guaranty law, does not make the guaranty fund liable for payment, if in fact a deposit has respondents.
not been made . . . . The banks have nothing to do with the guaranty fund as such. It is a
fund raised by assessments against all state banks, administered by officers of the state to SO ORDERED.
protect deposits in banks. . . . 
12

We come now to petitioner's second assigned error.

In order that a claim for deposit insurance with the PDIC may prosper, the law
requires that a corresponding deposit be placed in the insured bank. This is implicit
from a reading of the provisions of R.A. 3519:

A deposit as defined in Section 3(f) of R.A. No. 3591, may be constituted only if
money or the equivalent of money is received by a bank

Did RSB receive money or its equivalent when it issued the certificates of time
deposit?

Cardola de Jesus, RSB Deputy Liquidator, testified that RSB received three (3)
checks in consideration for the issuance of several CTDs, including the ones in
dispute. In consideration of one of the checks, private respondents received thirteen
(13) certificates of deposit, inclusive, with a value of P10,000.00 each or a total of
P130,000.00. To conform with the value of the third check, one Certificate of Time
Deposit was "chopped," and only the sum of P5,846.07 was credited in favor of
private respondents. The first two checks "made good in the clearing" while the
third was returned for being "drawn against insufficient funds."

The check in question is described in RSB's offer of evidence as "Traders Royal

Bank Check. . . issued by Premiere Financing Corporation."  At the back of said
check are the words "Refer to Drawer," indicating that the drawee bank (Traders
Royal Bank) refused to pay the value represented by said check. By reason of the
check's dishonor, RSB cancelled the corresponding as evidence by an RSB
"ticket". 

These pieces of evidence convincingly show that the subject CTDs were indeed
issued without RSB receiving any money therefor. No deposit, as defined in Section
3 (f) of R.A. No. 3591, therefore came into existence. Accordingly, petitioner PDIC
cannot be held liable for value of the certificates of time deposit held by private
respondents.

G.R. No. 176438               January 24, 2011
PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC), Petitioner,
vs.
PHILIPPINE COUNTRYSIDE RURAL BANK, INC., RURAL BANK OF CARMEN (CEBU),
INC., BANK OF EAST ASIA (MINGLANILLA, CEBU), INC., and PILIPINO RURAL
BANK (CEBU), INC., Respondents.
MENDOZA, J.:
THE FACTS
On March 9, 2005, PDIC Board adopted a Resolution approving the conduct of an
investigation, in accordance with Section 9(b-1) of Republic Act (R.A.) No. 3591, as
amended, on the basis of the Reports of Examination of the Bangko Sentral ng
Pilipinas (BSP) on ten (10) banks, four (4) of which are respondents in this petition for
review. The said resolution also created a Special Investigation Team to conduct the said
investigation, with the authority to administer oaths, to examine, take and preserve
testimony of any person relating to the subject of the investigation, and to examine
pertinent bank records.
PDIC Board adopted another resolution, approving the conduct of an investigation on
PCRBI based on a Complaint-Affidavit filed by a corporate depositor, the Philippine School
of Entrepreneurship and Management (PSEMI) through its president, Jacinto L. Jamero.
in accordance with the two PDIC Board resolutions, then PDIC President and Chief
Executive Officer Ricardo M. Tan issued the Notice of Investigation 5 to the President or
The Highest Ranking Officer of PCRBI.
According to PDIC, in the course of its investigation, PCRBI was found to have granted
loans to certain individuals, which were settled by way of dacion of properties. These
properties, however, had already been previously foreclosed and consolidated under the
names of PRBI, BEAI and RBCI.7
PDIC issued similar notices of investigation to PRBI8 and BEAI.9
A separate notice of investigation was served on RBCI. The latter provided the PDIC
Investigation Team with certified copies of the loan documents they had requested, until its
president received an order directing him not to allow the investigation. 14
Subsequently, PRBI and BEAI refused entry to their bank premises and access to their
records and documents by the PDIC Investigation Team, upon advice of their respective
counsels.
Atty. Victoria G. Noel (Atty. Noel) of the Tiongson & Antenor Cruz Law Office sent letters to
the PDIC16 informing it of her legal advice to PCRBI and BEAI not to submit to PDIC
investigation on the ground that its investigatory power pursuant to Section 9(b-1) of R.A.
No. 3591, as amended (An Act Establishing The Philippine Deposit Insurance Corporation,
Defining Its Powers And Duties And For Other Purposes), cannot be differentiated from the
examination powers accorded to PDIC under Section 8, paragraph 8 of the same law,
under which, prior approval from the Monetary Board is required.
PDIC General Counsel Romeo M. Mendoza sent a reply stating that "PDIC’s investigation
power, as distinguished from the examination power of the PDIC under Section 8 of the
same law, does not need prior approval of the Monetary Board." 17 PDIC then urged PRBI
and BEAI "not to impede the conduct of PDIC’s investigation" as the same "constitutes a
violation of the PDIC Charter for which PRBI and BEAI may be held criminally and/or
administratively liable."18
The Banks, through counsel, sought further clarification from PDIC on its source of
authority to conduct the impending investigations and requested that PDIC refrain from
proceeding with the investigations. PDIC persistently demanded on them to allow its
investigation. Pending action on such requests, PDIC was requested to refrain from
proceeding with the investigation.
Later on, the Banks received a letter from the PDIC General Counsel reiterating its position
that prior Monetary Board approval was not a pre-requisite to PDIC’s exercise of its
investigative power.24
Not in conformity, the Banks filed a Petition for Declaratory Relief with a Prayer for the
Issuance of a TRO and/or Writ of Preliminary Injunction (RTC Petition) before the Regional
Trial Court of Makati. The Banks prayed for a judgment interpreting Section 9(b-1) of the
PDIC Charter, as amended, to require prior Monetary Board approval before PDIC could
exercise its investigation/examination power over the Banks.
PDIC filed a motion to dismiss alleging that the RTC had no jurisdiction over the said
petition since a breach had already been committed by the Banks when they received the
notices of investigation, and because PDIC need not secure prior Monetary Board
approval since "examination" and "investigation" are two different terms.
Later, the Banks withdrew their application for a temporary restraining
order (TRO) reasoning that lower courts cannot issue injunctions against PDIC. Thus, the
Banks instituted a petition for injunction with application for TRO and/or Preliminary
Injunction (CA-Manila petition) before the Court of Appeals-Manila (CA-Manila).
Even before the CA-Manila could rule on the application for a TRO and/or writ of
preliminary injunction, the RTC-Makati dismissed the petition on the ground that there
already existed a breach of law that isolated the case from the jurisdiction of the trial court.
The Banks filed a motion for reconsideration but it was denied by the RTC for lack of merit.
the Banks filed a notice of appeal which they later withdrew.
Thereafter, the Banks filed their Petition for Injunction with Prayer for Preliminary
Injunction(CA-Cebu Petition) with the CA-Cebu (CA-Cebu) which was granted. This
enjoined the PDIC, its representatives or agents or any other persons or agency assisting
them or acting for and in their behalf from conducting examinations/investigations on the
Banks' head and branch offices without securing the requisite approval from the Monetary
Board of BSP.
The Supreme Court issued a resolution dismissing the petition for certiorari. The
Resolution states the Court resolves to DISMISS the petition for failure to... sufficiently
show that the questioned resolution of the Court of Appeals is tainted with grave abuse of
discretion.
the petition is premature since no motion for reconsideration of the questioned resolution of
the Court of Appeals was filed prior to the availment of this special civil action and there
are no sufficient allegations to bring the case within the... recognized exceptions to this
rule.
After both parties had submitted their respective memoranda, the CA-Cebu rendered a
decision granting the writ of preliminary injunction and stating that the prior approval of the
Monetary Board is a condition sine qua non for PDIC to exercise its power of examination.
To rule otherwise... would disregard the amendatory law of the PDIC's charter.
The Court is not swayed by the contention of respondent that what it seeks to conduct is
an investigation and not an examination of petitioners' transactions, hence prior approval of
the Monetary Board is a mere surplusage.
PDIC moved for reconsideration but it was denied in a resolution.
Hence, this petition.
THE COURT’S RULING
V – Whether the Court of Appeals-Cebu erred in finding that prior approval of the
Monetary Board of the Bangko Sentral ng Pilipinas is necessary before the PDIC
may conduct an investigation of respondent banks.
The process of examination covers a wider scope than that of investigation.
Examination involves an evaluation of the current status of a bank and determines its
compliance with the set standards regarding solvency, liquidity, asset valuation,
operations, systems, management, and compliance with banking laws, rules and
regulations.
Investigation, on the other hand, is conducted based on specific findings of certain acts or
omissions which are subject of a complaint or a Final Report of Examination.
Investigation does not involve a general evaluation of the status of a bank.  An
1âwphi1
investigation zeroes in on specific acts and omissions uncovered via an examination, or
which are cited in a complaint.
An examination entails a review of essentially all the functions and facets of a bank and its
operation. It necessitates poring through voluminous documents, and requires a detailed
evaluation thereof. Such a process then involves an intrusion into a bank’s records.
In contrast, although it also involves a detailed evaluation, an investigation centers on
specific acts of omissions and, thus, requires a less invasive assessment.
The practical justification for not requiring the Monetary Board approval to conduct an
investigation of banks is the administrative hurdles and paperwork it entails, and the
correspondent time to complete those additional steps or requirements. As in other types
of investigation, time is always of essence, and it is prudent to expedite the proceedings if
an accurate conclusion is to be arrived at, as an investigation is only as precise as the
evidence on which it is based. The promptness with which such evidence is gathered is
always of utmost importance because evidence, documentary evidence in particular, is
remarkably fungible. A PDIC investigation is conducted to "determine[e] whether the
allegations in a complaint or findings in a final report of examination may properly be the
subject of an administrative, criminal or civil action." 76 In other words, an investigation is
based on reports of examination and an examination is conducted with prior Monetary
Board approval. Therefore, it would be unnecessary to secure a separate approval for the
conduct of an investigation. Such would merely prolong the process and provide
unscrupulous individuals the opportunity to cover their tracks.
Indeed, while in a literary sense, the two terms may be used interchangeably, under the
PDIC Charter, examination and investigation refer to two different processes. To reiterate,
an examination of banks requires the prior consent of the Monetary Board, whereas an
investigation based on an examination report, does not.

WHEREFORE, the petition is GRANTED. SO ORDERED.


G.R. No. 230020, March 19, 2018
PETER L. SO, Petitioner, v. PHILIPPINE DEPOSIT INSURANCE
CORPORATION, Respondent.
Factual Antecedents
Petitioner opened an account with the Cooperative Rural Bank Bulacan (CRBB),
amounting to P300,000, for which he was assigned an account number.5
However, petitioner learned that CRBB closed its operations and was placed
under Philippine Deposit Insurance Corporation's (PDIC's) receivership. This
prompted petitioner, together with other depositors, to file an insurance claim
with the PDIC. Acting upon such claim, PDIC sent a letter/notice requiring
petitioner to submit additional documents, which petitioner averred of having
complied with.
Upon investigation, the PDIC found that petitioner's account originated from
and was funded by the proceeds of a terminated SISA (mother account),
jointly owned by a certain Reyes family. Thus, based on the determination that
petitioner's account was among the product of the splitting of the said mother
account which is prohibited by law, PDIC denied petitioner's claim for payment
of deposit insurance.9 Petitioner filed a Request for Reconsideration, which was
likewise denied by the PDIC.
Aggrieved, petitioner filed a Petition for Certiorari under Rule 65 before the
RTC.
RTC Ruling
RTC dismissed the petition for lack of jurisdiction.
PDIC is empowered to determine and pass upon the validity of the insurance
deposits claims, it being the deposit insurer. As such, when it rules on such
claims, it is exercising a quasi-judicial function. Thus, it was held that
petitioner's remedy to the dismissal of his claim is to file a petition
for certiorari with the Court of Appeals under Section 4,13 Rule 65, stating that
if the petition involves the acts or omissions of a quasi-judicial agency, unless
otherwise provided by law or the rules, it shall be filed in and cognizable only
by the Court of Appeals (CA).
Also, the RTC cited Section 22 of Republic Act (RA) No. 3591, as amended,
which essentially states that only the CA shall issue temporary restraining
orders, preliminary injunctions or preliminary mandatory injunctions against
the PDIC for any action under the said Act.
Hence, this petition, filed directly to Supreme Court.
Issue
Whether the RTC have jurisdiction over a petition for certiorari filed under Rule
65, assailing the PDIC's denial of a deposit insurance claim?
Our Ruling
The petition lacks merit.
PDIC was created under RA 3591 as an insurer of deposits in all banks entitled
to the benefits of insurance under the said Act to promote and safeguard the
interests of the depositing public. As such, PDIC has the duty and authority to
determine the validity of and grant or deny deposit insurance claims. Section
16(a) of its Charter, as amended, provides that PDIC shall commence the
determination of insured deposits due the depositors of a closed bank upon its
actual take over of the closed bank. Also, Section 1 of PDIC's Regulatory
Issuance No. 2011-03, provides that as it is tasked to promote and safeguard
the interests of the depositing public by way of providing permanent and
continuing insurance coverage on all insured deposits, and in helping develop a
sound and stable banking system at all times, PDIC shall pay all legitimate
deposits held by bona fide depositors and provide a mechanism by which
depositors may seek reconsideration from its decision, denying a deposit
insurance claim. Further, it bears stressing that as stated in Section 4(f) of its
Charter, as amended, PDIC's action, such as denying a deposit insurance
claim, is considered as final and executory and may be reviewed by the court
only through a petition for certiorari on the ground of grave abuse of
discretion.
PDIC exercises judicial discretion and judgment in determining whether a
claimant is entitled to a deposit insurance claim, which determination results
from its investigation of facts and weighing of evidence presented before it.
Noteworthy also is the fact that the law considers PDIC's action as final and
executory and may be reviewed only on the ground of grave abuse of
discretion.

In the matter of determining where petition for certiorari should be filed, the

Court cited Section 4, Rule 65 of the Rules of Court, that if the petition
involves an act or an omission of a quasi-judicial agency, unless
otherwise provided by law or these rules, the petition shall be filed
with and be cognizable only by the Court of Appeals.

Clearly, a petition for certiorari, questioning the PDIC's denial of a deposit

insurance claim should be filed before the CA, not the RTC. This further finds
support in Section 22 of the PDIC's Charter which states that:

No court, except the Court of Appeals, shall issue any temporary

restraining order, preliminary injunction or preliminary mandatory injunction
against the Corporation for any action under this Act. xxx.

This prohibition shall apply in all cases, disputes or controversies instituted by

a private party, the insured bank, or any shareholder of the insured bank. xxx.

xxxx

Finally, the new amendment in PDIC's Charter under RA 10846, specifically

Section 5(g) thereof, confirms such conclusion:

The actions of the Corporation taken under Section 5(g) shall be final and
executory, and may only be restrained or set aside by the Court of
Appeals, upon appropriate petition for certiorari on the ground that the action
was taken in excess of jurisdiction or with such grave abuse of discretion as to
amount to a lack or excess of jurisdiction.

THEREFORE, the petition is DENIED for lack of merit.


G.R. No. 170290               April 11, 2012
PHILIPPINE DEPOSIT INSURANCE CORPORATION, Petitioner,
vs.
CITIBANK, N.A. and BANK OF AMERICA, S.T. & N.A., Respondents.
The Facts
PDIC conducted an examination of the books of account of Citibank. It discovered that
Citibank, in the course of its banking business, from September 30, 1974 to June 30, 1977,
received from its head office and other foreign branches a total of ₱11,923,163,908.00 in
dollars, covered by Certificates of Dollar Time Deposit that were interest-bearing with
corresponding maturity dates. These funds, which were lodged in the books of Citibank
4 
under the account "Their Account-Head Office/Branches-Foreign Currency," were not
reported to PDIC as deposit liabilities that were subject to assessment for insurance. As
5 
such, in a letter dated March 16, 1978, PDIC assessed Citibank for deficiency in the sum
of ₱1,595,081.96. 6
Similarly, sometime in 1979, PDIC examined the books of accounts of BA which revealed
that from September 30, 1976 to June 30, 1978, BA received from its head office and its
other foreign branches a total of ₱629,311,869.10 in dollars, covered by Certificates of
Dollar Time Deposit that were interest-bearing with corresponding maturity dates and
lodged in their books under the account "Due to Head Office/Branches." Because BA also
7 
excluded these from its deposit liabilities, PDIC wrote to BA on October 9, 1979, seeking
the remittance of ₱109,264.83 representing deficiency premium assessments for dollar
deposits.8
Believing that litigation would inevitably arise from this dispute, Citibank and BA each filed
a petition for declaratory relief before the Court of First Instance (now the Regional Trial
Court) of Rizal on July 19, 1979 and December 11, 1979, respectively. In their petitions,
9 
Citibank and BA sought a declaratory judgment stating that the money placements they
received from their head office and other foreign branches were not deposits and did not
give rise to insurable deposit liabilities under Sections 3 and 4 of R.A. No. 3591 (the PDIC
Charter) and, as a consequence, the deficiency assessments made by PDIC were
improper and erroneous. The cases were then consolidated.
10  11
On June 29, 1998, the Regional Trial Court, Branch 163, Pasig City (RTC) promulgated its
Decision in favor of Citibank and BA, ruling that the subject money placements were not
12 
deposits and did not give rise to insurable deposit liabilities, and that the deficiency
assessments issued by PDIC were improper and erroneous. Therefore, Citibank and BA
were not liable to pay the same. The RTC reasoned out that the money placements
subject of the petitions were not assessable for insurance purposes under the PDIC
Charter because said placements were deposits made outside of the Philippines and,
under Section 3.05(b) of the PDIC Rules and Regulations, such deposits are excluded
13 
from the computation of deposit liabilities. Section 3(f) of the PDIC Charter likewise
excludes from the definition of the term "deposit" any obligation of a bank payable at the
office of the bank located outside the Philippines. The RTC further stated that there was no
depositor-depository relationship between the respondents and their head office or other
branches. As a result, such deposits were not included as third-party deposits that must be
insured. Rather, they were considered inter-branch deposits which were excluded from the
assessment base, in accordance with the practice of the United States Federal Deposit
Insurance Corporation (FDIC) after which PDIC was patterned.
Aggrieved, PDIC appealed to the CA which affirmed the ruling of the RTC in its October
27, 2005 Decision. In so ruling, the CA found that the money placements were received as
part of the bank’s internal dealings by Citibank and BA as agents of their respective head
offices. This showed that the head office and the Philippine branch were considered as the
same entity. Thus, no bank deposit could have arisen from the transactions between the
Philippine branch and the head office because there did not exist two separate contracting
parties to act as depositor and depositary. Secondly, the CA called attention to the
14 
purpose for the creation of PDIC which was to protect the deposits of depositors in the
Philippines and not the deposits of the same bank through its head office or foreign
branches. Thirdly, because there was no law or jurisprudence on the treatment of inter-
15 
branch deposits between the Philippine branch of a foreign bank and its head office and
other branches for purposes of insurance, the CA was guided by the procedure observed
by the FDIC which considered inter-branch deposits as non-assessable. Finally, the CA
16 
cited Section 3(f) of R.A. No. 3591, which specifically excludes obligations payable at the
office of the bank located outside the Philippines from the definition of a deposit or an
insured deposit. Since the subject money placements were made in the respective head
offices of Citibank and BA located outside the Philippines, then such placements could not
be subject to assessment under the PDIC Charter. 17
Hence, this petition.
The Issues
PDIC raises the issue of whether or not the subject dollar deposits are assessable for
insurance purposes under the PDIC Charter
The sole question to be resolved in this case is whether the funds placed in the Philippine
branch by the head office and foreign branches of Citibank and BA are insurable deposits
under the PDIC Charter and, as such, are subject to assessment for insurance premiums.
 The Court’s Ruling
The Court rules in the negative.
A branch has no separate legal personality;
Purpose of the PDIC
PDIC argues that the head offices of Citibank and BA and their individual foreign branches
are separate and independent entities. It insists that under American jurisprudence, a
bank’s head office and its branches have a principal-agent relationship only if they operate
in the same jurisdiction. In the case of foreign branches, however, no such relationship
exists because the head office and said foreign branches are deemed to be two distinct
entities. Under Philippine law, specifically, Section 3(b) of R.A. No. 3591, which defines
20  bank they are not independent agencies; they are, what their name imports, merely
the terms "bank" and "banking institutions," PDIC contends that the law treats a branch of
a foreign bank as a separate and independent banking unit. 21
The respondents, on the other hand, initially point out that the factual findings of the RTC
and the CA, with regard to the nature of the money placements, the capacity in which the
same were received by the respondents and the exclusion of inter-branch deposits from
assessment, can no longer be disturbed and should be accorded great weight by this
Court. They also argue that the money placements are not deposits. They postulate that
22  This ruling was later reiterated in the more recent case of United States v. BCCI Holdings
for a deposit to exist, there must be at least two parties – a depositor and a depository –
each with a legal personality distinct from the other. Because the respondents’ respective
head offices and their branches form only a single legal entity, there is no creditor-debtor
relationship and the funds placed in the Philippine branch belong to one and the same
bank. A bank cannot have a deposit with itself. 23
This Court is of the opinion that the key to the resolution of this controversy is the
relationship of the Philippine branches of Citibank and BA to their respective head offices
and their other foreign branches.
The Court begins by examining the manner by which a foreign corporation can establish its
presence in the Philippines. It may choose to incorporate its own subsidiary as a domestic
corporation, in which case such subsidiary would have its own separate and independent
legal personality to conduct business in the country. In the alternative, it may create a
branch in the Philippines, which would not be a legally independent unit, and simply obtain
a license to do business in the Philippines.24
In the case of Citibank and BA, it is apparent that they both did not incorporate a separate
domestic corporation to represent its business interests in the Philippines. Their Philippine
branches are, as the name implies, merely branches, without a separate legal personality
from their parent company, Citibank and BA. Thus, being one and the same entity, the
funds placed by the respondents in their respective branches in the Philippines should not
be treated as deposits made by third parties subject to deposit insurance under the PDIC
Charter.
For lack of judicial precedents on this issue, the Court seeks guidance from American
jurisprudence.  In the leading case of Sokoloff v. The National City Bank of New
1âwphi1
York, where the Supreme Court of New York held:
25 
Where a bank maintains branches, each branch becomes a separate business entity
with separate books of account. A depositor in one branch cannot issue checks or drafts
upon another branch or demand payment from such other branch, and in many other
respects the branches are considered separate corporate entities and as distinct from one
another as any other bank. Nevertheless, when considered with relation to the parent
branches, and are subject to the supervision and control of the parent bank, and are
instrumentalities whereby the parent bank carries on its business, and are established for
its own particular purposes, and their business conduct and policies are controlled by the
parent bank and their property and assets belong to the parent bank, although nominally
held in the names of the particular branches. Ultimate liability for a debt of a branch
would rest upon the parent bank. [Emphases supplied]
Luxembourg where the United States Court of Appeals, District of Columbia Circuit,
26 
emphasized that "while individual bank branches may be treated as independent of one
another, each branch, unless separately incorporated, must be viewed as a part of the
parent bank rather than as an independent entity."
In addition, Philippine banking laws also support the conclusion that the head office of a
foreign bank and its branches are considered as one legal entity. Section 75 of R.A. No.
8791 (The General Banking Law of 2000) and Section 5 of R.A. No. 7221 (An Act
Liberalizing the Entry of Foreign Banks) both require the head office of a foreign bank to
guarantee the prompt payment of all the liabilities of its Philippine branch, to wit:
Republic Act No. 8791:
Sec. 75. Head Office Guarantee. – In order to provide effective protection of the interests
of the depositors and other creditors of Philippine branches of a foreign bank, the head
office of such branches shall fully guarantee the prompt payment of all liabilities of its
Philippine branch.
Residents and citizens of the Philippines who are creditors of a branch in the Philippines of
foreign bank shall have preferential rights to the assets of such branch in accordance with
the existing laws.
Republic Act No. 7721:
Sec. 5. Head Office Guarantee. – The head office of foreign bank branches shall
guarantee prompt payment of all liabilities of its Philippine branches.
Moreover, PDIC must be reminded of the purpose for its creation, as espoused in Section
1 of R.A. No. 3591 (The PDIC Charter) which provides:
Section 1. There is hereby created a Philippine Deposit Insurance Corporation hereinafter
referred to as the "Corporation" which shall insure, as herein provided, the deposits of all
banks which are entitled to the benefits of insurance under this Act, and which shall have
the powers hereinafter granted.
The Corporation shall, as a basic policy, promote and safeguard the interests of the
depositing public by way of providing permanent and continuing insurance coverage on all
insured deposits.
R.A. No. 9576, which amended the PDIC Charter, reaffirmed the rationale for the
establishment of the PDIC:
Section 1. Statement of State Policy and Objectives. - It is hereby declared to be the policy
of the State to strengthen the mandatory deposit insurance coverage system to generate,
preserve, maintain faith and confidence in the country's banking system, and protect it from
illegal schemes and machinations.
Towards this end, the government must extend all means and mechanisms necessary for
the Philippine Deposit Insurance Corporation to effectively fulfill its vital task of promoting
and safeguarding the interests of the depositing public by way of providing permanent and
continuing insurance coverage on all insured deposits, and in helping develop a sound and
stable banking system at all times.
The purpose of the PDIC is to protect the depositing public in the event of a bank closure.
It has already been sufficiently established by US jurisprudence and Philippine statutes
that the head office shall answer for the liabilities of its branch. Now, suppose the
Philippine branch of Citibank suddenly closes for some reason. Citibank N.A. would then
be required to answer for the deposit liabilities of Citibank Philippines. If the Court were to
adopt the posture of PDIC that the head office and the branch are two separate entities
and that the funds placed by the head office and its foreign branches with the Philippine
branch are considered deposits within the meaning of the PDIC Charter, it would result to
the incongruous situation where Citibank, as the head office, would be placed in the
ridiculous position of having to reimburse itself, as depositor, for the losses it may incur
occasioned by the closure of Citibank Philippines. Surely our law makers could not have
envisioned such a preposterous circumstance when they created PDIC.
Finally, the Court agrees with the CA ruling that there is nothing in the definition of a "bank"
and a "banking institution" in Section 3(b) of the PDIC Charter which explicitly states that
27 
the head office of a foreign bank and its other branches are separate and distinct from their
Philippine branches.
There is no need to complicate the matter when it can be solved by simple logic bolstered
by law and jurisprudence. Based on the foregoing, it is clear that the head office of a bank
and its branches are considered as one under the eyes of the law. While branches are
treated as separate business units for commercial and financial reporting purposes, in the
end, the head office remains responsible and answerable for the liabilities of its branches
which are under its supervision and control. As such, it is unreasonable for PDIC to require
the respondents, Citibank and BA, to insure the money placements made by their home
office and other branches. Deposit insurance is superfluous and entirely unnecessary
when, as in this case, the institution holding the funds and the one which made the
placements are one and the same legal entity.
Funds not a deposit under the definition
of the PDIC Charter;
Excluded from assessment
PDIC avers that the funds are dollar deposits and not money placements. Citing R.A. No.
6848, it defines money placement as a deposit which is received with authority to invest.
Because there is no evidence to indicate that the respondents were authorized to invest
the subject dollar deposits, it argues that the same cannot be considered money
placements. PDIC then goes on to assert that the funds received by Citibank and BA are
28 
deposits, as contemplated by Section 3(f) of R.A. No. 3591, for the following reasons: (1)
the dollar deposits were received by Citibank and BA in the course of their banking
operations from their respective head office and foreign branches and were recorded in
their books as "Account-Head Office/Branches-Time Deposits" pursuant to Central Bank
Circular No. 343 which implements R.A. No. 6426; (2) the dollar deposits were credited as
dollar time accounts and were covered by Certificates of Dollar Time Deposit which were
interest-bearing and payable upon maturity, and (3) the respondents maintain 100%
foreign currency cover for their deposit liability arising from the dollar time deposits as
required by Section 4 of R.A. No. 6426. 29
To refute PDIC’s allegations, the respondents explain the inter-branch transactions which
necessitate the creation of the accounts or placements subject of this case. When the
Philippine branch needs to procure foreign currencies, it will coordinate with a branch in
another country which handles foreign currency purchases. Both branches have existing
accounts with their head office and when a money placement is made in relation to the
acquisition of foreign currency from the international market, the amount is credited to the
account of the Philippine branch with its head office while the same is debited from the
account of the branch which facilitated the purchase. This is further documented by the
issuance of a certificate of time deposit with a stated interest rate and maturity date. The
interest rate represents the cost of obtaining the funds while the maturity date represents
the date on which the placement must be returned. On the maturity date, the amount
previously credited to the account of the Philippine branch is debited, together with the cost
for obtaining the funds, and credited to the account of the other branch. The respondents
insist that the interest rate and maturity date are simply the basis for the debit and credit
entries made by the head office in the accounts of its branches to reflect the inter-branch
accommodation. As regards the maintenance of currency cover over the subject money
30 
placements, the respondents point out that they maintain foreign currency cover in excess
of what is required by law as a matter of prudent banking practice. 31
PDIC attempts to define money placement in order to impugn the respondents’ claim that
the funds received from their head office and other branches are money placements and
not deposits, as defined under the PDIC Charter. In the process, it loses sight of the
important issue in this case, which is the determination of whether the funds in question
are subject to assessment for deposit insurance as required by the PDIC Charter. In its
struggle to find an adequate definition of "money placement," PDIC desperately cites R.A.
No. 6848, The Charter of the Al-Amanah Islamic Investment Bank of the Philippines.
Reliance on the said law is unfounded because nowhere in the law is the term "money
placement" defined. Additionally, R.A. No. 6848 refers to the establishment of an Islamic
bank subject to the rulings of Islamic Shari’a to assist in the development of the
Autonomous Region of Muslim Mindanao (ARMM), making it utterly irrelevant to the case
32 
at bench. Since Citibank and BA are neither Islamic banks nor are they located anywhere
near the ARMM, then it should be painfully obvious that R.A. No. 6848 cannot aid us in
As explained by the respondents, the transfer of funds, which resulted from the inter-
branch transactions, took place in the books of account of the respective branches in their
head office located in the United States. Hence, because it is payable outside of the
Philippines, it is not considered a deposit pursuant to Section 3(f) of the PDIC Charter:
Sec. 3(f) The term "deposit" means the unpaid balance of money or its equivalent received
by a bank in the usual course of business and for which it has given or is obliged to give
credit to a commercial, checking, savings, time or thrift account or which is evidenced by
its certificate of deposit, and trust funds held by such bank whether retained or deposited in
any department of said bank or deposit in another bank, together with such other
obligations of a bank as the Board of Directors shall find and shall prescribe by regulations
to be deposit liabilities of the Bank; Provided, that any obligation of a bank which is
payable at the office of the bank located outside of the Philippines shall not be a
deposit for any of the purposes of this Act or included as part of the total deposits
or of the insured deposits; Provided further, that any insured bank which is incorporated
under the laws of the Philippines may elect to include for insurance its deposit obligation
payable only at such branch. [Emphasis supplied]
The testimony of Mr. Shaffer as to the treatment of such inter-branch deposits by the FDIC,
after which PDIC was modelled, is also persuasive. Inter-branch deposits refer to funds of
one branch deposited in another branch and both branches are part of the same parent
company and it is the practice of the FDIC to exclude such inter-branch deposits from a
bank’s total deposit liabilities subject to assessment.
34

deciding this case.

All things considered, the Court finds that the funds in question are not deposits within the
Furthermore, PDIC heavily relies on the fact that the respondents documented the money definition of the PDIC Charter and are, thus, excluded from assessment.
placements with certificates of time deposit to simply conclude that the funds involved are
deposits, as contemplated by the PDIC Charter, and are consequently subject to WHEREFORE, the petition is DENIED. The October 27, 2005 Decision of the Court of
assessment for deposit insurance. It is this kind of reasoning that creates non-existent Appeals in CA-G.R. CV No. 61316 is AFFIRMED.
obscurities in the law and obstructs the prompt resolution of what is essentially a
straightforward issue, thereby causing this case to drag on for more than three decades. 1âwphi1

Noticeably, PDIC does not dispute the veracity of the internal transactions of the
respondents which gave rise to the issuance of the certificates of time deposit for the funds
the subject of the present dispute. Neither does it question the findings of the RTC and the
CA that the money placements were made, and were payable, outside of the Philippines,
thus, making them fall under the exclusions to deposit liabilities. PDIC also fails to impugn
the truth of the testimony of John David Shaffer, then a Fiscal Agent and Head of the
Assessment Section of the FDIC, that inter-branch deposits were excluded from the
assessment base. Therefore, the determination of facts of the lower courts shall be
accepted at face value by this Court, following the well-established principle that factual
findings of the trial court, when adopted and confirmed by the CA, are binding and
conclusive on this Court, and will generally not be reviewed on appeal. 33
G.R. No. 70054 December 11, 1991
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner,
vs.
THE MONETARY BOARD, CENTRAL BANK OF THE PHILIPPINES, JOSE B.
FERNANDEZ, CARLOTA P. VALENZUELA, ARNULFO B. AURELLANO and RAMON
V. TIAOQUI, respondents.
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner
vs.
COURT OF APPEALS, THE CENTRAL BANK OF THE PHILIPPINES, JOSE B.
FERNANDEZ, JR., CARLOTA P. VALENZUELA, ARNULFO B. AURELLANO AND
RAMON TIAOQUI, respondents.
G.R. No. 81303 December 11, 1991

G.R. No. 68878 December 11, 1991 PILAR DEVELOPMENT CORPORATION, petitioner

vs.
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner, COURT OF APPEALS, HON. MANUEL M. COSICO, in his capacity as Presiding
vs. Judge of Branch 136 of the Regional Trial Court of Makati, CENTRAL BANK OF THE
HON. INTERMEDIATE APPELLATE COURT and CELESTINA S. PAHIMUNTUNG, PHILIPPINES AND CARLOTA P. VALENZUELA, respondents.
assisted by her husband, respondents.
G.R. No. 81304 December 11, 1991
G.R. No. 77255-58 December 11, 1991
BF HOMES DEVELOPMENT CORPORATION, petitioner,
TOP MANAGEMENT PROGRAMS CORPORATION AND PILAR DEVELOPMENT vs.
CORPORATION, petitioners, THE COURT OF APPEALS, CENTRAL BANK AND CARLOTA P.
vs. VALENZUELA, respondents.
THE COURT OF APPEALS, The Executive Judge of the Regional Trial Court of
Cavite, Ex-Officio Sheriff REGALADO E. EUSEBIO, BANCO FILIPINO SAVINGS AND G.R. No. 90473 December 11, 1991
MORTGAGE BANK, CARLOTA P. VALENZUELA AND SYCIP, SALAZAR,
HERNANDEZ AND GATMAITAN, respondents. EL GRANDE DEVELOPMENT CORPORATION, petitioner,
vs.
G.R. No. 78766 December 11, 1991 THE COURT OF APPEALS, THE EXECUTIVE JUDGE of the Regional Trial Court of
Cavite, CLERK OF COURT and Ex-Officio Sheriff ADORACION VICTA, BANCO
EL GRANDE CORPORATION, petitioner, FILIPINO SAVINGS AND MORTGAGE BANK, CARLOTA P. VALENZUELA AND
vs. SYCIP, SALAZAR, HERNANDEZ AND GATMAITAN, respondents.
THE COURT OF APPEALS, THE EXECUTIVE JUDGE of The Regional Trial Court and
Ex-Officio Sheriff REGALADO E. EUSEBIO, BANCO FILIPINO SAVINGS AND Panganiban, Benitez, Barinaga & Bautista Law Offices collaborating counsel for petitioner.
MORTGAGE BANK, CARLOTA P. VALENZUELA AND SYCIP, SALAZAR, FELICIANO
AND HERNANDEZ, respondents. Florencio T. Domingo, Jr. and Crisanto S. Cornejo for intervenors.

G.R. No. 78767 December 11, 1991

METROPOLIS DEVELOPMENT CORPORATION, petitioner,

vs. MEDIALDEA, J.:
COURT OF APPEALS, CENTRAL BANK OF THE PHILIPPINES, JOSE B.
FERNANDEZ, JR., CARLOTA P. VALENZUELA, ARNULFO AURELLANO AND This refers to nine (9) consolidated cases concerning the legality of the closure and
RAMON TIAOQUI, respondents. receivership of petitioner Banco Filipino Savings and Mortgage Bank (Banco Filipino for
brevity) pursuant to the order of respondent Monetary Board. Six (6) of these cases,
G.R. No. 78894 December 11, 1991
namely, G.R. Nos. 68878, 77255-68, 78766, 81303, 81304 and 90473 involve the common
issue of whether or not the liquidator appointed by the respondent Central Bank (CB for
brevity) has the authority to prosecute as well as to defend suits, and to foreclose
mortgages for and in behalf of the bank while the issue on the validity of the receivership
and liquidation of the latter is pending resolution in G.R. No. 7004. Corollary to this issue is
whether the CB can be sued to fulfill financial commitments of a closed bank pursuant to
Section 29 of the Central Bank Act. On the other hand, the other three (3) cases, namely,
G.R. Nos. 70054, which is the main case, 78767 and 78894 all seek to annul and set aside
M.B. Resolution No. 75 issued by respondents Monetary Board and Central Bank on
January 25, 1985.
The antecedent facts of each of the nine (9) cases are as follows:
G.R No. 68878
This is a motion for reconsideration, filed by respondent Celestina Pahimuntung, of the
decision promulgated by thisCourt on April 8, 1986, granting the petition for review
on certiorari and reversing the questioned decision of respondent appellate court, which
annulled the writ of possession issued by the trial court in favor of petitioner.
The respondent-movant contends that the petitioner has no more personality to continue
prosecuting the instant case considering that petitioner bank was placed under
receivership since January 25, 1985 by the Central Bank pursuant to the resolution of the
Monetary Board.
G.R. Nos. 77255-58
Petitioners Top Management Programs Corporation (Top Management for brevity) and
Pilar Development Corporation (Pilar Development for brevity) are corporations engaged in
the business of developing residential subdivisions.
Top Management obtained a loan of P4,836,000 from Banco Filipino as evidenced by a
promissory note dated January 7, 1982 payable in three years from date. The loan was
secured by real estate mortgage in its various properties in Cavite. Likewise, Pilar
Development obtained loans from Banco Filipino between 1982 and 1983 in the principal
amounts of P6,000,000, P7,370,000 and P5,300,000 with maturity dates on December 28,
1984, January 5, 1985 and February 16, 1984, respectively. To secure the loan, Pilar
Development mortgaged to Banco Filipino various properties in Dasmariñas, Cavite.
On January 25, 1985, the Monetary Board issued a resolution finding Banco Filipino
insolvent and unable to do business without loss to its creditors and depositors. It placed
Banco Filipino under receivership of Carlota Valenzuela, Deputy Governor of the Central
Bank.
On March 22, 1985, the Monetary Board issued another resolution placing the bank under
liquidation and designating Valenzuela as liquidator. By virtue of her authority as liquidator,
Valenzuela appointed the law firm of Sycip, Salazar, et al. to represent Banco Filipino in all
litigations.
On March 26, 1985, Banco Filipino filed the petition for certiorari in G.R. No. 70054
questioning the validity of the resolutions issued by the Monetary Board authorizing the
receivership and liquidation of Banco Filipino.
In a resolution dated August 29, 1985, this Court in G.R. No. 70054 resolved to issue a
temporary restraining order, effective during the same period of 30 days, enjoining the
respondents from executing further acts of liquidation of the bank; that acts such as
receiving collectibles and receivables or paying off creditors' claims and other transactions
pertaining to normal operations of a bank are not enjoined. The Central Bank is ordered to
designate a comptroller for Banco Filipino.
Subsequently, Top Management failed to pay its loan on the due date. Hence, the law firm
of Sycip, Salazar, et al. acting as counsel for Banco Filipino under authority of Valenzuela
as liquidator, applied for extra-judicial foreclosure of the mortgage over Top Management's
properties. Thus, the Ex-Officio Sheriff of the Regional Trial Court of Cavite issued a notice
of extra-judicial foreclosure sale of the properties on December 16, 1985.
On December 9, 1985, Top Management filed a petition for injunction and prohibition with
the respondent appellate court docketed as CA-G.R. SP No. 07892 seeking to enjoin the
Regional Trial Court of Cavite, the ex-officio sheriff of said court and Sycip, Salazar, et al.
from proceeding with foreclosure sale.
Similarly, Pilar Development defaulted in the payment of its loans. The law firm of Sycip,
Salazar, et al. filed separate applications with the ex-officio sheriff of the Regional Trial
Court of Cavite for the extra-judicial foreclosure of mortgage over its properties.
Hence, Pilar Development filed with the respondent appellate court a petition for prohibition
with prayer for the issuance of a writ of preliminary injunction docketed as CA-G.R SP Nos.
08962-64 seeking to enjoin the same respondents from enforcing the foreclosure sale of its
properties. CA-G.R. SP Nos. 07892 and 08962-64 were consolidated and jointly decided.
On October 30, 1986, the respondent appellate court rendered a decision dismissing the
aforementioned petitions.
Hence, this petition was filed by the petitioners Top Management and Pilar Development
alleging that Carlota Valenzuela, who was appointed by the Monetary Board as liquidator
of Banco Filipino, has no authority to proceed with the foreclosure sale of petitioners'
properties on the ground that the resolution of the issue on the validity of the closure and
liquidation of Banco Filipino is still pending with this Court in G.R. 70054.
G.R. No. 78766
Petitioner El Grande Development Corporation (El Grande for brevity) is engaged in the
business of developing residential subdivisions. It was extended by respondent Banco
Filipino a credit accommodation to finance its housing program. Hence, petitioner was
granted a loan in the amount of P8,034,130.00 secured by real estate mortgages on its
various estates located in Cavite.
On January 15, 1985, the Monetary Board forbade Banco Filipino to do business, placed it
under receivership and designated Deputy Governor Carlota Valenzuela as receiver. On
March 22, 1985, the Monetary Board confirmed Banco Filipino's insolvency and designated
the receiver Carlota Valenzuela as liquidator.
When petitioner El Grande failed to pay its indebtedness to Banco Filipino, the latter thru
its liquidator, Carlota Valenzuela, initiated the foreclosure with the Clerk of Court and Ex-
officio sheriff of RTC Cavite. Subsequently, on March 31, 1986, the ex-officio sheriff issued
the notice of extra-judicial sale of the mortgaged properties of El Grande scheduled on
April 30, 1986.
In order to stop the public auction sale, petitioner El Grande filed a petition for prohibition
with the Court of Appeals alleging that respondent Carlota Valenzuela could not proceed
with the foreclosure of its mortgaged properties on the ground that this Court in G.R. No.
70054 issued a resolution dated August 29, 1985, which restrained Carlota Valenzuela
from acting as liquidator and allowed Banco Filipino to resume banking operations only
under a Central Bank comptroller.
On March 2, 1987, the Court of Appeals rendered a decision dismissing the petition.
Hence this petition for review on certiorari was filed alleging that the respondent court
erred when it held in its decision that although Carlota P. Valenzuela was restrained by this
Honorable Court from exercising acts in liquidation of Banco Filipino Savings & Mortgage
Bank, she was not legally precluded from foreclosing the mortgage over the properties of
the petitioner through counsel retained by her for the purpose.
G.R. No. 81303
On November 8, 1985, petitioner Pilar Development Corporation (Pilar Development for
brevity) filed an action against Banco Filipino, the Central Bank and Carlota Valenzuela for
specific performance, docketed as Civil Case No. 12191. It appears that the former
management of Banco Filipino appointed Quisumbing & Associates as counsel for Banco
Filipino. On June 12, 1986 the said law firm filed an answer for Banco Filipino which
confessed judgment against Banco Filipino.
On June 17, 1986, petitioner filed a second amended complaint. The Central Bank and
Carlota Valenzuela, thru the law firm Sycip, Salazar, Hernandez and Gatmaitan filed an
answer to the complaint.
On June 23, 1986, Sycip, et al., acting for all the defendants including Banco Filipino
moved that the answer filed by Quisumbing & Associates for defendant Banco Filipino be
expunged from the records. Despite opposition from Quisumbing & Associates, the trial
court granted the motion to expunge in an order dated March 17, 1987. Petitioner Pilar
Development moved to reconsider the order but the motion was denied.
Petitioner Pilar Development filed with the respondent appellate court a petition
for certiorari and mandamus to annul the order of the trial court. The Court of Appeals
rendered a decision dismissing the petition. A petition was filed with this Court but was
denied in a resolution dated March 22, 1988. Hence, this instant motion for
reconsideration.
G.R. No. 81304
On July 9, 1985, petitioner BF Homes Incorporated (BF Homes for brevity) filed an action
with the trial court to compel the Central Bank to restore petitioner's; financing facility with
Banco Filipino.
The Central Bank filed a motion to dismiss the action. Petitioner BF Homes in a
supplemental complaint impleaded as defendant Carlota Valenzuela as receiver of Banco
Filipino Savings and Mortgage Bank.
On April 8, 1985, petitioner filed a second supplemental complaint to which respondents
filed a motion to dismiss.
On July 9, 1985, the trial court granted the motion to dismiss the supplemental complaint
on the grounds (1) that plaintiff has no contractual relation with the defendants, and (2) that
the Intermediate Appellate Court in a previous decision in AC-G.R. SP. No. 04609 had
stated that Banco Filipino has been ordered closed and placed under receivership pending
liquidation, and thus, the continuation of the facility sued for by the plaintiff has become
legally impossible and the suit has become moot.
The order of dismissal was appealed by the petitioner to the Court of Appeals. On
November 4, 1987, the respondent appellate court dismissed the appeal and affirmed the
order of the trial court.
Hence, this petition for review on certiorari was filed, alleging that the respondent court
erred when it found that the private respondents should not be the ones to respond to the
cause of action asserted by the petitioner and the petitioner did not have any cause of
action against the respondents Central Bank and Carlota Valenzuela.
G.R. No. 90473
Petitioner El Grande Development Corporation (El Grande for brevity) obtained a loan from
Banco Filipino in the amount of P8,034,130.00, secured by a mortgage over its five parcels
of land located in Cavite which were covered by Transfer Certificate of Title Nos. T-82187,
T-109027, T-132897, T-148377, and T-79371 of the Registry of Deeds of Cavite.
When Banco Filipino was ordered closed and placed under receivership in 1985, the
appointed liquidator of BF, thru its counsel Sycip, Salazar, et al. applied with the ex-officio
sheriff of the Regional Trial Court of Cavite for the extrajudicial foreclosure of the mortgage
constituted over petitioner's properties. On March 24, 1986, the ex-officio sheriff issued a
notice of extrajudicial foreclosure sale of the properties of petitioner.
Thus, petitioner filed with the Court of Appeals a petition for prohibition with prayer for writ
of preliminary injunction to enjoin the respondents from foreclosing the mortgage and to
nullify the notice of foreclosure.
On June 16, 1989, respondent Court of Appeals rendered a decision dismissing the
petition.
Not satisfied with the decision, petitioner filed the instant petition for review on certiorari.
G.R. No. 70054
Banco Filipino Savings and Mortgage Bank was authorized to operate as such under M.B.
Resolution No. 223 dated February 14, 1963. It commenced operations on July 9, 1964. It
has eighty-nine (89) operating branches, forty-six (46) of which are in Manila, with more
than three (3) million depositors.
As of July 31, 1984, the list of stockholders showed the major stockholders to be:
Metropolis Development Corporation, Apex Mortgage and Loans Corporation, Filipino
Business Consultants, Tiu Family Group, LBH Inc. and Anthony Aguirre.
Petitioner Bank had an approved emergency advance of P119.7 million under M.B.
Resolution No. 839 dated June 29, 1984. This was augmented with a P3 billion credit line
under M.B. Resolution No. 934 dated July 27, 1984.
On the same date, respondent Board issued M.B. Resolution No. 955 placing petitioner
bank under conservatorship of Basilio Estanislao. He was later replaced by Gilberto
Teodoro as conservator on August 10, 1984. The latter submitted a report dated January
8, 1985 to respondent Board on the conservatorship of petitioner bank, which report shall
hereinafter be referred to as the Teodoro report.
Subsequently, another report dated January 23, 1985 was submitted to the Monetary
Board by Ramon Tiaoqui, Special Assistant to the Governor and Head, SES Department II
of the Central Bank, regarding the major findings of examination on the financial condition
of petitioner BF as of July 31, 1984. The report, which shall be referred to herein as the
Tiaoqui Report contained the following conclusion and recommendation:
The examination findings as of July 31, 1984, as shown earlier, indicate one of insolvency
and illiquidity and further confirms the above conclusion of the Conservator.
All the foregoing provides sufficient justification for forbidding the bank from engaging in
banking.
Foregoing considered, the following are recommended:
1. Forbid the Banco Filipino Savings & Mortgage Bank to do business in the Philippines
effective the beginning of office January 1985, pursuant to Sec. 29 of R.A No. 265, as
amended;
2. Designate the Head of the Conservator Team at the bank, as Receiver of Banco Filipino
Savings & Mortgage Bank, to immediately take charge of the assets and liabilities, as
expeditiously as possible collect and gather all the assets and administer the same for the
benefit of all the creditors, and exercise all the powers necessary for these purposes
including but not limited to bringing suits and foreclosing mortgages in the name of the
bank.
3. The Board of Directors and the principal officers from Senior Vice Presidents, as listed in
the attached Annex "A" be included in the watchlist of the Supervision and Examination
Sector until such time that they shall have cleared themselves.
4. Refer to the Central Bank's Legal Department and Office of Special Investigation the
report on the findings on Banco Filipino for investigation and possible prosecution of
directors, officers, and employees for activities which led to its insolvent position. (pp- 61-
62, Rollo)
On January 25, 1985, the Monetary Board issued the assailed MB Resolution No. 75
which ordered the closure of BF and which further provides:
After considering the report dated January 8, 1985 of the Conservator for Banco Filipino
Savings and Mortgage Bank that the continuance in business of the bank would involve
probable loss to its depositors and creditors, and after discussing and finding to be true the
statements of the Special Assistant to the Governor and Head, Supervision and
Examination Sector (SES) Department II as recited in his memorandum dated January 23,
1985, that the Banco Filipino Savings & Mortgage Bank is insolvent and that its
continuance in business would involve probable loss to its depositors and creditors, and in
pursuance of Sec. 29 of RA 265, as amended, the Board decided:
1. To forbid Banco Filipino Savings and Mortgage Bank and all its branches to do business
in the Philippines;
2. To designate Mrs. Carlota P. Valenzuela, Deputy Governor as Receiver who is hereby
directly vested with jurisdiction and authority to immediately take charge of the bank's
assets and liabilities, and as expeditiously as possible collect and gather all the assets and
administer the same for the benefit of its creditors, exercising all the powers necessary for
these purposes including but not limited to, bringing suits and foreclosing mortgages in the
name of the bank;
3. To designate Mr. Arnulfo B. Aurellano, Special Assistant to the Governor, and Mr.
Ramon V. Tiaoqui, Special Assistant to the Governor and Head, Supervision and
Examination Sector Department II, as Deputy Receivers who are likewise hereby directly
vested with jurisdiction and authority to do all things necessary or proper to carry out the
functions entrusted to them by the Receiver and otherwise to assist the Receiver in
carrying out the functions vested in the Receiver by law or Monetary Board Resolutions;
4. To direct and authorize Management to do all other things and carry out all other
measures necessary or proper to implement this Resolution and to safeguard the interests
of depositors, creditors and the general public; and
5. In consequence of the foregoing, to terminate the conservatorship over Banco Filipino
Savings and Mortgage Bank. (pp. 10-11, Rollo, Vol. I)
On February 2, 1985, petitioner BF filed a complaint docketed as Civil Case No. 9675 with
the Regional Trial Court of Makati to set aside the action of the Monetary Board placing BF
under receivership.
On February 28, 1985, petitioner filed with this Court the instant petition for certiorari and
mandamus under Rule 65 of the Rules of Court seeking to annul the resolution of January
25, 1985 as made without or in excess of jurisdiction or with grave abuse of discretion, to
order respondents to furnish petitioner with the reports of examination which led to its
closure and to afford petitioner BF a hearing prior to any resolution that may be issued
under Section 29 of R.A. 265, also known as Central Bank Act.
On March 19, 1985, Carlota Valenzuela, as Receiver and Arnulfo Aurellano and Ramon
Tiaoqui as Deputy Receivers of Banco Filipino submitted their report on the receivership of
BF to the Monetary Board, in compliance with the mandate of Sec. 29 of R.A. 265 which
provides that the Monetary Board shall determine within sixty (60) days from date of
receivership of a bank whether such bank may be reorganized/permitted to resume
business or ordered to be liquidated. The report contained the following recommendation:
In view of the foregoing and considering that the condition of the banking institution
continues to be one of insolvency, i.e., its realizable assets are insufficient to meet all its
liabilities and that the bank cannot resume business with safety to its depositors, other
creditors and the general public, it is recommended that:
1. Banco Filipino Savings & Mortgage Bank be liquidated pursuant to paragraph 3, Sec. 29
of RA No. 265, as amended;
2. The Legal Department, through the Solicitor General, be authorized to file in the proper
court a petition for assistance in th liquidation of the Bank;
3. The Statutory Receiver be designated as the Liquidator of said bank; and
4. Management be instructed to inform the stockholders of Banco Filipino Savings &
Mortgage Bank of the Monetary Board's decision liquidate the Bank. (p. 167, Rollo, Vol. I)
On July 23, 1985, petitioner filed a motion before this Court praying that a restraining order
or a writ of preliminary injunction be issued to enjoin respondents from causing the
dismantling of BF signs in its main office and 89 branches. This Court issued a resolution
on August 8, 1985 ordering the issuance of the aforesaid temporary restraining order.
On August 20, 1985, the case was submitted for resolution.
In a resolution dated August 29, 1985, this Court Resolved direct the respondents
Monetary Board and Central Bank hold hearings at which the petitioner should be heard,
and terminate such hearings and submit its resolution within thirty (30) days. This Court
further resolved to issue a temporary restraining order enjoining the respondents from
executing further acts of liquidation of a bank. Acts such as receiving collectibles and
receivables or paying off creditors' claims and other transactions pertaining to normal
operations of a bank were no enjoined. The Central Bank was also ordered to designate
comptroller for the petitioner BF. This Court also ordered th consolidation of Civil Cases
Nos. 8108, 9676 and 10183 in Branch 136 of the Regional Trial Court of Makati.
However, on September 12, 1985, this Court in the meantime suspended the hearing it
ordered in its resolution of August 29, 1985.
On October 8, 1985, this Court submitted a resolution order ing Branch 136 of the
Regional Trial Court of Makati the presided over by Judge Ricardo Francisco to conduct
the hear ing contemplated in the resolution of August 29, 1985 in the most expeditious
manner and to submit its resolution to this Court.
In the Court's resolution of February 19, 1987, the Court stated that the hearing
contemplated in the resolution of August 29, 1985, which is to ascertain whether
substantial administrative due process had been observed by the respondent Monetary
Board, may be expedited by Judge Manuel Cosico who now presides the court vacated by
Judge Ricardo Francisco, who was elevated to the Court of Appeals, there being no legal
impediment or justifiable reason to bar the former from conducting such hearing. Hence,
this Court directed Judge Manuel Cosico to expedite the hearing and submit his report to
this Court.
On February 20, 1988, Judge Manuel Cosico submitted his report to this Court with the
recommendation that the resolutions of respondents Monetary Board and Central Bank
authorizing the closure and liquidation of petitioner BP be upheld.
On October 21, 1988, petitioner BF filed an urgent motion to reopen hearing to which
respondents filed their comment on December 16, 1988. Petitioner filed their reply to
respondent's comment of January 11, 1989. After having deliberated on the grounds raised
in the pleadings, this Court in its resolution dated August 3, 1989 declared that its intention
as expressed in its resolution of August 29, 1985 had not been faithfully adhered to by the
herein petitioner and respondents. The aforementioned resolution had ordered a healing
on the reports that led respondents to order petitioner's closure and its alleged pre-planned
liquidation. This Court noted that during the referral hearing however, a different scheme
was followed. Respondents merely submitted to the commissioner their findings on the
examinations conducted on petitioner, affidavits of the private respondents relative to the
findings, their reports to the Monetary Board and several other documents in support of
their position while petitioner had merely submitted objections to the findings of
respondents, counter-affidavits of its officers and also documents to prove its claims.
Although the records disclose that both parties had not waived cross-examination of their
deponents, no such cross-examination has been conducted. The reception of evidence in
the form of affidavits was followed throughout, until the commissioner submitted his report
and recommendations to the Court. This Court also held that the documents pertinent to
the resolution of the instant petition are the Teodoro Report, Tiaoqui Report, Valenzuela,
Aurellano and Tiaoqui Report and the supporting documents which were made as the
bases by the reporters of their conclusions contained in their respective reports. This Court
also Resolved in its resolution to re-open the referral hearing that was terminated after
Judge Cosico had submitted his report and recommendation with the end in view of
allowing petitioner to complete its presentation of evidence and also for respondents to
adduce additional evidence, if so minded, and for both parties to conduct the required
cross-examination of witnesses/deponents, to be done within a period of three months. To
obviate all doubts on Judge Cosico's impartiality, this Court designated a new hearing
commissioner in the person of former Judge Consuelo Santiago of the Regional Trial
Court, Makati, Branch 149 (now Associate Justice of the Court of Appeals).
Three motions for intervention were filed in this case as follows: First, in G.R. No. 70054
filed by Eduardo Rodriguez and Fortunate M. Dizon, stockholders of petitioner bank for
and on behalf of other stockholders of petitioner; second, in G.R. No. 78894, filed by the
same stockholders, and, third, again in G.R. No. 70054 by BF Depositors' Association and
others similarly situated. This Court, on March 1, 1990, denied the aforesaid motions for
intervention.
On January 28, 1991, the hearing commissioner, Justice Consuelo Santiago of the Court
of Appeals submitted her report and recommendation (to be hereinafter called, "Santiago
Report") on the following issues stated therein as follows:
l) Had the Monetary Board observed the procedural requirements laid down in Sec. 29 of
R.A. 265, as amended to justify th closure of the Banco Filipino Savings and Mortgage
Bank?
2) On the date of BF's closure (January 25, 1985) was its condition one of insolvency or
would its continuance in business involve probable loss to its depositors or creditors?
The commissioner after evaluation of the evidence presented found and recommended the
following:
1. That the TEODORO and TIAOQUI reports did not establish in accordance with See. 29
of the R.A. 265, as amended, BF's insolvency as of July 31, 1984 or that its continuance in
business thereafter would involve probable loss to its depositors or creditors. On the
contrary, the evidence indicates that BF was solvent on July 31, 1984 and that on January
25, 1985, the day it was closed, its insolvency was not clearly established;
2. That consequently, BF's closure on January 25, 1985, not having satisfied the
requirements prescribed under Sec. 29 of RA 265, as amended, was null and void.
3. That accordingly, by way of correction, BF should be allowed to re-open subject to such
laws, rules and regulations that apply to its situation.
Respondents thereafter filed a motion for leave to file objections to the Santiago Report. In
the same motion, respondents requested that the report and recommendation be set for
oral argument before the Court. On February 7, 1991, this Court denied the request for oral
argument of the parties.
On February 25, 1991, respondents filed their objections to the Santiago Report. On March
5, 1991, respondents submitted a motion for oral argument alleging that this Court is
confronted with two conflicting reports on the same subject, one upholding on all points the
Monetary Board's closure of petitioner, (Cosico Report dated February 19, 1988) and the
other (Santiago Report dated January 25, 1991) holding that petitioner's closure was null
and void because petitioner's insolvency was not clearly established before its closure; and
that such a hearing on oral argrument will therefore allow the parties to directly confront the
issues before this Court.
On March 12, 1991 petitioner filed its opposition to the motion for oral argument. On March
20, 1991, it filed its reply to respondents' objections to the Santiago Report.
On June 18, 1991, a hearing was held where both parties were heard on oral argument
before this Court. The parties, having submitted their respective memoranda, the case is
now submitted for decision.
G.R. No. 78767
On February 2, 1985, Banco Filipino filed a complaint with the trial court docketed as Civil
Case No. 9675 to annul the resolution of the Monetary Board dated January 25, 1985,
which ordered the closure of the bank and placed it under receivership.
On February 14, 1985, the Central Bank and the receivers filed a motion to dismiss the
complaint on the ground that the receivers had not authorized anyone to file the action. In
a supplemental motion to dismiss, the Central Bank cited the resolution of this Court dated
October 15, 1985 in G.R. No. 65723 entitled, "Central Bank et al. v. Intermediate Appellate
Court" whereby We held that a complaint questioning the validity of the receivership
established by the Central Bank becomes moot and academic upon the initiation of
liquidation proceedings.
While the motion to dismiss was pending resolution, petitioner herein Metropolis
Development Corporation (Metropolis for brevity) filed a motion to intervene in the
aforestated civil case on the ground that as a stockholder and creditor of Banco Filipino, it
has an interest in the subject of the action.
On July 19, 1985, the trial court denied the motion to dismiss and also denied the motion
for reconsideration of the order later filed by Central Bank. On June 5, 1985, the trial court
allowed the motion for intervention.
Hence, the Central Bank and the receivers of Banco Filipino filed a petition
for certiorari with the respondent appellate court alleging that the trial court committed
grave abuse of discretion in not dismissing Civil Case No. 9675.
On March 17, 1986, the respondent appellate court rendered a decision annulling and
setting aside the questioned orders of the trial court, and ordering the dismissal of the
complaint filed by Banco Filipino with the trial court as well as the complaint in intervention
of petitioner Metropolis Development Corporation.
Hence this petition was filed by Metropolis Development Corporation questioning the
decision of the respondent appellate court.
G.R. No. 78894
On February 2, 1985, a complaint was filed with the trial court in the name of Banco
Filipino to annul the resolution o the Monetary Board dated January 25, 1985 which
ordered the closure of Banco Filipino and placed it under receivership. The receivers
appointed by the Monetary Board were Carlota Valenzuela, Arnulfo Aurellano and Ramon
Tiaoqui.
On February 14, 1985, the Central Bank and the receiver filed a motion to dismiss the
complaint on the ground that the receiver had not authorized anyone to file the action.
On March 22, 1985, the Monetary Board placed the bank under liquidation and designated
Valenzuela as liquidator and Aurellano and Tiaoqui as deputy liquidators.
The Central Bank filed a supplemental motion to dismiss which was denied. Hence, the
latter filed a petition for certiorari with the respondent appellate court to set aside the order
of the trial court denying the motion to dismiss. On March 17, 1986, the respondent
appellate court granted the petition and dismissed the complaint of Banco Filipino with the
trial court.
Thus, this petition for certiorari was filed with the petitioner contending that a bank which
has been closed and placed under receivership by the Central Bank under Section 29 of
RA 265 could file suit in court in its name to contest such acts of the Central Bank, without
the authorization of the CB-appointed receiver.
After deliberating on the pleadings in the following cases:
1. In G.R. No. 68878, the respondent's motion for reconsideration;
2. In G.R. Nos. 77255-58, the petition, comment, reply, rejoinder and sur-rejoinder;
2. In G.R. No. 78766, the petition, comment, reply and rejoinder;
3. In G.R. No. 81303, the petitioner's motion for reconsideration;
4. In G.R.No. 81304, the petition, comment and reply;
5. Finally, in G.R. No. 90473, the petition comment and reply.
We find the motions for reconsideration in G.R. Nos. 68878 and 81303 and the petitions in
G.R. Nos. 77255-58, 78766, 81304 and 90473 devoid of merit.
Section 29 of the Republic Act No. 265, as amended known as the Central Bank
Act, provides that when a bank is forbidden to do business in the Philippines and placed
under receivership, the person designated as receiver shall immediately take charge of the
bank's assets and liabilities, as expeditiously as possible, collect and gather all the assets
and administer the same for the benefit of its creditors, and represent the bank personally
or through counsel as he may retain in all actions or proceedings for or against the
institution, exercising all the powers necessary for these purposes including, but not limited
to, bringing and foreclosing mortgages in the name of the bank. If the Monetary Board shall
later determine and confirm that banking institution is insolvent or cannot resume business
safety to depositors, creditors and the general public, it shall, public interest requires, order
its liquidation and appoint a liquidator who shall take over and continue the functions of
receiver previously appointed by Monetary Board. The liquid for may, in the name of the
bank and with the assistance counsel as he may retain, institute such actions as may
necessary in the appropriate court to collect and recover a counts and assets of such
institution or defend any action ft against the institution.
When the issue on the validity of the closure and receivership of Banco Filipino bank was
raised in G.R. No. 70054, pendency of the case did not diminish the powers and authority
of the designated liquidator to effectuate and carry on the a ministration of the bank. In fact
when We adopted a resolute on August 25, 1985 and issued a restraining order to
respondents Monetary Board and Central Bank, We enjoined me further acts of liquidation.
Such acts of liquidation, as explained in Sec. 29 of the Central Bank Act are those which
constitute the conversion of the assets of the banking institution to money or the sale,
assignment or disposition of the s to creditors and other parties for the purpose of paying
debts of such institution. We did not prohibit however acts a as receiving collectibles and
receivables or paying off credits claims and other transactions pertaining to normal operate
of a bank. There is no doubt that the prosecution of suits collection and the foreclosure of
mortgages against debtors the bank by the liquidator are among the usual and ordinary
transactions pertaining to the administration of a bank. their did Our order in the same
resolution dated August 25, 1985 for the designation by the Central Bank of a comptroller
Banco Filipino alter the powers and functions; of the liquid insofar as the management of
the assets of the bank is concerned. The mere duty of the comptroller is to supervise
counts and finances undertaken by the liquidator and to d mine the propriety of the latter's
expenditures incurred behalf of the bank. Notwithstanding this, the liquidator is empowered
under the law to continue the functions of receiver is preserving and keeping intact the
assets of the bank in substitution of its former management, and to prevent the dissipation
of its assets to the detriment of the creditors of the bank. These powers and functions of
the liquidator in directing the operations of the bank in place of the former management or
former officials of the bank include the retaining of counsel of his choice in actions and
proceedings for purposes of administration.
Clearly, in G.R. Nos. 68878, 77255-58, 78766 and 90473, the liquidator by himself or
through counsel has the authority to bring actions for foreclosure of mortgages executed
by debtors in favor of the bank. In G.R. No. 81303, the liquidator is likewise authorized to
resist or defend suits instituted against the bank by debtors and creditors of the bank and
by other private persons. Similarly, in G.R. No. 81304, due to the aforestated reasons, the
Central Bank cannot be compelled to fulfill financial transactions entered into by Banco
Filipino when the operations of the latter were suspended by reason of its closure. The
Central Bank possesses those powers and functions only as provided for in Sec. 29 of the
Central Bank Act.
While We recognize the actual closure of Banco Filipino and the consequent legal effects
thereof on its operations, We cannot uphold the legality of its closure and thus, find the
petitions in G.R. Nos. 70054, 78767 and 78894 impressed with merit. We hold that the
closure and receivership of petitioner bank, which was ordered by respondent Monetary
Board on January 25, 1985, is null and void.
It is a well-recognized principle that administrative and discretionary functions may not be
interfered with by the courts. In general, courts have no supervising power over the
proceedings and actions of the administrative departments of the government. This is
generally true with respect to acts involving the exercise of judgment or discretion, and
findings of fact. But when there is a grave abuse of discretion which is equivalent to a
capricious and whimsical exercise of judgment or where the power is exercised in an
arbitrary or despotic manner, then there is a justification for the courts to set aside the
administrative determination reached (Lim, Sr. v. Secretary of Agriculture and Natural
Resources, L-26990, August 31, 1970, 34 SCRA 751)
The jurisdiction of this Court is called upon, once again, through these petitions, to
undertake the delicate task of ascertaining whether or not an administrative agency of the
government, like the Central Bank of the Philippines and the Monetary Board, has
committed grave abuse of discretion or has acted without or in excess of jurisdiction in
issuing the assailed order. Coupled with this task is the duty of this Court not only to strike
down acts which violate constitutional protections or to nullify administrative decisions
contrary to legal mandates but also to prevent acts in excess of authority or jurisdiction, as
well as to correct manifest abuses of discretion committed by the officer or tribunal
involved.
The law applicable in the determination of these issues is Section 29 of Republic Act No.
265, as amended, also known as the Central Bank Act, which provides:
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
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's of its creditors, and represent the bank personally or through counsel as he may
retain in all actions or proceedings for or against the institution, exercising all the powers
necessary for these purposes including, but not limited to, bringing and foreclosing
mortgages in the name of the bank or non-bank financial intermediary performing quasi-
banking functions.
The Monetary Board shall thereupon determine within sixty days whether the institution
may be reorganized or otherwise placed in such a condition so that it may be permitted to
resume business with safety to its depositors and creditors and the general public and
shall prescribe the conditions under which such resumption of business shall take place as
well as the time for fulfillment of such conditions. In such case, the expenses and fees in
the collection and administration of the assets of the institution shall be determined by the
Board and shall be paid to the Central Bank out of the assets of such institution.
If the Monetary Board shall determine and confirm within the said period that the bank or
non-bank financial intermediary performing quasi-banking functions is insolvent or cannot
resume business with safety to its depositors, creditors, and the general public, it shall, if
the public interest requires, order its liquidation, indicate the manner of its liquidation and
approve a liquidation plan which may, when warranted, involve disposition of any or all
assets in consideration for the assumption of equivalent liabilities. The liquidator
designated as hereunder provided shall, by the Solicitor General, file a petition in the
regional trial court reciting the proceedings which have been taken and praying the
assistance of the court in the liquidation of such institutions. The court shall have
jurisdiction in the same proceedings to assist in the adjudication of the disputed claims
against the bank or non-bank financial intermediary performing quasi-banking functions
and in the enforcement of individual liabilities of the stockholders and do all that is
necessary to preserve the assets of such institutions and to implement the liquidation plan
approved by the Monetary Board. The Monetary Board shall designate an official of the
Central bank or a person of recognized competence in banking or finance, as liquidator
who shall take over and continue the functions of the receiver previously appointed by the
Monetary Board under this Section. The liquidator shall, with all convenient speed, convert
the assets of the banking institutions or non-bank financial intermediary performing quasi-
banking function to money or sell, assign or otherwise dispose of the same to creditors and
other parties for the purpose of paying the debts of such institution and he may, in the
name of the bank or non-bank financial intermediary performing quasi-banking functions
and with the assistance of counsel as he may retain, institute such actions as may be
necessary in the appropriate court to collect and recover accounts and assets of such
institution or defend any action filed against the institution: Provided, However, That after
having reasonably established all claims against the institution, the liquidator may, with the
approval of the court, effect partial payments of such claims for assets of the institution in
accordance with their legal priority.
The assets of an institution under receivership or liquidation shall be deemed in custodia
legis in the hands of the receiver or liquidator and shall from the moment of such
receivership or liquidation, be exempt from any order of garnishment, levy, attachment,
orexecution.
The provisions of any law to the contrary notwithstanding, the actions of the Monetary
Board under this Section, Section 28-A, an the second paragraph of Section 34 of this Act
shall be final an executory, and can be set aside by a court only if there is convince proof,
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 th capital stock within ten (10) days from the date the receiver take charge
of the assets and liabilities of the bank or non-bank financial intermediary performing
quasi-banking functions or, in case of conservatorship or liquidation, within ten (10) days
from receipt of notice by the said majority stockholders of said bank or non-bank financial
intermediary of the order of its placement under conservatorship o liquidation. No
restraining order or injunction shall be issued by an court enjoining the Central Bank from
implementing its actions under this Section and the second paragraph of Section 34 of this
Act in th absence of any convincing proof that the action of the Monetary Board is plainly
arbitrary and made in bad faith and the petitioner or plaintiff files a bond, executed in favor
of the Central Bank, in an amount 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 th 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 provision of this Section shall govern the issuance and dissolution of
the re straining order or injunction contemplated in this Section.
x x x           x x x          x x x
Based on the aforequoted provision, the Monetary Board may order the cessation of
operations of a bank in the Philippine and place it under receivership upon a finding of
insolvency or when its continuance in business would involve probable loss its depositors
or creditors. If the Monetary Board shall determine and confirm within sixty (60) days that
the bank is insolvent or can no longer resume business with safety to its depositors,
creditors and the general public, it shall, if public interest will be served, order its
liquidation.
Specifically, the basic question to be resolved in G.R. Nos. 70054, 78767 and 78894 is
whether or not the Central Bank and the Monetary Board acted arbitrarily and in bad faith
in finding and thereafter concluding that petitioner bank is insolvent, and in ordering its
closure on January 25, 1985.
As We have stated in Our resolution dated August 3, 1989, the documents pertinent to the
resolution of these petitions are the Teodoro Report, Tiaoqui Report, and the Valenzuela,
Aurellano and Tiaoqui Report and the supporting documents made as bases by the
supporters of their conclusions contained in their respective reports. We will focus Our
study and discussion however on the Tiaoqui Report and the Valenzuela, Aurellano and
Tiaoqui Report. The former recommended the closure and receivership of petitioner bank
while the latter report made the recommendation to eventually place the petitioner bank
under liquidation. This Court shall likewise take into consideration the findings contained in
the reports of the two commissioners who were appointed by this Court to hold the referral
hearings, namely the report by Judge Manuel Cosico submitted February 20, 1988 and the
report submitted by Justice Consuelo Santiago on January 28, 1991.
There is no question that under Section 29 of the Central Bank Act, the following are the
mandatory requirements to be complied with before a bank found to be insolvent is
ordered closed and forbidden to do business in the Philippines: Firstly, an examination
shall be conducted by the head of the appropriate supervising or examining department or
his examiners or agents into the condition of the bank; secondly, it shall be disclosed in the
examination that the condition of the bank is one of insolvency, or that its continuance in
business would involve probable loss to its depositors or creditors; thirdly, the department
head concerned shall inform the Monetary Board in writing, of the facts; and lastly, the
Monetary Board shall find the statements of the department head to be true.
Anent the first requirement, the Tiaoqui report, submitted on January 23, 1985, revealed
that the finding of insolvency of petitioner was based on the partial list of exceptions and
findings on the regular examination of the bank as of July 31, 1984 conducted by the
Supervision and Examination Sector II of the Central Bank of the PhilippinesCentral Bank
(p. 1, Tiaoqui Report).
On December 17, 1984, this list of exceptions and finding was submitted to the petitioner
bank (p. 6, Tiaoqui Report) This was attached to the letter dated December 17, 1984, of
examiner-in-charge Dionisio Domingo of SES Department II of the Central Bank to
Teodoro Arcenas, president of petitione bank, which disclosed that the examination of the
petitioner bank as to its financial condition as of July 31, 1984 was not yet completed or
finished on December 17, 1984 when the Central Bank submitted the partial list of findings
of examination to th petitioner bank. The letter reads:
In connection with the regular examination of your institution a of July 31, 1984, we
are submitting herewith a partial list of our exceptions/findings for your comments.
Please be informed that we have not yet officially terminated our examination (tentatively
scheduled last December 7, 1984) and that we are still awaiting for the unsubmitted replies
to our previous letters requests. Moreover, other findings/ observations are still being
summarized including the classification of loans and other risk assets. These shall be
submitted to you in due time (p. 810, Rollo, Vol. III; emphasis ours).
It is worthy to note that a conference was held on January 21, 1985 at the Central Bank
between the officials of the latter an of petitioner bank. What transpired and what was
agreed upon during the conference was explained in the Tiaoqui report.
... The discussion centered on the substantial exposure of the bank to the various entities
which would have a relationship with the bank; the manner by which some bank funds
were made indirectly available to several entities within the group; and the unhealth
financial status of these firms in which the bank was additionally exposed through new
funds or refinancing accommodation including accrued interest.
Queried in the impact of these clean loans, on the bank solvency Mr. Dizon (BF Executive
Vice President) intimated that, collectively these corporations have large undeveloped real
estate properties in the suburbs which can be made answerable for the unsecured loans a
well as the Central Bank's credit accommodations. A formal reply of the bank would still be
forthcoming. (pp. 58-59, Rollo, Vol. I; emphasis ours)
Clearly, Tiaoqui based his report on an incomplete examination of petitioner bank and
outrightly concluded therein that the latter's financial status was one of insolvency or
illiquidity. He arrived at the said conclusion from the following facts: that as of July 31,
1984, total capital accounts consisting of paid-in capital and other capital accounts such as
surplus, surplus reserves and undivided profits aggregated P351.8 million; that capital
adjustments, however, wiped out the capital accounts and placed the bank with a capital
deficiency amounting to P334.956 million; that the biggest adjustment which contributed to
the deficit is the provision for estimated losses on accounts classified as doubtful and loss
which was computed at P600.4 million pursuant to the examination. This provision is also
known as valuation reserves which was set up or deducted against the capital accounts of
the bank in arriving at the latter's financial condition.
Tiaoqui however admits the insufficiency and unreliability of the findings of the examiner as
to the setting up of recommended valuation reserves from the assets of petitioner bank. He
stated:
The recommended valuation reserves as bases for determining the financial status of the
bank would need to be discussed with the bank, consistent with standard examination
procedure, for which the bank would in turn reply. Also, the examination has not been
officially terminated. (p. 7. Tiaoqui report; p. 59, Rollo, Vol. I)
In his testimony in the second referral hearing before Justice Santiago, Tiaoqui testified
that on January 21, 1985, he met with officers of petitioner bank to discuss the advanced
findings and exceptions made by Mr. Dionisio Domingo which covered 70%-80% of the
bank's loan portfolio; that at that meeting, Fortunato Dizon (BF's Executive Vice President)
said that as regards the unsecured loans granted to various corporations, said
corporations had large undeveloped real estate properties which could be answerable for
the said unsecured loans and that a reply from BF was forthcoming, that he (Tiaoqui)
however prepared his report despite the absence of such reply; that he believed, as in fact
it is stated in his report, that despite the meeting on January 21, 1985, there was still a
need to discuss the recommended valuation reserves of petitioner bank and; that he
however, did not wait anymore for a discussion of the recommended valuation reserves
and instead prepared his report two days after January 21, 1985 (pp. 3313-3314, Rollo).
Records further show that the examination of petitioner bank was officially terminated only
when Central Bank Examination-charge Dionisio Domingo submitted his final report of
examination on March 4,1985.
It is evident from the foregoing circumstances that the examination contemplated in Sec.
29 of the CB Act as a mandatory requirement was not completely and fully complied with.
Despite the existence of the partial list of findings in the examination of the bank, there
were still highly significant items to be weighed and determined such as the matter of
valuation reserves, before these can be considered in the financial condition of the bank. It
would be a drastic move to conclude prematurely that a bank is insolvent if the basis for
such conclusion is lacking and insufficient, especially if doubt exists as to whether such
bases or findings faithfully represent the real financial status of the bank.
The actuation of the Monetary Board in closing petitioner bank on January 25, 1985 barely
four days after a conference with the latter on the examiners' partial findings on its financial
position is also violative of what was provided in the CB Manual of Examination
Procedures. Said manual provides that only after the examination is concluded, should a
pre-closing conference led by the examiner-in-charge be held with the
officers/representatives of the institution on the findings/exception, and a copy of the
summary of the findings/violations should be furnished the institution examined so that
corrective action may be taken by them as soon as possible (Manual of Examination
Procedures, General Instruction, p. 14). It is hard to understand how a period of four days
after the conference could be a reasonable opportunity for a bank to undertake a
responsive and corrective action on the partial list of findings of the examiner-in-charge.
We recognize the fact that it is the responsibility of the Central Bank of the Philippines to
administer the monetary, banking and credit system of the country and that its powers and
functions shall be exercised by the Monetary Board pursuant to Rep. Act No. 265, known
as the Central Bank Act. Consequently, the power and authority of the Monetary Board to
close banks and liquidate them thereafter when public interest so requires is an exercise of
the police power of the state. Police power, however, may not be done arbitratrily or
unreasonably and could be set aside if it is either capricious, discriminatory, whimsical,
arbitrary, unjust or is tantamount to a denial of due process and equal protection clauses of
the Constitution (Central Bank v. Court of Appeals, Nos. L-50031-32, July 27, 1981, 106
SCRA 143).
In the instant case, the basic standards of substantial due process were not observed.
Time and again, We have held in several cases, that the procedure of administrative
tribunals must satisfy the fundamentals of fair play and that their judgment should express
a well-supported conclusion.
In the celebrated case of Ang Tibay v. Court of Industrial Relations, 69 Phil. 635, this Court
laid down several cardinal primary rights which must be respected in a proceeding before
an administrative body.
However, as to the requirement of notice and hearing, Sec. 29 of RA 265 does not require
a previous hearing before the Monetary Board implements the closure of a bank, since its
action is subject to judicial scrutiny as provided for under the same law (Rural Bank of Bato
v. IAC, G.R. No. 65642, October 15, 1984, Rural Bank v. Court of Appeals, G.R. 61689,
June 20, 1988,162 SCRA 288).
Notwithstanding the foregoing, administrative due process does not mean that the other
important principles may be dispensed with, namely: the decision of the administrative
body must have something to support itself and the evidence must be substantial.
Substantial evidence is more than a mere scintilla. It means such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion (Ang Tibay vs.
CIR, supra). Hence, where the decision is merely based upon pieces of documentary
evidence that are not sufficiently substantial and probative for the purpose and conclusion
they are presented, the standard of fairness mandated in the due process clause is not
met. In the case at bar, the conclusion arrived at by the respondent Board that the
petitioner bank is in an illiquid financial position on January 23, 1985, as to justify its
closure on January 25, 1985 cannot be given weight and finality as the report itself admits
the inadequacy of its basis to support its conclusion.
The second requirement provided in Section 29, R.A. 265 before a bank may be closed is
that the examination should disclose that the condition of the bank is one of insolvency.
As to the concept of whether the bank is solvent or not, the respondents contend that
under the Central Bank Manual of Examination Procedures, Central Bank examiners must
recommend valuation reserves, when warranted, to be set up or deducted against the
corresponding asset account to determine the bank's true condition or net worth. In the
case of loan accounts, to which practically all the questioned valuation reserves refer, the
manual provides that:
1. For doubtful loans, or loans the ultimate collection of which is doubtful and in which a
substantial loss is probable but not yet definitely ascertainable as to extent, valuation
reserves of fifty per cent (50%) of the accounts should be recommended to be set up.
2. For loans classified as loss, or loans regarded by the examiner as absolutely
uncollectible or worthless, valuation reserves of one hundred percent (100%) of the
accounts should be recommended to be set up (p. 8, Objections to Santiago report).
The foregoing criteria used by respondents in determining the financial condition of the
bank is based on Section 5 of RA 337, known as the General Banking Act which states:
Sec. 5. The following terms shall be held to be synonymous and interchangeable:
... f. Unimpaired Capital and Surplus, "Combined capital accounts," and "Net worth," which
terms shall mean for the purposes of this Act, the total of the "unimpaired paid-in capital,
surplus, and undivided profits net of such valuation reserves as may be required by the
Central Bank."
There is no doubt that the Central Bank Act vests authority upon the Central Bank and
Monetary Board to take charge and administer the monetary and banking system of the
country and this authority includes the power to examine and determine the financial
condition of banks for purposes provided for by law, such as for the purpose of closure on
the ground of insolvency stated in Section 29 of the Central Bank Act. But express grants
of power to public officers should be subjected to a strict interpretation, and will be
construed as conferring those powers which are expressly imposed or necessarily implied
(Floyd Mechem, Treatise on the Law of Public Offices and Officers, p. 335).
In this case, there can be no clearer explanation of the concept of insolvency than what the
law itself states. Sec. 29 of the Central Bank Act provides that insolvency under the Act,
shall be understood to mean that "the realizable assets of a bank or a non-bank financial
intermediary performing quasi-banking functions as determined by the Central Bank
are insufficient to meet its liabilities."
Hence, the contention of the Central Bank that a bank's true financial condition is
synonymous with the terms "unimpaired capital and surplus," "combined capital accounts"
and net worth after deducting valuation reserves from the capital, surplus and unretained
earnings, citing Sec. 5 of RA 337 is misplaced.
Firstly, it is clear from the law that a solvent bank is one in which its assets exceed its
liabilities. It is a basic accounting principle that assets are composed of liabilities and
capital. The term "assets" includes capital and surplus" (Exley v. Harris, 267 p. 970, 973,
126 Kan., 302). On the other hand, the term "capital" includes common and preferred
stock, surplus reserves, surplus and undivided profits. (Manual of Examination Procedures,
Report of Examination on Department of Commercial and Savings Banks, p. 3-C). If
valuation reserves would be deducted from these items, the result would merely be the
networth or the unimpaired capital and surplus of the bank applying Sec. 5 of RA 337 but
not the total financial condition of the bank.
Secondly, the statement of assets and liabilities is used in balance sheets. Banks use
statements of condition to reflect the amounts, nature and changes in the assets and
liabilities. The Central Bank Manual of Examination Procedures provides a format or
checklist of a statement of condition to be used by examiners as guide in the examination
of banks. The format enumerates the items which will compose the assets and liabilities of
a bank. Assets include cash and those due from banks, loans, discounts and advances,
fixed assets and other property owned or acquired and other miscellaneous assets. The
amount of loans, discounts and advances to be stated in the statement of condition as
provided for in the manual is computed after deducting valuation reserves when deemed
necessary. On the other hand, liabilities are composed of demand deposits, time and
savings deposits, cashier's, manager's and certified checks, borrowings, due to head
office, branches; and agencies, other liabilities and deferred credits (Manual of
Examination Procedure, p. 9). The amounts stated in the balance sheets or statements of
condition including the computation of valuation reserves when justified, are based
however, on the assumption that the bank or company will continue in business
indefinitely, and therefore, the networth shown in the statement is in no sense an indication
of the amount that might be realized if the bank or company were to be liquidated
immediately (Prentice Hall Encyclopedic Dictionary of Business Finance, p. 48). Further,
based on respondents' submissions, the allowance for probable losses on loans and
discounts represents the amount set up against current operations to provide for possible
losses arising from non-collection of loans and advances, and this account is also referred
to as valuation reserve (p. 9, Objections to Santiago report). Clearly, the statement of
condition which contains a provision for recommended valuation reserves should not be
used as the ultimate basis to determine the solvency of an institution for the purpose of
termination of its operations.
Respondents acknowledge that under the said CB manual, CB examiners must
recommend valuation reserves, when warranted, to be set up against the corresponding
asset account (p. 8, Objections to Santiago report). Tiaoqui himself, as author of the report
recommending the closure of petitioner bank admits that the valuation reserves should still
be discussed with the petitioner bank in compliance with standard examination procedure.
Hence, for the Monetary Board to unilaterally deduct an uncertain amount as valuation
reserves from the assets of a bank and to conclude therefrom without sufficient basis that
the bank is insolvent, would be totally unjust and unfair.
The test of insolvency laid down in Section 29 of the Central Bank Act is measured by
determining whether the realizable assets of a bank are leas than its liabilities. Hence, a
bank is solvent if the fair cash value of all its assets, realizable within a reasonable time by
a reasonable prudent person, would equal or exceed its total liabilities exclusive of stock
liability; but if such fair cash value so realizable is not sufficient to pay such liabilities within
a reasonable time, the bank is insolvent. (Gillian v. State, 194 N.E. 360, 363, 207 Ind. 661).
Stated in other words, the insolvency of a bank occurs when the actual cash market value
of its assets is insufficient to pay its liabilities, not considering capital stock and surplus
which are not liabilities for such purpose (Exley v. Harris, 267 p. 970, 973,126 Kan. 302;
Alexander v. Llewellyn, Mo. App., 70 S.W. 2n 115,117).
In arriving at the computation of realizable assets of petitioner bank, respondents used its
books which undoubtedly are not reflective of the actual cash or fair market value of its
assets. This is not the proper procedure contemplated in Sec. 29 of the Central Bank Act.
Even the CB Manual of Examination Procedures does not confine examination of a bank
solely with the determination of the books of the bank. The latter is part of auditing which
should not be confused with examination. Examination appraises the soundness of the
institution's assets, the quality and character of management and determines the
institution's compliance with laws, rules and regulations. Audit is a detailed inspection of
the institution's books, accounts, vouchers, ledgers, etc. to determine the recording of all
assets and liabilities. Hence, examination concerns itself with review and appraisal, while
audit concerns itself with verification (CB Manual of Examination Procedures, General
Instructions, p. 5). This Court however, is not in the position to determine how much cash
or market value shall be assigned to each of the assets and liabilities of the bank to
determine their total realizable value. The proper determination of these matters by using
the actual cash value criteria belongs to the field of fact-finding expertise of the Central
Bank and the Monetary Board. Notwithstanding the fact that the figures arrived at by the
respondent Board as to assets and liabilities do not truly indicate their realizable value as
they were merely based on book value, We will however, take a look at the figures
presented by the Tiaoqui Report in concluding insolvency as of July 31, 1984 and at the
figures presented by the CB authorized deputy receiver and by the Valenzuela, Aurellano
and Tiaoqui Report which recommended the liquidation of the bank by reason of
insolvency as o January 25,1985.
The Tiaoqui report dated January 23, 1985, which was based on partial examination
findings on the bank's condition as of July 31, 1984, states that total liabilities of P5,282.1
million exceeds total assets of P4,947.2 million after deducting from the assets valuation
reserves of P612.2 million. Since, as We have explained in our previous discussion that
valuation reserves can not be legally deducted as there was no truthful and complete
evaluation thereof as admitted by the Tiaoqui report itself, then an adjustment of the
figures win show that the liabilities of P5,282.1 million will not exceed the total assets which
will amount to P5,559.4 if the 612.2 million allotted to valuation reserves will not be
deducted from the assets. There can be no basis therefore for both the conclusion of
insolvency and for the decision of the respondent Board to close petitioner bank and place
it under receivership.
Concerning the financial position of the bank as of January 25, 1985, the date of the
closure of the bank, the consolidated statement of condition thereof as of the aforesaid
date shown in the Valenzuela, Aurellano and Tiaoqui report on the receivership of
petitioner bank, dated March 19, 1985, indicates that total liabilities of 4,540.84 million
does not exceed the total assets of 4,981.53 million. Likewise, the consolidated statement
of condition of petitioner bank as of January 25, 1985 prepared by the Central Bank
Authorized Deputy Receiver Artemio Cruz shows that total assets amounting to
P4,981,522,996.22 even exceeds total liabilities amounting to P4,540,836,834.15. Based
on the foregoing, there was no valid reason for the Valenzuela, Aurellano and Tiaoqui
report to finally recommend the liquidation of petitioner bank instead of its rehabilitation.
We take note of the exhaustive study and findings of the Cosico report on the petitioner
bank's having engaged in unsafe, unsound and fraudulent banking practices by the
granting of huge unsecured loans to several subsidiaries and related companies. We do
not see, however, that this has any material bearing on the validity of the closure. Section
34 of the RA 265, Central Bank Act empowers the Monetary Board to take action under
Section 29 of the Central Bank Act when a bank "persists in carrying on its business in an
unlawful or unsafe manner." There was no showing whatsoever that the bank had
persisted in committing unlawful banking practices and that the respondent Board had
attempted to take effective action on the bank's alleged activities. During the period from
July 27, 1984 up to January 25, 1985, when petitioner bank was under conservatorship no
official of the bank was ever prosecuted, suspended or removed for any participation in
unsafe and unsound banking practices, and neither was the entire management of the
bank replaced or substituted. In fact, in her testimony during the second referral hearing,
Carlota Valenzuela, CB Deputy Governor, testified that the reason for petitioner bank's
closure was not unsound, unsafe and fraudulent banking practices but the alleged
insolvency position of the bank (TSN, August 3, 1990, p. 3316, Rollo, Vol. VIII).
Finally, another circumstance which point to the solvency of petitioner bank is the granting
by the Monetary Board in favor of the former a credit line in the amount of P3 billion along
with the placing of petitioner bank under conservatorship by virtue of M.B. Resolution No.
955 dated July 27, 1984. This paved the way for the reopening of the bank on August 1,
1984 after a self-imposed bank holiday on July 23, 1984.
On emergency loans and advances, Section 90 of RA 265 provides two types of
emergency loans that can be granted by the Central Bank to a financially distressed bank:
Sec. 90. ... In periods of emergency or of imminent financial panic which directly threaten
monetary and banking stability, the Central Bank may grant banking institutions
extraordinary advances secured by any assets which are defined as acceptable by by a
concurrent vote of at least five members of the Monetary Board. While such advances are
outstanding, the debtor institution may not expand the total volume of its loans or
investments without the prior authorization of the Monetary Board.
The Central Bank may, at its discretion, likewise grant advances to banking institutions,
even during normal periods, for the purpose of assisting a bank in a precarious financial
condition or under serious financial pressures brought about by unforeseen events, or
events which, though foreseeable, could not be prevented by the bank concerned.
Provided, however, That the Monetary Board has ascertained that the bank is not insolvent
and has clearly realizable assets to secure the advances. Provided, further, That a
concurrent vote of at least five members of the Monetary Board is obtained. (Emphasis
ours)
The first paragraph of the aforequoted provision contemplates a situation where the whole
banking community is confronted with financial and economic crisis giving rise to serious
and widespread confusion among the public, which may eventually threaten and gravely
prejudice the stability of the banking system. Here, the emergency or financial confusion
involves the whole banking community and not one bank or institution only. The second
situation on the other hand, provides for a situation where the Central Bank grants a loan
to a bank with uncertain financial condition but not insolvent.
As alleged by the respondents, the following are the reasons of the Central Bank in
approving the resolution granting the P3 billion loan to petitioner bank and the latter's
reopening after a brief self-imposed banking holiday:
WHEREAS, the closure by Banco Filipino Savings and Mortgage Bank of its Banking
offices on its own initiative has worked serious hardships on its depositors and has
affected confidence levels in the banking system resulting in a feeling of apprehension
among depositors and unnecessary deposit withdrawals;
WHEREAS, the Central Bank is charged with the function of administering the banking
system;
WHEREAS, the reopening of Banco Filipino would require additional credit resources from
the Central Bank as well as an independent management acceptable to the Central Bank;
WHEREAS, it is the desire of the Central Bank to rapidly diffuse the uncertainty that
presently exists;
... (M.B. Min. No. 35 dated July 27, 1984 cited in Respondents' Objections to Santiago
Report, p. 26; p. 3387, Rollo, Vol. IX; Emphasis ours).
A perusal of the foregoing "Whereas" clauses unmistakably show that the clear reason for
the decision to grant the emergency loan to petitioner bank was that the latter was
suffering from financial distress and severe bank "run" as a result of which it closed on July
23, 1984 and that the release of the said amount is in accordance with the Central Bank's
full support to meet Banco Filipino's depositors' withdrawal requirements (Excerpts of
minutes of meeting on MB Min. No. 35, p. 25, Rollo, Vol. IX). Nothing therein shows that an
extraordinary emergency situation exists affecting most banks, not only as regards
petitioner bank. This Court thereby finds that the grant of the said emergency loan was
intended from the beginning to fall under the second paragraph of Section 90 of the
Central Bank Act, which could not have occurred if the petitioner bank was not solvent.
Where notwithstanding knowledge of the irregularities and unsafe banking practices
allegedly committed by the petitioner bank, the Central Bank even granted financial
support to the latter and placed it under conservatorship, such actuation means that
petitioner bank could still be saved from its financial distress by adequate aid and
management reform, which was required by Central Bank's duty to maintain the stability of
the banking system and the preservation of public confidence in it (Ramos v. Central Bank,
No. L-29352, October 4, 1971, 41 SCRA 565).
In view of the foregoing premises, We believe that the closure of the petitioner bank was
arbitrary and committed with grave abuse of discretion. Granting in gratia argumenti that
the closure was based on justified grounds to protect the public, the fact that petitioner
bank was suffering from serious financial problems should not automatically lead to its
liquidation. Section 29 of the Central Bank provides that a closed bank may be reorganized
or otherwise placed in such a condition that it may be permitted to resume business with
safety to its depositors, creditors and the general public.
We are aware of the Central Bank's concern for the safety of Banco Filipino's depositors as
well as its creditors including itself which had granted substantial financial assistance up to
the time of the latter's closure. But there are alternatives to permanent closure and
liquidation to safeguard those interests as well as those of the general public for the failure
of Banco Filipino or any bank for that matter may be viewed as an irreversible decline of
the country's entire banking system and ultimately, it may reflect on the Central Bank's own
viability. For one thing, the Central Bank and the Monetary Board should exercise strict
supervision over Banco Filipino. They should take all the necessary steps not violative of
the laws that will fully secure the repayment of the total financial assistance that the
Central Bank had already granted or would grant in the future.
ACCORDINGLY, decision is hereby rendered as follows:
1. The motion for reconsideration in G.R. Nos. 68878 and 81303, and the petitions in G.R.
Nos. 77255-58, 78766, 81304 and 90473 are DENIED;
2. The petitions in G.R. No. 70054, 78767 and 78894 are GRANTED and the assailed
order of the Central Bank and the Monetary Board dated January 25, 1985 is hereby
ANNULLED AND SET ASIDE. The Central Bank and the Monetary Board are ordered to
reorganize petitioner Banco Filipino Savings and Mortgage Bank and allow the latter to
resume business in the Philippines under the comptrollership of both the Central Bank and
the Monetary Board and under such conditions as may be prescribed by the latter in
connection with its reorganization until such time that petitioner bank can continue in
business with safety to its creditors, depositors and the general public.

SO ORDERED.
 G.R. No. 200678, June 04, 2018
BANCO FILIPINO SAVINGS AND MORTGAGE
BANK, Petitioner, v. BANGKO SENTRAL NG PILIPINAS AND THE
MONETARY BOARD, Respondents.
DECISION
LEONEN, J.:
A bank which has been ordered closed by the Bangko Sentral ng Pilipinas
(Bangko Sentral) is placed under the receivership of the Philippine Deposit
Insurance Corporation. As a consequence of the receivership, the closed bank
may sue and be sued only through its receiver, the Philippine Deposit
Insurance Corporation. Any action filed by the closed bank without its receiver
may be dismissed.
This is a Petition for Review on Certiorari1 assailing the Court of Appeals July
28, 2011 Decision2 and February 16, 2012 Resolution3 in CA-G.R. SP No.
116905, which dismissed Civil Case No. 10-1042 and held that the trial court
had no jurisdiction over Bangko Sentral and the Monetary Board.
On December 11, 1991, this Court promulgated Banco Filipino Savings &
Mortgage Bank v. Monetary Board and Central Bank of the Philippines,4 which
declared void the Monetary Board's order for closure and receivership of Banco
Filipino Savings & Mortgage Bank (Banco Filipino). This Court also directed the
Central Bank of the Philippines and the Monetary Board to reorganize Banco
Filipino and to allow it to resume business under the comptrollership of both
the Central Bank and the Monetary Board.5
Banco Filipino subsequently filed several Complaints before the Regional Trial
Court, among them a claim for damages in the total amount of
P18,800,000,000.00.6
On June 14, 1993, Congress passed Republic Act No. 7653,7 providing for the
establishment and organization of Bangko Sentral as the new monetary
authority.
On November 6, 1993, pursuant to this Court's 1991 Banco Filipino Decision,
the Monetary Board issued Resolution No. 427, which allowed Banco Filipino to
resume its business.8
In 2002, Banco Filipino suffered from heavy withdrawals, prompting it to seek
the help of Bangko Sentral. In a letter dated October 9, 2003, Banco Filipino
asked for financial assistance of more than P3,000,000,000.00 through
emergency loans and credit easement terms.9 In a letter10 dated November 21,
2003, Bangko Sentral informed Banco Filipino that it should first comply with
certain conditions imposed by Republic Act No. 7653 before financial assistance
could be extended. Banco Filipino was also required to submit a rehabilitation
plan approved by Bangko Sentral before emergency loans could be granted.
In a letter11 dated April 14, 2004, Banco Filipino submitted its Long-Term
Business Plan to Bangko Sentral. It also claimed that Bangko Sentral already
extended similar arrangements to other banks and that it was still awaiting the
payment of P18,800,000,000.00 in damage claims, "the entitlement to which
the Supreme Court has already decided with finality."12
In response, Bangko Sentral informed Banco Filipino that its business plan
could not be acted upon since it was neither "confirmed nor approved by
[Banco Filipino's Board of Directors]."13
On July 8, 2004, Banco Filipino filed a Petition for Revival of Judgment with the
Regional Trial Court of Makati to compel Bangko Sentral to approve its business
plan. The case was docketed as Civil Case No. 04-823 and was raffled to
Branch 62.14
During the pendency of its Petition, Banco Filipino entered into discussions and
negotiations with Bangko Sentral, which resulted to seven (7) revisions in the
business plan. Thus, Banco Filipino filed a Proposal for Settlement dated
September 21, 2007 before Branch 62, Regional Trial Court, Makati City to
settle the issues between the parties.15
On April 8, 2009, Banco Filipino submitted its 8th Revised Business Plan to
Bangko Sentral for evaluation.16 In this business plan, Banco Filipino requested,
among others, a P25,000,000,000.00 income enhancement loan. Unable to
come to an agreement, the parties constituted an Ad Hoc Committee composed
of representatives from both parties to study and act on the proposals. The Ad
Hoc Committee produced an Alternative Business Plan, which was accepted by
Banco Filipino, but was subject to the Monetary Board's approval.17
In a letter18 dated December 4, 2009, Bangko Sentral informed Banco Filipino
that the Monetary Board issued Resolution No. 1668 granting its request for
the P25,000,000,000.00 Financial Assistance and Regulatory Reliefs to form
part of its Revised Business Plan and Alternative Business Plan. The approval
was also subject to certain terms and conditions, among which was the
withdrawal or dismissal with prejudice to all pending cases filed by Banco
Filipino against Bangko Sentral and its officials.19 The terms also included the
execution of necessary quitclaims and commitments to be given by Banco
Filipino's principal stockholders, Board of Directors, and duly authorized officers
"not to revive or refile such similar cases in the future."20
In a letter21 dated January 20, 2010, Banco Filipino requested reconsideration
of the terms and conditions of the P25,000,000,000.00 Financial Assistance
and Regulatory Reliefs package, noting that the salient features of the
Alternative Business Plan were materially modified.22 However, in a
letter23 dated April 8, 2010, Banco Filipino informed Bangko Sentral that it was
constrained to accept the "unilaterally whittled down version of the
[P25,000,000,000.00] Financial Assistance Package and Regulatory
Reliefs."24 It, however, asserted that it did not agree with the condition to
dismiss and withdraw its cases since this would require a separate discussion.25
In a letter26 dated April 19, 2010, Bangko Sentral informed Banco Filipino that
it was surprised by the latter's hesitation in accepting the terms and conditions,
in particular, the withdrawal of the cases against it, since this condition had
already been discussed from the start of the negotiations between the
parties.27
In a letter28 dated June 21, 2010, Banco Filipino informed Bangko Sentral that
it never accepted the condition of the withdrawal of the cases in prior
negotiations but was willing to discuss this condition as a separate and distinct
matter.
In a letter29 dated August 10, 2010, Bangko Sentral and the Monetary Board,
through counsel CVC Law, informed Banco Filipino that its rejection of certain
portions of Resolution No. 1668, particularly its refusal to withdraw all cases
filed against Bangko Sentral, was deemed as a failure to reach a mutually
acceptable settlement.
In a letter30 dated August 13, 2010, Banco Filipino questioned the legality of
referring the matter to private counsel and stated that it had not been notified
of the action taken on the acceptance of its Business Plan.
In a letter31 dated September 13, 2010, CVC Law told Banco Filipino that the
matter was referred to it as an incident of Civil Case No. 04-823, which it was
handling on behalf of Bangko Sentral. It also informed Banco Filipino that the
latter's rejection of the terms and conditions of Resolution No. 1668 made this
Resolution legally unenforceable.
Banco Filipino sent letters32 dated September 22, 2010 and September 28,
2010, questioning the legality of Bangko Sentral's referral to private counsel
and reiterating that the terms and conditions embodied in Resolution No. 1668
were not meant to be a settlement of its P18,800,000,000.00 damage claim
against Bangko Sentral.
In a letter33 dated October 4, 2010, Bangko Sentral reiterated that its referral
of the matter to CVC Law was due to the matter being incidental to the civil
case pending before the Regional Trial Court.
On October 20, 2010, Banco Filipino filed a Petition For Certiorari and
Mandamus with prayer for issuance of a temporary restraining order and writ
of preliminary injunction34 before Branch 66, Regional Trial Court, Makati City,
docketed as Civil Case No. 10-1042. It assailed the alleged "arbitrary,
capricious and illegal acts"35 of Bangko Sentral and of the Monetary Board in
coercing Banco Filipino to withdraw all its present suits in exchange of the
approval of its Business Plan. In particular, Banco Filipino alleged that Bangko
Sentral and the Monetary Board committed grave abuse of discretion in
imposing an additional condition in Resolution No. 1668 requiring it to withdraw
its cases and waive all future cases since it was unconstitutional and contrary
to public policy. It prayed that a writ of mandamus be issued to compel Bangko
Sentral and the Monetary Board to approve and implement its business plan
and release its Financial Assistance and Regulatory Reliefs package.36
The trial court issued a Notice of Hearing on the prayer for a temporary
restraining order on the same day, setting the hearing on October 27, 2010.37
On October 27, 2010, Bangko Sentral and the Monetary Board filed their
Motion to Dismiss Ad Cautelam,38 assailing the Regional Trial Court's
jurisdiction over the subject matter and over the persons of Bangko Sentral
and the Monetary Board. Banco Filipino, on the other hand, filed its
Opposition39 to this Petition.
In its October 28, 2010 Order,40 the Regional Trial Court granted the request
for the issuance of a temporary restraining order against Bangko Sentral and
the Monetary Board. The dispositive portion of this Order read:
WHEREFORE, premises considered and pursuant to Rule 58 of the Revised
Rules of Court, Petitioner's prayer for a Temporary Restraining Order is hereby
GRANTED. Respondent[s] Ban[gk]o Sentral ng Pilipinas and [t]he Monetary
Board, as well as [their] representatives, agents, assigns and/or third person
or entity acting for and [their] behalf are hereby enjoined from (a) employing
acts inimical to the enforcement and implementation of the approv[ed]
Business Plan, (b) continuing and committing acts prejudicial to Petitioner's
operations, (c) withdrawing or threatening to withdraw the approval of the
Business Plan containing financial assistance, and package of regulatory reliefs,
and (d) otherwise enforcing other regulatory measures and abuses calculated
to coerce Banco Filipino Savings and Mortgage Bank into agreeing to drop
and/or withdraw its suits and damage claims against BSP and MB, and to waive
future claims against Respondents or their official[s] and employees.
Further, the Court directs Sheriff Leodel N. Roxas to personally serve a copy of
this Order to the herein Respondent Ban[gk]o Sentral ng Pilipinas and [t]he
Monetary Board. Finally, let this case be set on November 11, 2010 and
November 12, 2010 both at 2:00 in the afternoon for hearing on the prayer for
issuance of a Writ of Preliminary Mandatory Injunction.
SO ORDERED.41
On the same day or on October 28, 2010, summons was served on Bangko
Sentral through a staff member of the Office of the Governor, as certified by
the Process Server's Return dated November 4, 2010.42
On November 5, 2010, Bangko Sentral and the Monetary Board filed a Petition
For Certiorari with prayer for temporary restraining order and/or writ of
preliminary injunction43 with the Court of Appeals, assailing the Regional Trial
Court's October 28, 2010 Order for having been issued without jurisdiction. The
Petition was docketed as CA-G.R. SP No. 116627.44
On November 17, 2010, the trial court issued an Order45 denying the Bangko
Sentral and the Monetary Board's Motion to Dismiss Ad Cautelam, stating that
the acts complained of pertained to Bangko Sentral 's regulatory functions, not
its adjudicatory functions.46 It likewise stated that as requested in the
handwritten letter47 dated October 21, 2010 by Bangko Sentral's general
counsel requesting for an advanced copy of Banco Filipino's Petition, it
furnished Bangko Sentral a copy of the Petition. It also held that Bangko
Sentral's subsequent participation in the preliminary hearing and its receipt of
the summons on October 28, 2010 satisfied the requirements of procedural
due process.48
The trial court likewise found that litis pendencia and forum shopping were not
present in the case, that Bangko Sentral's verification and certification of non-
forum shopping were validly signed by the Executive Committee, and that
Banco Filipino's Petition did not fail to state a cause of action.49
On November 25, 2010, Bangko Sentral and the Monetary Board filed another
Petition for Certiorari50 with prayer for temporary restraining order and writ of
preliminary injunction with the Court of Appeals, this time assailing the
November 17, 2010 Order. The case was docketed as CA-G.R. SP No. 116905.
However, the trial court issued a writ of preliminary injunction on November
18, 201051 so they filed their Urgent Motion to Admit Attached Amended
Petition52 with the Court of Appeals to include the Issuance.
In the meantime, or on November 23, 2010, Bangko Sentral and the Monetary
Board filed a Motion to Admit Attached Supplemental Petition for Certiorari with
Application for Interim Relief53 in CA-G.R. SP No. 116627 seeking to include the
trial court's October 28, 2010 Order.
In its December 28, 2010 Resolution,54 the Court of Appeals granted55 Bangko
Sentral and the Monetary Board's Urgent Motion to Admit Attached Amended
Petition in CA-G.R. SP No. 116905.
Meanwhile, Banco Filipino filed its Opposition dated January 18, 2011 in CA-
G.R. SP No. 116905.56
After oral arguments were held on February 7, 2011,57 the Court of Appeals
issued its February 14, 2011 Resolution58 in CA-G.R. SP No. 116905. It granted
the application for a writ of preliminary injunction and enjoined the trial court
from conducting further proceedings in Civil Case No. 10-1042 pending a
decision on the merits.
On February 16, 2011, Banco Filipino filed an Urgent Motion for
Consolidation59 in CA-G.R. SP No. 116905, requesting for the consolidation of
the two (2) Petitions for Certiorari filed by Bangko Sentral and the Monetary
Board before the Court of Appeals. On March 1, 2011, it also filed a Motion for
Reconsideration60 of the Court of Appeals February 14, 2011 Resolution.
In its June 2, 2011 Resolution,61 the Court of Appeals in CA-G.R. SP No.
116905 denied Banco Filipino's Motion for Reconsideration, holding that special
civil actions against quasi-judicial agencies should be filed before the Court of
Appeals, not before a trial court.62 The Court of Appeals also denied the Urgent
Motion for Consolidation for the following reasons:
1) [I]t would cause not only further congestion of the already congested docket
of the ponente of CA-G.R. SP No. 116627, but also in the delay in the
disposition of both cases; 2) the subject matters and issues raised in the
instant petition are different from those set forth in CA-G.R. SP No. 116627,
hence, they can be the subject of separate: petitions; and 3) Since a writ of
preliminary injunction was earlier issued, Section 2 (d), Rule VI of the 2009
IRCA requires that the instant petition remain with the undersigned ponente for
decision on the merits with dispatch.63
On July 28, 2011, the Court of Appeals rendered its Decision64 in CA-G.R. SP
No. 116905 granting Bangko Sentral and the Monetary Board's Amended
Petition. According to the Court of Appeals, the trial court had no jurisdiction
over the Petition for Certiorari and Mandamus filed by Banco Filipino since
special civil actions against quasi-judicial agencies are only cognizable by the
Court of Appeals.65 It also found that the trial court gravely abused its
discretion in acquiring jurisdiction over Bangko Sentral and the Monetary Board
by reason of their voluntary appearance in the preliminary hearing since their
counsel had made it clear that the appearance was specifically to question the
absence of a service of summons.66
The Court of Appeals likewise found that the delegation of authority from Banco
Filipino's Board of Directors to the Executive Committee to sign pleadings on its
behalf validated the verification and certification of non-forum shopping signed
only by the Executive Vice Presidents.67 It also ruled that there was no litis
pendencia or forum shopping in the case docketed as Civil Case No. 10-1042
despite the pendency of Civil Case No. 04-823 since the causes of action and
the reliefs prayed for were not the same.68 The dispositive portion of the Court
of Appeals July 28, 2011 Decision read:
WHEREFORE, the petition is GRANTED. The Order dated November 17, 2010
issued by respondent Judge Joselito C. Villarosa of the Regional Trial Court
(RTC), Branch 66, Makati City, in Civil Case No. 10-1042, is ANNULLED and
SET ASIDE. In lieu thereof, judgment is hereby rendered. DISMISSING Civil
Case No. 10-1042 on the ground of the RTC's lack of jurisdiction over the
same.
Accordingly, the writ of preliminary injunction issued by this Court on February
14, 2011, enjoining respondent Judge, private respondent and their
representatives from conducting further proceedings in Civil Case No. 10-1042,
is hereby made PERMANENT.
SO ORDERED.69
Banco Filipino filed a Motion for Reconsideration,70 which was denied by the
Court of Appeals in its February 16, 2012 Resolution.71 Hence, it filed this
Petition72 on April 10, 2012 against Bangko Sentral and the Monetary Board
before this Court.
Petitioner claims that it had the authority to file this Petition since the Court of
Appeals promulgated its January 27, 2012 Decision in CA-G.R. SP No. 118599,
finding petitioner's closure and receivership to have been illegal.73 It argues
that to dismiss its Petition now pending before this Court for lack of authority
from its receiver Philippine Deposit Insurance Corporation would be "an absurd
and unjust situation."74 Petitioner admits, however, that this decision was
eventually overturned on reconsideration75 in the Court of Appeals November
21, 2012 Amended Decision.76
Petitioner points out that there was nothing in the Philippine Deposit Insurance
Corporation Charter or in Republic Act No. 7653 that precludes its Board of
Directors from suing on its behalf. It adds that there was an obvious conflict of
interest in requiring it to seek Philippine Deposit Insurance Corporation's
authority to file the case considering that Philippine Deposit Insurance
Corporation was under the control of herein respondent Monetary Board.77
Petitioner asserts that the trial court had jurisdiction over special civil actions
against respondents, accordingly with Merchants Rural Bank of Talavera v.
Monetary Board, et al.,78 a decision promulgated by the Court of Appeals in
2006.79
Petitioner likewise argues that the trial court acquired jurisdiction over
respondents considering that they were able to participate in the summary
hearing. It points out that respondents questioned before the trial court the
service of the petition on October 21, 2010 but never actually questioned the
service of summons on October 28, 2010 until it filed its petition with the Court
of Appeals.80 It argues that respondents' private counsel was present during
the raffle of the case on October 21, 2010 and even assisted respondents'
general counsel in receiving copies of the petition that the latter requested,
showing that respondents' due process was never violated.81 It asserts that the
Court of Appeals should have dismissed outright respondents' Petition for
Certiorari for "maliciously omitt[ing]" the handwritten letter dated October 21,
2010 of their general counsel.82 It likewise points out that respondents failed to
file a motion for reconsideration before the trial court before filing their petition
for certiorari with the Court of Appeals.83
Respondents, on the other hand, counter that the Petition should be dismissed
outright for being filed without Philippine Deposit Insurance Corporation's
authority. It asserts that petitioner was placed under receivership on March 17,
2011, and thus, petitioner's Executive Committee would have had no authority
to sign for or on behalf of petitioner absent the authority of its receiver,
Philippine Deposit Insurance Corporation.84 They also point out that both the
Philippine Deposit Insurance Corporation Charter and Republic Act No. 7653
categorically state that the authority to file suits or retain counsels for closed
banks is vested in the receiver.85 Thus, the verification and certification of non-
forum shopping signed by petitioner's Executive Committee has no legal
effect.86
Respondents likewise claim that the Court of Appeals did not err in finding that
the trial court had no jurisdiction over respondents. It cited this Court's ruling
in United Coconut Planters Bank v. E. Ganzon, Inc.87 and National Water
Resources Board v. A. L. Ang Network,88 where this Court categorically stated
that special civil cases filed against quasi-judicial agencies must be filed before
the Court of Appeals.89 They argue that there was no showing that Merchants
Rural Bank of Talavera was ever upheld by this Court.90 They contend that
petitioner should be estopped from raising the issue of jurisdiction considering
that during the pendency of this case, or on March 21, 2011 and November 20,
2011, it filed two (2) separate petitions for certiorari against respondent
Monetary Board directly before the Court of Appeals.91
Respondents maintain that the trial court did not acquire jurisdiction over them
since there was no valid service of summons. They argue that when they filed
their Motion to Dismiss on October 27, 2010, they could not have validly
argued the propriety of the summons on them on October 28, 2010.92 They
likewise contend that their voluntary appearance in the summary hearing
before the trial court was not a submission to the trial court's jurisdiction since
they consistently manifested that their appearance would be special and limited
to raise the issues of jurisdiction.93 They also assert that the service of
summons to a staff member of the Office of the Governor General is not
equivalent to the service of summons to the Governor General, making the
service of summons ineffective.94
Respondents likewise claim that their filing of their Petition before the Court of
Appeals without a prior motion for reconsideration was justified by certain
exceptional circumstances. They mention, among others, the trial court's lack
of jurisdiction, the fact that the issues have already been raised and passed
upon by the trial court, the prejudice to government interest in delaying the
case, and their denied due process because of the improper service of
summons.95 They further argue that the only significance of the October 21,
2010 handwritten letter was to show that respondents were informed that a
Petition was filed, and not that the trial court had. already acquired jurisdiction
over their persons.96
From the arguments of the parties, this Court is asked to resolve the following
issues:
First, whether or not trial courts have jurisdiction to take cognizance of a
petition for certiorari against acts and omissions of the Monetary Board;
Second, whether or not respondents Bangko Sentral ng Pilipinas and the
Monetary Board should have filed a motion for reconsideration of the trial
court's denial of their motion to dismiss before filing their petition for certiorari
before the Court of Appeals; and
Finally, whether or not the trial court validly acquired jurisdiction over
respondents Bangko Sentral ng Pilipinas and the Monetary Board.
However, before any of these issues can be addressed, this Court must first
resolve the issue of whether or not petitioner Banco Filipino, as a closed bank
under receivership, could file this Petition for Review without joining its
statutory receiver, the Philippine Deposit Insurance Corporation, as a party to
the case.
I
A closed bank under receivership can only sue or be sued through its receiver,
the Philippine Deposit Insurance Corporation.
Under Republic Act No. 7653,97 when the Monetary Board finds a bank
insolvent, it may "summarily and without need for prior hearing forbid the
institution from doing business in the Philippines and designate the Philippine
Deposit Insurance Corporation as receiver of the banking institution."98
Before the enactment of Republic Act No. 7653, an insolvent bank under
liquidation could not sue or be sued except through its liquidator. In Hernandez
v. Rural Bank of Lucena:99
[A]n insolvent bank, which was under the control of the finance commissioner
for liquidation, was without power or capacity to sue or be sued, prosecute or
defend, or otherwise function except through the finance commissioner or
liquidator.100
This Court in Manalo v. Court of Appeals101 reiterated this principle:
A bank which had been ordered closed by the monetary board retains its
juridical personality which can sue and be sued through its liquidator. The only
limitation being that the prosecution or defense of the action must be done
through the liquidator. Otherwise, no suit for or against an insolvent entity
would prosper.102
Under the old Central Bank Act, or Republic Act No. 265,103 as amended,104 the
same principle applies to the receiver appointed by the Central Bank. The law
explicitly stated that a receiver shall "represent the [insolvent] bank personally
or through counsel as he [or she] may retain in all actions or proceedings for or
against the institution." Section 29 of the old law states:
Section 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 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 personally or through counsel as he [or she] may
retain in all actions or proceedings for or against the institution, exercising all
the powers necessary for these purposes including, but not limited to, bringing
and foreclosing mortgages in the name of the bank or non-bank financial
intermediary performing quasi-banking functions.
In Republic Act No. 7653, this provision is substantially altered. Section 30 now
states, in part:
The receiver shall immediately gather and take charge of all the assets and
liabilities of the institution, administer the same for the benefit of its creditors,
and exercise the general powers of a receiver under the Revised Rules of
Court but shall not, with the exception of administrative expenditures, pay or
commit any act that will involve the transfer or disposition of any asset of the
institution: Provided, That the receiver may deposit or place the funds of the
institution in non-speculative investments. The receiver shall determine as
soon as possible, but not later than ninety (90) days from take-over, whether
the institution may be rehabilitated or otherwise placed in such a condition so
that it may be permitted to resume business with safety to its depositors and
creditors and the general public: Provided, That any determination for the
resumption of business of the institution shall be subject to prior approval of
the Monetary Board.
If the receiver determines that the institution cannot be rehabilitated or
permitted to resume business in accordance with the next preceding
paragraph, the Monetary Board shall notify in writing the board of directors of
its findings and direct the receiver to proceed with the liquidation of the
institution. The receiver shall:
(1) file ex parte with the proper regional trial court, and without requirement of
prior notice or any other action, a petition for assistance in the liquidation of
the institution pursuant to a liquidation plan adopted by the Philippine Deposit
Insurance Corporation for general application to all closed banks. In case of
quasi-banks, the liquidation plan shall be adopted by the Monetary Board.
Upon acquiring jurisdiction, the court shall, upon motion by the receiver after
due notice, adjudicate disputed claims against the institution, assist the
enforcement of individual liabilities of the stockholders, directors and officers,
and decide, on other issues as may be material to implement the liquidation
plan adopted. The receiver shall pay the cost of the proceedings from the
assets of the institution.
(2) convert the assets of the institution to money, dispose of the same to
creditors and other parties, for the purpose of paying the debts of such
institution in accordance with the rules on concurrence and preference of credit
under the Civil Code of the Philippines and he may, in the name of the
institution, and with the assistance of counsel as he may retain, institute such
actions as may be necessary to collect and recover accounts and assets of, or
defend any action against, the institution. The assets of an institution under
receivership or liquidation shall be deemed in custodia legis in the hands of the
receiver and shall, from the moment the institution was placed under such
receivership or liquidation, be exempt from any order of garnishment, levy,
attachment, or execution. (Emphasis supplied)
The relationship between the Philippine Deposit Insurance Corporation and a
closed bank is fiduciary in nature. Section 30 of Republic Act No. 7653 directs
the receiver of a closed bank to "immediately gather and take charge of all the
assets and liabilities of the institution" and "administer the same for the benefit
of its creditors."105
The law likewise grants the receiver "the general powers of a receiver under
the Revised Rules of Court."106 Under Rule 59, Section 6 of the Rules of Court,
"a receiver shall have the power to bring and defend, in such capacity, actions
in his [or her] own name."107 Thus, Republic Act No. 7653 provides that the
receiver shall also "in the name of the institution, and with the assistance of
counsel as [it] may retain, institute such actions as may be necessary to collect
and recover accounts and assets of, or defend any action against, the
institution."108 Considering that the receiver has the power to take charge
of all the assets of the closed bank and to institute for or defend any action
against it, only the receiver, in its fiduciary capacity, may sue and be sued on
behalf of the closed bank.
In Balayan Bay Rural Bank v. National Livelihood Development
Corporation,109 this Court explained that a receiver of a closed bank is tasked
with the duty to hold the assets and liabilities in trust for the benefit of the
bank's creditors.
As fiduciary of the insolvent bank, Philippine Deposit Insurance Corporation
conserves and manages the assets of the bank to prevent the assets'
dissipation. This includes the power to bring and defend any action that
threatens to dissipate the closed bank's assets. Balayan Bay Rural
Bank  explained that Philippine Deposit Insurance Corporation does so, not as
the real party-in-interest, but as a representative party, thus:
As the fiduciary of the properties of a closed bank, the PDIC may prosecute or
defend the case by or against the said bank as a representative party while the
bank will remain as the real party in interest pursuant to Section 3, Rule 3 of
the Revised Rules of Court which provides:
SEC. 3. Representatives as parties. — Where the action is allowed to be
prosecuted or defended by a representative or someone acting in a fiduciary
capacity, the beneficiary shall be included in the title of the case and shall be
deemed to be the real party in interest. A representative may be a trustee of
an express trust, a guardian, an executor or administrator, or a party
authorized by law or these Rules. An agent acting in his own name and for the
benefit of an undisclosed principal may sue or be sued without joining the
principal except when the contract involves things belonging to the principal.
The inclusion of the PDIC as a representative party in the case is therefore
grounded on its statutory role as the fiduciary of the closed bank which, under
Section 30 of R.A. 7653 (New Central Bank Act), is authorized to conserve the
latter's property for the benefit of its creditors.110 (Citation omitted)
For this reason, Republic Act No. 3591,111 or the Philippine Deposit Insurance
Corporation Charter, as amended,112 grants Philippine Deposit Insurance
Corporation the following powers as a receiver:
(c) In addition to the powers of a receiver pursuant to existing laws, the
Corporation is empowered to:
(1) bring suits to enforce liabilities to or recoveries of the closed bank;
....
(6) hire or retain private counsels as may be necessary;
....
(9) exercise such other powers as are inherent and necessary for the effective
discharge of the duties of the Corporation as a receiver.113
Balayan Bay Rural Bank summarized, thus:
[T]he legal personality of the petitioner bank is not  ipso facto dissolved by
insolvency; it is not divested of its capacity to sue and be sued after it was
ordered by the Monetary Board to cease operation. The law mandated,
however, that the action should be brought through its statutory
liquidator/receiver which in this case is the PDIC. The authority of the PDIC to
represent the insolvent bank in legal actions emanates from the fiduciary
relation created by statute which reposed upon the receiver the task of
preserving and conserving the properties of the insolvent for the benefit of its
creditors.114
Petitioner contends that it was not a closed bank at the time of the filing of this
Petition on April 10, 2012 since the Court of Appeals January 27, 2012
Decision, docketed as CA-G.R. SP No. 118599, found the closure to have been
illegal.115
This Court of Appeals Decision, however, was not yet final since the Monetary
Board filed a timely motion for reconsideration.116 There is also nothing in its
dispositive portion which states that it was immediately executory.117 Through
its November 21, 2012 Amended Decision, the Court of Appeals reversed its
January 27, 2012 Decision,118 confirming petitioner's status as a closed bank
under receivership. It was, therefore, erroneous for petitioner to presume that
it was not a closed bank on April 10, 2012 when it filed its Petition with this
Court considering that there was no final declaration yet on the matter.
Petitioner should have attempted to comply after the promulgation of the
November 21, 2012 Amended Decision. Its substantial compliance would have
cured the initial defect of its Petition.
Petitioner likewise claims that there was "an obvious conflict of interest"119 if it
was required to sue respondents only through Philippine Deposit Insurance
Corporation, considering that respondent Monetary Board appointed Philippine
Deposit Insurance Corporation as petitioner's receiver. This is a fact, however,
that petitioner failed to address when it filed its Petition, signifying that
petitioner had no intention of complying with the law when it filed its Petition or
anytime after.
It was speculative on petitioner's part to presume that it could file this Petition
without joining its receiver on the ground that Philippine Deposit Insurance
Corporation might not allow the suit. At the very least, petitioner should have
shown that it attempted to seek Philippine Deposit Insurance Corporation's
authorization to file suit. It was possible that Philippine Deposit Insurance
Corporation could have granted its permission to be joined in the suit. If it had
refused to allow petitioner to file its suit, petitioner still had a remedy available
to it. Under Rule 3, Section 10 of the Rules of Court,120 petitioner could have
made Philippine Deposit Insurance Corporation an unwilling co-petitioner and
be joined as a respondent to this case.
Petitioner's suit concerned its Business Plan, a matter that could have affected
the status of its insolvency. Philippine Deposit Insurance Corporation's
participation would have been necessary, as it had the duty to conserve
petitioner's assets and to examine any possible liability that petitioner might
undertake under the Business Plan.
Philippine Deposit Insurance Corporation also safeguards the interests of the
depositors in all legal proceedings. Most bank depositors are ordinary people
who have entrusted their money to banks in the hopes of growing their
savings. When banks become insolvent, depositors are secure in the knowledge
that they can still recoup some part of their savings through Philippine Deposit
Insurance Corporation.121 Thus, Philippine Deposit Insurance Corporation's
participation in all suits involving the insolvent bank is necessary and imbued
with the public interest.
In any case, petitioner's verification and certification of non-forum shopping
was signed by its Executive Vice Presidents Maxy S. Abad and Atty. Francisco
A. Rivera, as authorized by its Board of Directors.122 Under Section 10(b) of the
Philippine Deposit Insurance Corporation Charter, as amended:
b. The Corporation as receiver shall control, manage and administer the affairs
of the closed bank. Effective immediately upon takeover as receiver of such
bank, the powers, functions and duties, as well as all allowances,
remunerations and prerequisites of the directors, officers, and stockholders of
such bank are suspended, and the relevant provisions of the Articles of
Incorporation and By-laws of the closed bank are likewise deemed
suspended.123 (Emphasis supplied)
When petitioner was placed under receivership, the powers of its Board of
Directors and its officers were suspended. Thus, its Board of Directors could
not have validly authorized its Executive Vice Presidents to file the suit on its
behalf. The Petition, not having been properly verified, is considered an
unsigned pleading.124 A defect in the certification of non-forum shopping is
likewise fatal to petitioner's cause.125
Considering that the Petition was filed by signatories who were not validly
authorized to do so, the Petition does not produce any legal effect.126 Being an
unauthorized pleading, this Court never validly acquired jurisdiction over the
case. The Petition, therefore, must be dismissed.
II
Even assuming that the Petition did not suffer from procedural infirmities, it
must still be denied for lack of merit.
Unless otherwise provided for by law and the Rules of Court, petitions for
certiorari against a quasi-judicial agency are cognizable only by the Court of
Appeals. The Regional Trial Court had no jurisdiction over the Petition for
Certiorari filed by petitioner against respondents.
Pursuant to Article XII, Section 20 of the Constitution,127 Congress constituted
Bangko Sentral128 as an independent central monetary authority. As an
administrative agency, it is vested with quasi-judicial powers, which it
exercises through the Monetary Board. In United Coconut Planters Bank v. E.
Ganzon, Inc.:129
A quasi-judicial agency or body is an organ of government other than a court
and other than a legislature, which affects the rights of private parties through
either adjudication or rule-making. The very definition of an administrative
agency includes its being vested with quasi-judicial powers. The ever
increasing variety of powers and functions given to administrative agencies
recognizes the need for the active intervention of administrative agencies in
matters calling for technical knowledge and speed in countless controversies
which cannot possibly be handled by regular courts. A "quasi-judicial function"
is a term which applies to the action, discretion, etc., of public administrative
officers or bodies, who are required to investigate facts, or ascertain the
existence of facts, hold hearings, and draw conclusions from them, as a basis
for their official action and to exercise discretion of a judicial nature.
Undoubtedly, the BSP Monetary Board is a quasi-judicial agency exercising
quasi-judicial powers or functions. As aptly observed by the Court of Appeals,
the BSP Monetary Board is an independent central monetary authority and a
body corporate with fiscal and administrative autonomy, mandated to provide
policy directions in the areas of money, banking and credit. It has power to
issue subpoena, to sue for contempt those refusing to obey the subpoena
without justifiable reason, to administer oaths and compel presentation of
books, records and others, needed in its examination, to impose fines and
other sanctions and to issue cease and desist order. Section 37 of Republic Act
No. 7653, in particular, explicitly provides that the BSP Monetary Board shall
exercise its discretion in determining whether administrative sanctions should
be imposed on banks and quasi-banks, which necessarily implies that the BSP
Monetary Board must conduct some form of investigation or hearing regarding
the same. 130
Bangko Sentral's Monetary Board is a quasi-judicial agency. Its decisions,
resolutions, and orders are the decisions, resolutions, and orders of a quasi-
judicial agency. Any action filed against the Monetary Board is an action
against a quasi-judicial agency.
This does not mean, however, that Bangko Sentral only exercises quasi-judicial
functions. As an administrative agency, it likewise exercises "powers and/or
functions which may be characterized as administrative, investigatory,
regulatory, quasi-legislative, or quasi-judicial, or a mix of these five, as may be
conferred by the Constitution or by statute."131
In this case, the issue between the parties was whether the trial court had
jurisdiction over petitions for certiorari against Bangko Sentral and the
Monetary Board. Rule 65, Section 4 of the Rules of Court provides:
Section 4. Where and when petition to be filed. — The petition shall be filed not
later than sixty (60) days from notice of the judgment, order or resolution. In
case a motion for reconsideration or new trial is timely filed, whether such
motion is required or not, the sixty (60) day period shall be counted from
notice of the denial of said motion.
The petition shall be filed in the Supreme Court or, if it relates to the acts or
omissions of a lower court or of a corporation, board, officer or person, in the
Regional Trial Court exercising jurisdiction over the territorial area as defined
by the Supreme Court. It may also be filed in the Court of Appeals whether or
not the same is in aid of its appellate jurisdiction, or in the Sandiganbayan if it
is in aid of its appellate jurisdiction. If it involves the acts or omissions of a
quasi-judicial agency, unless otherwise provided by law or these Rules, the
petition shall be filed in and cognizable only by the Court of Appeals. (Emphasis
supplied)
The Rules of Court categorically provide that petitions for certiorari involving
acts or omissions of a quasi-judicial agency "shall be filed in and cognizable
only by the Court of Appeals."
As previously discussed, respondent Bangko Sentral exercises a myriad of
functions, including those that may not be necessarily exercised by a quasi-
judicial agency. It is settled, however, that it exercises its quasi judicial
functions through respondent Monetary Board. Any petition for certiorari
against an act or omission of Bangko Sentral, when it acts through the
Monetary Board, must be filed with the Court of Appeals. Thus, this Court
in Vivas v. Monetary Board and Philippine Deposit Insurance Corporation 132 held
that the proper remedy to question a resolution of the Monetary Board is
through a petition for certiorari filed with the Court of Appeals.
The Court of Appeals, therefore, did not err in dismissing the case before the
Regional Trial Court since the trial court did not have jurisdiction over the
Petition for Certiorari filed by petitioner against respondents.
This Court cannot subscribe to petitioner's contention that a Court of Appeals
decision already provided for an exception to Rule 65. A Court of Appeals
decision, no matter how persuasive or well written, does not function as stare
decisis.133 Neither can a Court of Appeals decision amend the Rules of
Court.134 As it stands, Rule 65 and jurisprudence hold that petitions for
certiorari against the Monetary Board must be filed with the Court of Appeals.
III
While this Petition is considered dismissed, this Court takes the opportunity to
address other lingering procedural issues raised by the parties in their
pleadings.
Petitioner assails respondents' failure to file a motion for reconsideration of the
trial court's denial of its motion to dismiss before filing a petition for certiorari
with the Court of Appeals.135
Rule 65, Section 1 of the Rules of Court requires that there be "no appeal, or
any plain, speedy, and adequate remedy in the ordinary course of law"
available before a petition for certiorari can be filed. An order denying a motion
to dismiss is merely an interlocutory order of the court as it does not finally
dispose of a case.136 In BA Finance Corporation v. Pineda,137 a case citing the
1964 Rules of Court:
It must be remembered that, normally, when an interlocutory order is sought
to be reviewed or annulled by means of any of the extra legal remedies of
prohibition or certiorari, it is required that a motion for reconsideration of the
question[ed] order must first be filed, such being considered a speedy and
adequate remedy at law which must first be resorted to as a condition
precedent for filing of any of such proceedings (Secs. 1 and 2, Rule 65, Rules
of Court).138
In contrast, Rule 41, Section 1(c) of the Revised Rules of Court now provides:
Section 1. Subject of appeal. — An appeal may be taken from a judgment or
final order that completely disposes of the case, or of a particular matter
therein when declared by these Rules to be appealable.
No appeal may be taken from:
....
(c) An interlocutory order;
....
In all the above instances where the judgment or final order is not appealable,
the aggrieved party may file an appropriate special civil action under Rule 65.
It would appear that the Revised Rules of Court allow a direct filing of a
petition for certiorari of an interlocutory order without need of a motion for
reconsideration. However, in Estate of Salvador Serra Serra v. Primitivo
Hernaez,139 a case decided after the Rules of Court were revised in 1997:
The settled rule is that a motion for reconsideration is a sine qua non condition
for the filing of a petition for certiorari. The purpose is to grant an opportunity
to public respondent to correct any actual or perceived error attributed to it by
the re-examination of the legal and factual circumstances of the case.140
This rule evolved from several labor cases of this Court. Estate of Salvador
Serra Serra cited  Interorient Maritime Enterprises v. National Labor Relations
Commission141 as basis for this rule, which in turn, cited Palomado v. National
Labor Relations Commission142 and Pure Foods Corporation v. National Labor
Relations Commission.143 This Court, in formulating the rule in Palomado,
declared:
The unquestioned rule in this jurisdiction is that certiorari will lie only if there is
no appeal or any other plain, speedy and adequate remedy in the ordinary
course of law against the acts of public respondent. In the instant case, the
plain and adequate remedy expressly provided by [Sec. 9, Rule X, New Rules
of the National Labor Relations Commission] was a motion for reconsideration
of the assailed decision, based on palpable or patent errors, to be made under
oath and filed within ten (10) calendar days from receipt of the questioned
decision.144
Pure Foods Corporation, on the other hand, stated:
In the present case, the plain and adequate remedy expressly provided by law
was a motion for reconsideration of the assailed decision and the resolution
thereof, which was not only expected to be but would actually have provided
adequate and more speedy remedy than the present petition for certiorari. This
remedy was actually sought to be availed of by petitioner when it filed a
motion for reconsideration albeit beyond the 10-day reglementary period. For
all intents and purposes, petitioner cannot now be heard to say that there was
no plain, speedy and adequate remedy available to it and that it must,
therefore, be allowed to seek relief by certiorari. This contention is not only
untenable but would even place a premium on a party's negligence or
indifference in availing of procedural remedies afforded by law.145
In labor cases, it was necessary to first file a motion for reconsideration before
resorting to a petition for certiorari since the National Labor Relations
Commission's rules of procedure provided for this remedy. The same rule has
since applied to civil cases through Estate of Salvador Serra Serra, regardless
of the absence of a provision in the Rules of Court requiring a motion for
reconsideration even for interlocutory orders.
In this instance, the trial court had no jurisdiction over the petition filed by
petitioner against respondents, an issue which respondents properly asserted
before the Court of Appeals when they filed their Petition for Certiorari.148 They
were, thus, excused from filing the requisite motion for reconsideration.
Considering that there is sufficient basis to dismiss this Petition outright, this
Court finds it unnecessary to address the other issues raised.
In sum, this Court holds that petitioner did not have the legal capacity to file
this Petition absent any authorization from its statutory receiver, Philippine
Deposit Insurance Corporation. Even assuming that the Petition could be given
due course, it would still be denied. The Court of Appeals did not err in
dismissing the action pending between the parties before the trial court since
special civil actions against quasi-judicial agencies must be filed with the Court
of Appeals.
WHEREFORE, the Petition is DISMISSED on the ground of petitioner's lack of
capacity to sue.
SO ORDERED.

Thus, the general rule, in all cases; "is that a motion for reconsideration is
a sine qua non  condition for the filing of a petition for certiorari."146 There are,
however, recognized exceptions to this rule, namely:

(a) where the order is a patent nullity, as where the Court a quo had no
jurisdiction; (b) where the questions raised in the certiorari proceeding have
been duly raised and passed upon by the lower court, or are the same as those
raised and passed upon in the lower court; (c) where there is an urgent
necessity for the resolution of the question and any further delay would
prejudice the interests of the Government or of the petitioner or the subject
matter of the action is perishable; (d) where, under the circumstances, a
motion for reconsideration would be useless; (e) where petitioner was deprived
of due process and there is extreme urgency for relief; (f) where, in a criminal
case, relief from an order of arrest is urgent and the granting of such relief by
the trial court is improbable; (g) where the proceedings in the lower court are
a nullity for lack of due process; (h) where the proceedings [were] ex parte or
in which the petitioner had no opportunity to object; and (i) where the issue
raised is one purely of law or where public interest is involved.147 (Citations
omitted)