I. SHORT TITLE : Vivas v.

Monetary Board of BSP

II. FULL TITLE : Alfeo D. Vivas, on his behalf and on behalf of the shareholders of
Eurocredit Community Bank versus The Monetary Board of the Bangko Sentral ng Pilipinas
and the Philippine Deposit Insurance Corporation - G.R. No. 191424, THIRD DIVISION,
August 7, 2013 Mendoza, J
III. TOPIC : Special Commercial Law - The New Central Bank Act (R.A. No.
7653) – Receivership

IV. STATEMENT OF FACTS:

Rural Bank of Faire Inc. (RBFI) was a duly registered rural banking institution in Cagayan. In
2005 the corporate life of RBFI expired, petitioner Vivas and his principals then acquired the
controlling interests of RBFI and acquired a Certificate of Authority extending the corporate life
of RBFI for another fifty (50) years and was later renamed to Eurocredit Community Bank Inc.
(ECBI). Bangko Sentral ng Pilipinas conducted a series of examinations through its Integrated
Supervision Department II and the result of the findings concluded that ECBI is illiquid,
insolvent, and was performing transactions which are considered unsafe and unsound banking
practices. ECBI then was placed under receivership without prior hearing. Petitioner alleged that
the resolution was in bad faith and implemented with arbitrariness because it is in violation of his
and the bank’s right to due process since there was no prior hearing when ECBI was placed
under receivership.

V. STATEMENT OF THE CASE:

Vivas filed a petition for prohibition in the Supreme Court praying for the issuance of a status
quo ante order or writ of preliminary injunction ordering the respondents to desist from closing
(ECBI) and from pursuing the receivership thereof.

VI. ISSUE:
Whether or not ECBI was entitled to due and prior hearing before its being placed under
receivership

VII. RULING:
The court ruled that at any rate, the Monetary Board may forbid a bank from doing business and
plate it under receivership without prior notice and hearing under Section 30 of R.A No. 7653 if
it warrants the following circumstances: 1.) The bank is unable to pay its liabilities as they
become due in the ordinary course of business, 2.) The bank has insufficient realizable assets as
determined by BSP, to meet its liabilities; or 3.) cannot continue in business without involving
probable losses to its depositors or creditors; or 4.) has willfully violated a cease and desist order
under Section 37 that has become final, involving acts or transactions which amount to fraud or a
dissipation of the assets of the institution; in which cases, the Monetary Board may summarily
and without need for prior hearing forbid the institution from doing business in the Philippines
and designate the Philippine Deposit Insurance Corporation as receiver of the banking institution.

The court also reiterated the doctrine of “close now, hear later” in the case of Bangko Sentral ng
Pilipinas Monetary Board v. Hon. Antonio-Valenzuala.

The “close now, hear later” doctrine has already been justified as a measure for the protection of
the public interest. Swift action is called for on the part of the BSP when it finds that a bank is in
dire straits. Unless adequate and determined efforts are taken by the government against
distressed and mismanaged banks, public faith in the banking system is certain to deteriorate to
the prejudice of the national economy itself, not to mention the losses suffered by the bank
depositors, creditors, and stockholders, who all deserve the protection of the government.

The doctrine is founded on practical and legal considerations to obviate unwarranted dissipation
of the bank’s assets and as a valid exercise of police power to protect the depositors, creditors,
stockholders, and the general public.

VIII. DISPOSITIVE PORTION:

WHEREFORE, the petition for prohibition is DENIED.