G.R. No. L-21146 September 20, 1965 ordering the Central Bank to pay P5,000.00 damages and costs.

ering the Central Bank to pay P5,000.00 damages and costs. The Central Bank
appealed.
RURAL BANK OF LUCENA, INC., PETITIONER,
VS. Upon the other hand, the Court of First Instance of Quezon Province, in its Case No.
HON. FRANCISCO ARCA, AS JUDGE OF THE COURT OF FIRST 6741, on February, 24, 1962, dissolved its preliminary injunction against the
INSTANCE OF MANILA, BRANCH 1, AND CENTRAL BANK OF THE enforcement of Resolution 122 of the Monetary Board. Other than filing a motion for
reconsideration (ultimately denied on January 9, 1963) the Lucena bank took no other
PHILIPPINES, RESPONDENTS. steps to prosecute the case it had filed.
REYES, J.B.L., J.: On the 31st of March 1962, invoking section 29 of Republic Act 265, the Central
Bank, as liquidator, petitioned the Court of First Instance of Manila for assistance in
The Rural Bank of Lucena, Inc., a banking corporation organized under Republic the liquidation of the Lucena bank (Civil Case No. 50019). Upon motion, and after
Act No. 720, instituted, on June 22, 1961, in the Court of First Instance of Manila hearing the parties, Judge Arca issued on interlocutory order on March 28, 1963, the
(Civil Case No. 47345) an action to collect damages and to enjoin the Central Bank dispositive portion of which is to the following effect (Petition, Annex "D"):
from enforcing Resolution No. 928 of its Monetary Board, finding that the Rural
Bank of Lucena (Lucena for short), through its officers, directors, and employees, had The Rural Bank of Lucena thru its duly authorized officers or representatives, is
committed acts substantially prejudicial to the Government, depositors, and creditors, hereby ordered to turn over to the Central Bank, thru its duly authorized
and directing Lucena to reorganize its board of directors; to refrain from granting or representative, within a period of five (5) days from receipt of copy of this order, the
renewing loans, or accept new deposits, and not to issue drafts or make disbursements physical possession of all of said Rural Bank of Lucena's assets, properties and papers.
without the approval of the supervising Central Bank examiners, and threatening Should the Rural Bank of Lucena or its officers fail to comply with the above order
Lucena that its management would be taken over if the latter should fail to comply within the period indicated herein, the Central Bank, thru its authorized
with the resolution. After issue joined and trial of the case, and while the litigation was representatives, is hereby authorized to take actual and physical possession of all said
still undecided by the Court of First Instance, the Monetary Board, having been assets, properties and papers of the Rural Bank of Lucena, duly inventoried in the
informed that the Director of its Department of Rural Banks recommended the presence of the Provincial Fiscal, the Provincial Commander, the Provincial Treasurer,
liquidation of the Rural Bank of Lucena, adopted on February 2, 1962 its Resolution and the Provincial Auditor of Quezon province, or their duly authorized
No. 122 (Petition, Annex "C") — representatives.
To request the Solicitor General, pursuant to Section 29 of Republic Act No. 265, to The Rural Bank of Lucena resorted to this Court on certiorari, claiming that Judge
file a petition in the proper courts for the liquidation of the affairs of the Rural Bank Arca gravely abused his discretion in issuing the above order, in that —
of Lucena, Inc.
(a) it interferes with the immediately executory judgment of Judge Gatmaitan in Case
Notice was given by Central Bank officials, on February 10, 1962 that the Lucena No. 47345 of the Court of First Instance of Manila;
bank was temporarily closed pending final decision of the Court, and that business be
transacted with Central Bank representatives only. (b) Section 29 of the Central Bank Act (R.A. 265) does not apply;
Two days later (February 12, 1962), the Lucena bank filed suit in the Court of First (c) there was no prior valid take over of assets nor due hearing of the liquidated Bank;
Instance of Quezon (Tayabas) annual Resolution 122 of the Monetary Board (Case
No. 6471) and enjoin its enforcement; and on February 14 the court issued ex parte a (d) Judge Gatmaitan's decision constitutes a judicial review of the Monetary Board's
writ of preliminary injunction to such effect. action that cannot be nullified by the challenged order of Judge Area; and
On the same day, the Court of First Instance of Manila, per Judge, now Court of (e) the turn over should not be ordered before trial on the merits.1awphîl.nèt
Appeals Justice, Magno Gatmaitan of Branch XIV, decided Case No. 47345,
enjoining enforcement of Resolution No. 928 of the Monetary Board, for having been
issued without the prior hearing prescribed by section 10 of the Rural Bank Act, and
This Court issued a temporary restraining order until April 25, 1963, but the same for an order requiring the Monetary Board to show cause why it should not be
was not renewed when it expired. enjoined from continuing such charge of its assets, and the court may direct the Board
to refrain from further proceedings and to surrender charge of its assets.
We see no irreconcilable conflict between section 10 (as amended) of Republic Act
No. 720 (Rural Banks Act) and section 29 of Republic Act No. 265 (Central Bank If the Monetary Board shall determine that the banking institution cannot resume
Act). The former provides in substance as follows: business with safety to its creditors, it shall, by the Solicitor General, file a petition in
the Court of First Instance reciting the proceedings which have been taken and
The director of the Department of the Central Bank designated by the Monetary praying the assistance and supervision of the court in the liquidation of the affairs of
Board to supervise Rural Banks ... upon proof that the Rural Bank or its board of the same. The Superintendent shall thereafter, upon order of the Monetary Board
directors or officers are conducting and managing the affairs of the bank in a manner and under the supervision of the court and with all convenient speed, convert the
contrary to laws, orders, instructions, rules and regulations promulgated by the assets of the banking institution to money.
Monetary Board or in any manner substantially prejudicial to the interests of the
government, depositors or creditors, to take over the management of such bank when Considering that section 27 of the Rural Banks law (R.A. No. 720) expressly declares
specifically authorized to do so by the Monetary Board after due hearing until a new that —
board of directors and officers are elected and qualified. ...
The provisions of Republic Acts numbered 265 and 337, in so far as applicable and
It is easily seen that what this section authorized is the take over of the management not in conflict with any provision of this Act, are hereby made a part of this Act.
by the Central Bank, until the governing body of the offending Rural Bank is
recognized with a view to assuring compliance by it with the laws and regulations. we find no room for questioning the applicability of section 29 of Republic Act No.
265 (Central Bank Act) to rural banks organized under Republic Act 720, whenever
Upon the other hand, section 29 6f the Central Bank Act (R. A. 265) has in view a the Monetary Board should find that the rural bank affected is insolvent, or that its
much more drastic step, the liquidation of a rural bank by taking over its assets and continuance in business would involve probable loss to its depositors or creditors, and
converting them into money to pay off its creditors. Said section prescribes: that it cannot resume business with safety.

SEC. 29. Proceedings upon insolvency. — Whenever, upon examination by the It follows that on the assumption that under section 10 of the Rural Banks Act the
Superintendent or his examiners or agents into the condition of any banking Monetary Board may not take over the management of a rural bank without giving
institution, it shall be disclosed that the condition of the same is one of insolvency, or the latter a hearing, i.e., an opportunity to rebut the charge that it has contravened
that its continuance in business would involve probable loss to its depositors or applicable laws, rules and regulations to the substantial prejudice of the government,
creditors, it shall be the duty of the Superintendent forthwith, in writing, to inform the its depositors and creditors, such a previous hearing is nowhere required by section 29
Monetary Board of the facts, and the Board, upon finding the statement of the of the Central Bank Law. Manifestly, whether a rural bank's "continuance in business
Superintendent to be true, shall forthwith forbid the institution to do business in the would involve probable loss" to its clients or creditors and that it "cannot resume
Philippines and shall take charge of its assets and proceeds according to law. business with safety," is a matter of appreciation and judgment that the law entrusts
primarily to the Monetary Board. Equally apparent is that if the rural bank affected is
The Monetary Board shall thereupon determine within thirty days whether the in the condition previously adverted to, every minute of delay in securing its assets
institution may be reorganized or otherwise placed in such a condition so that it may from dissipation inevitably increases the danger to the creditors. For this reason, the
be permitted to resume business with safety to its creditors and shall prescribe the statute has provided for a subsequent judicial review of the Monetary Board, in lieu of
conditions under which such resumption of business shall take place. In such case the a previous hearing.
expenses and fee in the administration of the institution shall be determined by the
Board and shall be paid to the Central Bank out of the assets of such banking In point of fact, the petitioner Rural Bank of Lucena did file a petition (Annex "G")
institution. for judicial review in the Court of First Instance of Quezon Province, dated February
12, 1962, and challenged the validity of Resolution No. 122 of the Monetary Board
At any time within ten days after the Monetary Board has taken charge of the assets (Case No. 6471) ; but the Court of First Instance of Quezon dissolved the preliminary
of any banking institution, such institution may apply to the Court of First Instance injunction issued in that case and allowed Resolution No. 122 to take effect, without
any steps being taken for a review of such action. This being the case, and in view of correctness of the Monetary Board's resolution to stop operation and proceed to the
the manifest reluctance the Lucena bank's officials to comply with the Monetary liquidation of the Lucena Rural Bank should first be adjudged before making the
Board's resolution, the Central Bank had cause to seek judicial assistance for the resolution effective, it being enough that a subsequent judicial review by provided
discharge of its duties as liquidator. (section 29, R.A. 265; 12 Am. Jur. 305, sec. 611; Bourjois vs. Chapman, 301 U.S. 183,
81 Law Ed. 1027, 1032; American Surety Co. vs. Baldwin, 77 Law Ed. 231, 86 ALR
The petitioner rural bank seems to take the view that the proceedings had before 307; Wilson vs. Standefer, 46 Law Ed. 612); (2) the period for asking such judicial
Judge Gatmaitan in Case No. 47345, Branch XIV, of the Court of First Instance of review had elapsed with excess between the adoption of the Monetary Board
Manila constituted the judicial review required by section 29 of Republic Act No. 265, Resolution No. 122 and the filing of the case by the Central Bank in the Court of
the Central Bank Act. Such a stand is untenable, for the case tried and decided by First Instance of Manila; (3) the correctness of said resolution had already been put in
Judge Gatmaitan concerned an attempt by the Central Bank to take over management issue before the Court of Quezon Province; (4) because the latter court had refused to
under section 10 of the Rural Banks law (R.A. No. 720) in connection with the stop implementation of the Resolution of the Monetary Board when it dissolved its
Monetary Board's resolution No. 928 of June 16, 1961. Even more conclusive is the own preliminary injunction; and (5) because the Lucena Bank had apparently
consideration that said action (Case No. 47345) was filed on June 22, 1961, and could acquiesced in the action taken by the Court of Quezon Province, since the rural bank
not possibly be a judicial review of the Resolution No. 122 adopted eight months later, had not sought that the action of the Quezon court be set aside by a higher court.
on February 2, 1962. A review cannot precede the adoption of the resolution being
reviewed. This proposition requires no demonstration. IN VIEW OF THE FOREGOING, the writ applied for is denied with costs against
the petitioner Lucena Rural Bank, Inc.
The narrated events also rebut the contention that the order of Judge Area, issued on
March 28, 1963, in Case No. 50019, constitutes unlawful interference with the Bengzon, C.J., Bautista Angelo, Concepcion, Dizon, Makalintal, Bengzon, J.P., and
enforcement of Judge Gatmaitan's decision of February 14, 1962, the issues involved Zaldivar, JJ., concur.
being different in each case. As heretofore pointed out one involved a take over of
management under section 10 of the Rural Banks Act, and the other a seizure of
assets and liquidation under section 29 of the Central Bank law (R.A. 265).

Nor can the proceedings before Judge Area be deemed judicial review of the 1962
resolution No. 122 of the Monetary Board, if only because by law (section 29, R. A.
G.R. No. 161276. January 31, 2005]
265) such review must be asked within 10 days from notice of the resolution of the
Board. Between the adoption of Resolution No. 122 and the challenged order of
Judge Arca, more than one year had elapsed. Hence, the validity of the Monetary BORLONGAN vs. REYES
Board's resolution can no longer be litigated before Judge Arca, whose role under the
fourth paragraph of section 29 is confined to assisting and supervising the liquidation THIRD DIVISION
of the Lucena bank.
Gentlemen:
Whether or not the Central Bank acted with arbitrariness or bad faith in decreeing
that circumstances called for the liquidation of the Lucena Rural Bank, and should be
answerable in damages, should be threshed out and determined, not by Judge Arca Quoted hereunder, for your information, is a resolution of this Court dated
but in Case No. 6471 of the Court of First Instance of Quezon Province, which was JAN 31 2005.
filed within the 10-day period prescribed by the Central Bank law, and which appears
to be still pending, unless the Lucena bank had abandoned such litigation, a fact that G.R. No. 161276 (Teodoro C. Borlongan vs. Alberto V. Reyes, Ma. Dolores B.
we need not decide at present. Suffice it to say that Judge Arca had no reason to
inquire into the merits of the case before issuing the disputed order requiring the Yuviengco, Candon B. Guerrero and Tomas S. Aure, Jr.)
surrender of the assets and papers of the Lucena bank, because: (1) neither the statute
(sec. 29, R.A. 265) nor the constitutional requirement of due process demand that the
At bar is this petition for review on certiorari filed by petitioner Teodoro C. Initially, petitioner filed a motion to consolidate the two (2) cases. Later,
Borlongan, assailing the decision dated 18 September 2003[1] of the Court of however, he not only withdrew said motion but even vigorously opposed the
Appeals in CA-G.R. SP No. 72234, reversing and setting aside the Orders consolidation.
dated 2 July 2002 and 30 July 2002 of the Ombudsman in OMB-
ADM-0-00-0867 which respectively declared herein respondents guilty of Unconsolidated, the two (2) cases proceeded separately. And, as it turned out,
simple neglect of duty, and denied both parties' separate motions for the two (2) divisions of the Court of Appeals rendered conflicting decisions.
reconsideration.
Thus, in a decision dated 13 August 2003,[4] the 5th Division modified the
In a complaint-affidavit filed with Office of the Ombudsman and thereat questioned orders of the Ombudsman by finding the herein respondents,
docketed as OMB-ADM-0-00-0867, petitioner Teodoro C. Borlongan, former including the BSP Governor, guilty of gross neglect of duty and imposing on
president and chief executive officer of Union Bank, Inc. (UBI), each of them the penalty of one (1) year suspension without pay.
administratively charged herein respondent officials of the Bangko Sentral ng
Pilipinas (BSP), for allegedly falsifying statement of facts in the BSP On the other hand, the 17th Division, in a decision dated 18 September 2003,
Supervision and Examination Sector (SES) reports and tendering incorrect [5]cralawreversed and set aside the same assailed orders of the Ombudsman
and inaccurate reports and opinions to conjure false grounds for the closure of and dismissed the administrative complaints against the herein respondents.
UBI and Urbancorp Development Bank and placing them under receivership,
to the detriment of their shareholders, officers and employees. Petitioner filed a motion for reconsideration, imploring the 17th Division to set
aside its September 18,2003 decision for being inconsistent with the August
In an Order dated 2 July 2002,[2]cralaw the Ombudsman found respondents 13, 2003 decision of the 5th Division in CA-G.R. SP No. 72270.
guilty of simple neglect of duty and imposed upon them the penalty of one (1)
month and one (1) day suspension without pay. In a subsequent Order dated In a Resolution dated 17 December 2003,[6]cralaw the 17th Division denied
30 July 2002,[3]cralawthe Ombudsman denied both parties' motions for petitioner's motion for reconsideration, and, in the process, castigated
reconsideration. petitioner for his refusal to have the two (2) cases consolidated:

Therefrom, both parties interposed separate appellate recourses to the Court Without a consolidation, there is no rule of law or jurisprudence that prevents
of Appeals. us, the 17th Division, from deciding SP 72234 according to our own
independent judgment, any more than the 5th Division can be prevented from
Respondents were the first to appeal via a petition for review, which was ruling upon SP 72270 according to their own independent judgment.
docketed in the Court of Appeals as CA-G.R. SP No. 72234 and raffled off to
its 17th Division. The records show that respondent had, indeed, filed with us a motion to
consolidate SP 72270 with our SP 72234. But for reasons only known to him,
For his part, petitioner, also thru a petition for review, questioned before the he withdrew the motion for consolidation. He even said that the 5th Division
Court of Appeals the Ombudsman's absolution of the BSP Governor and its had eventually denied the consolidation of the case with us, again for reasons
General Counsel from his affidavit-complaint, and sought the imposition of a we do not know.
graver penalty against the herein respondents. Docketed as CA-G.R. SP No.
72270, petitioner's appeal landed to the 5th Division of the appellate court. Under these circumstances, without a consolidation, both divisions will have to
decide their own cases, and any resulting conflict in the decisions on similar
issues of fact and law will have to be resolved ultimately by the Supreme Court Meanwhile, on February 13, 2004, petitioner filed the instant petition for
as the supreme arbiter of all justiciable controversies in this jurisdiction. review on certiorari, this time assailing the 18 September 2003 decision of the
17th Decision of the Court of Appeals in CA-G.R. SP No. 72234.
But for the respondent to make it appear as if we are to blame for the conflict
between the two divisions of the Court, after the respondent refused to Perusal of the present petition reveals that it raises substantially the same
consolidate the cases before us, is absurd and comical. Absurd, because he is issues already passed upon by the two (2) Divisions of the Court of Appeals
saying in so many words that we should not exercise an independent judgment and by this Court, no less, in G.R. No. 163765.
in our case anymore after the 5th Division happened to decide its case ahead
of us and comical, because he has reduced the adjudicative process into a race Chanting the same tone, the recourse is unavailing.
between the cases. If we had only known that this was the kind of ballgame he
wanted us to observe, we would have considered our case submitted for In Philippine Retirement Authority vs. Rupa,[9]cralaw we laid down the
decision a long time ago, immediately after he filed his comment, and bar the standard definition of simple neglect of duty, as a disregard of a duty resulting
parties from filling replies, memoranda and other pleadings as a waste of our from carelessness or indifference.
time. This is how things would turn out if we pursued his line of thinking ad
absurdum. Here, we find that neither gross nor simple neglect of duty characterized the
acts of the respondents. The subject SES reports prepared by respondents and
To repeat, the respondent refused to have his case in the 5th Division submitted to the Monetary Board were anything but haphazardly or
consolidated before us. If he is to fault anyone now for the consequence of this negligently made. As it were, the reports were a compendium of long years of
non-consolidation, he should point all his fingers to himself. monitoring by the BSP of a problem bank, and assembled over a period of 15
hours after the respondents were instructed to do so. The data contained
Later, or on June 14, 2004, the former 5th Division of the Court of Appeals, therein had been patiently collected and analyzed.
this time acting as a Special Division of Five in connection with the motions
for reconsideration therein pending, came out with an Amended Decision, Record reveals that UBI was being monitored by BSP officials for years.
[7]cralawamending the earlier decision of 12 August 2003 in CA-G.R. SP No. Respondent Dolores Yuvienco had supervised the bank directly since 1999 as
72270 by dismissing the administrative complaint against all the respondents Director of DCB II
therein. Petitioner elevated the same Amended Decision to this Court via a
petition for review on certiorari in G.R. No. 163765. UBI had since given up its status as an expanded commercial bank and
reverted to an ordinary commercial bank because it could not meet the P3.5
In a Resolution promulgated on July 26, 2004,[8]cralaw the Court, thru its billion minimum capital requirement for a universal bank. For two (2) months
Third Division, denied the petition in G.R. No. 163765 "for failure of the prior to its closure, Urban Bank had been besieged by liquidity problems, and
petitioner to show that a reversible error had been committed by the appellate its declaration of a bank holiday on April 25 only confirmed its decreasing
court". In a subsequent Resolution promulgated on October 1, 2004, the ability to meet obligations on time.
Court denied petitioner's motion for reconsideration with finality "as no
substantial arguments were raised to warrant a reconsideration thereof". Section 30(a) of RA 7653, otherwise known as the New Central Bank Act, is
relevant. Under that law, the Monetary Board may execute measures such
those taken in this case, summarily and without need of prior hearing:
Sec. 30. Proceedings in Receivership and Liquidation. -Whenever, upon preparation of reports that are, in their nature, merely recommendatory and
report of the head of the supervising and examining department, the have to be acted upon by superior officials. The reports were not the final
Monetary Board finds that the Bank or quasi-bank: action that creates right and duties and affects the interest and fortunes of
third parties. Courts do not interfere with any administrative measure prior to
(a) is unable to pay its liabilities as they become due in the ordinary course its completion or finality, and when they do, what is actionable is not the
of business: Provided, that this shall not include inability to pay caused by recommendation but the decision of the official with the competence under
extraordinary demands induced by financial panic in the banking community; the law to issue it.[11]cralaw

(b) has insufficient realizable asset, as determined by the Bangko Sentral to The subject reports are only between the Monetary Board and the BSP
meet its liabilities; or officials who prepared and endorsed them and may be rejected, modified or
accepted by the Monetary Board. As far as this case is concerned, the legal
(c) cannot continue in business without involving probable losses to its obligations of diligence and good faith that BSP officials owe to the public
creditors; or under Section 16 of the New Central Act start with the official acts of the
Monetary Board which, rightly or wrong, are the cause of loss or injury to
(d) has willfully violated a cease and desist order under Section 37 that has third parties, not any preparatory report or recommendation.
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 As earlier noted, UBI's own top management, specifically Bartolome III, its
may summarily and without need for prior hearing forbid the institution from chairman of the Board, and the petitioner himself, its president, continually
doing business in the Philippines and designate the Philippine Deposit provided the BSP the picture of the worsening situation of UBI in the four (4)
Insurance Corporation as receiver of the Banking institution. xxx. (Emphasis weeks from March 20, 2000 to April 25, 2000, leading to UBI's unilateral
supplied) declaration of a bank holiday on April 25, 2000.[12]cralaw Their constant
reporting showed that UBI was "unable to pay its liabilities as they become
Pertinent, too, is Section 53 of Republic Act No. 8791,[10]cralaw since it due in the ordinary course of business; (or that it) has insufficient realizable
underscores the summary character of the MB's initiative of placing a bank assets, as determined by the Bangko Sentral, to meet its liabilities."[13]cralaw
under receivership. It provides that in case a bank or quasi-bank notifies the While other factors might have weighed in the analysis of UBI's financial
BSP or publicly announces a bank holiday, or in any manner suspends the liquidity and in the preparation of the inevitable Supervisor and Examination
payment of its deposit liabilities continuously for more than 30 days, the MB Sector (SES) reports, the MB considered the constant reports of UBI's own
may summarily and without need of prior hearing close such banking top management as the best proof of its dire liquidity status.
institution and place it under receivership of the PDIC.
Petitioner would have this Court review and reverse factual findings of the
This authority is beyond review by the courts except on a petition for Court of Appeals. This, of course, the Court cannot and will not do. Review
certiorari. Here, it is worth to note even the Ombudsman found significant of factual findings of the appellate court is not a function ordinarily
evidence to rationalize the decision of the Monetary Board to place UBI undertaken by this Court, the rule admitting only a few exceptions recognized
under receivership. in decisional law. The principle is consistent with Rule 45 of the Rules of
Court which categorically provides that a petition for review on certiorari must
Likewise, we agree with the appellate court's 17th Division in its ratiocination raise "only questions of law which must be distinctly set forth" in the petition.
that it is illogical to hold the respondents administratively liable for the Even then, the review sought will be denied if the questions raised are "too
unsubstantial to require consideration" or if the Court is not convinced of the Subsequently, RTC in separate orders denied petitioners' motion to dismiss and
existence of "special and important reasons" to warrant review, of which none ordered receiver Tiaoqui to restore the management of TSB to its elected board of
directors and officers, subject to CB comptrollership. Instead of proceeding to trial,
exists in this case. petitioners elevated the twin orders of the RTC to the Court of Appeals on a petition
for certiorari and prohibition under Rule 65. The CA upheld the findings of the trial
All told, we find that no reversible error was committed by the 17th Division court.
of Court of Appeals when it reversed and set aside the July 2, 2002 and July
30, 2002 Orders of the Ombudsman in OMB-ADM-0-00-0867. VI. STATEMENT OF THE CASE:

TSB filed a complaint before the Regional Trial Court against Central Bank
WHEREFORE, the instant petition is hereby DENIED DUE COURSE. and Tiaoqui to annul the MB resolution. TSB argued that the Central Bank has no
authority to take over a banking institution even if it is not charged with violation of
SO ORDERED. any law or regulation, much less found guilty thereof.
TSB thereafter filed for a Temporary Restraining Order (TRO), which was initially
issued by the RTC, until the trial court quashed the TRO upon motion by Central
Bank and Tiaoqui. Afterwards, Central Bank and Tiaoqui filed a motion to dismiss
the complaint. Meanwhile, TSB filed an urgent motion in the RTC to direct receiver
Tiaoqui to restore TSB to its elected board of directors and officers after failing to
secure an injunction. The RTC denied the motion to dismiss and granted TSB’s
THE CENTRAL BANK OF THE PHILIPPINES and RAMON V. urgent motion.
TIAOQUI, petitioners, The RTC’s order prompted Central Bank and Tiaoqui to file a petition for certiorari
vs. and prohibition under Rule 65 before the Court of Appeals, but the appellate court
ruled in favor of TSB. Central Bank and Tiaoqui filed a petition for review on
COURT OF APPEALS and TRIUMPH SAVINGS BANK, respondents.
certiorari under Rule 45 to set aside the decision of the CA.
III. PONENTE: Bellosillo
IV. TOPIC: NCBA VII. ISSUES:
WON a Monetary Board resolution placing a private bank under receivership should
V. STATEMENT OF FACTS: be annulled on the ground of lack of prior notice and hearing.
TSB filed a complaint with the Regional Trial Court of Quezon City, VIII. RULING:
docketed as Civil Case No. Q-45139, against Central Bank and Ramon V. Tiaoqui to
annul MB Resolution No. 596, with prayer for injunction, challenging in the process No, the subject monetary board resolution in the case at bar cannot be
the constitutionality of Sec. 29 of R.A. 269, otherwise known as "The Central Bank annulled merely on the ground of lack of prior notice and hearing.
Act,". The resolution was allegedly issued by reason of an examination submitted by Under Sec. 29 of R.A. 265, the Central Bank, through the Monetary Board, is vested
the Supervision and Examination Sector (SES), Department II, of the Central Bank with exclusive authority to assess, evaluate and determine the condition of any bank,
(CB) stating that: "that the financial condition of TSB is one of insolvency and its and finding such condition to be one of insolvency, or that its continuance in business
continuance in business would involve probable loss to its depositors and creditors," would involve probable loss to its depositors or creditors, forbid the bank or non-bank
The trial court temporarily restrained petitioners from implementing MB Resolution financial institution to do business in the Philippines; and shall designate an official of
No. 596 "until further orders", thus prompting them to move for the quashal of the the CB or other competent person as receiver to immediately take charge of its assets
restraining order (TRO) on the ground that it did not comply with said Sec. 29, i.e., and liabilities. The fourth paragraph, which was then in effect at the time the action
that TSB failed to show convincing proof of arbitrariness and bad faith on the part of was commenced, allows the filing of a case to set aside the actions of the Monetary
petitioners;' and, that TSB failed to post the requisite bond in favor of Central Bank. Board which are tainted with arbitrariness and bad faith.
On 19 July 1985, acting on the motion to quash the restraining order, the trial court
granted the relief sought and denied the application of TSB for injunction.
Contrary to the notion of private respondent, Sec. 29 does not contemplate prior involving probable losses to its depositors and creditors; that the management of the
notice and hearing before a bank may be directed to stop operations and placed under bank had been accordingly informed of the need to infuse additional capital to place
receivership. When par. 4 (now par. 5, as amended by E.O. 289) provides for the filing the bank in a solvent financial condition and was given adequate time within which to
of a case within ten (10) days after the receiver takes charge of the assets of the bank, make the required infusion and that no infusion of adequate fresh capital was made.
it is unmistakable that the assailed actions should precede the filing of the case. Plainly, RBSM filed a petition for certiorari and prohibition to nullify the resolution placing it
the legislature could not have intended to authorize "no prior notice and hearing" in under receivership.
the closure of the bank and at the same time allow a suit to annul it on the basis of The Regional Trial Court and the Court of Appeals (CA) dismissed the
absence thereof. petition. The CA found that RBSM was granted with emergency loans as a last
In the early case of Rural Bank of Lucena, Inc. v. Arca [1965], We held that a trenche. The emergency loan was for the sole purpose of servicing and meeting
previous hearing is nowhere required in Sec. 29 nor does the constitutional withdrawals but RBSM did not use it for that purpose.
requirement of due process demand that the correctness of the Monetary Board's Thereafter, RBSM declared a bank holiday which prompted BSP to ecamine its
resolution to stop operation and proceed to liquidation be first adjudged before books. The Comptroller report was submitted before the MB and based on that, a
making the resolution effective. It is enough that a subsequent judicial review be closure and liquidation order was issued.
provided. RBSM now argues that the resolution ordering the closure and liquidation of RBSM
is void because there was no prior complete examination but merely a report.

VI. STATEMENT OF THE CASE:

On January 31, 2000, petitioners filed a petition for certiorari and


 prohibition in the Regional Trial Court (RTC) of Malolos, Branch 22 to nullify and set
aside Resolution No. 105. However, on February 7, 2000, petitioners filed a notice of
RURAL BANK OF SAN MIGUEL, INC. and HILARIO P. SORIANO, in his withdrawal in the RTC and, on the same day, filed a special civil action for certiorari
capacity as majority stockholder in the Rural Bankof San Miguel, Inc., and prohibition in the CA. On February 8, 2000, the RTC dismissed the case
Petitioners, pursuant to Section 1, Rule 17 of the Rules of Court. In their petition before the CA,
vs. petitioners claimed that respondents MB and BSP committed grave abuse of
discretion in issuing Resolution No. 105. The petition was dismissed by the CA on
MONETARY BOARD, BANGKO SENTRAL NG PILIPINAS and
March 28, 2000. It held, among others, that the decision of the MB to issue
PHILIPPINE DEPOSIT INSURANCE CORPORATION, Respondents. G.R. Resolution No. 105 was based on the findings and recommendations of the
No. 150886 February 16, 2007, Department of Rural Banks Supervision and Examination Sector, the comptroller
III: PONENTE: J. Corona reports as of October 31, 1999 and December 31, 1999 and the declaration of a bank
IV. TOPIC: The New Central Bank Act holiday. Such could be considered as substantial evidence.
V. STATEMENT OF FACTS: Pertinently, on June 9, 2000, on the basis of reports prepared by PDIC stating that
RBSM could not resume business with sufficient assurance of protecting the interest
Petitioner Rural Bank of San Miguel, Inc. (RBSM) was a domestic of its depositors, creditors and the general public, the MB passed Resolution No. 966
corporation engaged in banking. On January 21, 2000, respondent Monetary Board directing PDIC to proceed with the liquidation of RBSM under Section 30 of RA
(MB), the governing board of respondent Bangko Sentral ng Pilipinas (BSP), issued 7653.
Resolution No. 105 prohibiting RBSM from doing business in the Philippines, placing Hence this petition.
it under receivership and designating respondent Philippine Deposit Insurance
Corporation (PDIC) as receiver. VII. ISSUE:
On the basis of the comptrollership/monitoring report as of October 31, 1999 as Whether or not Sec. 30 of RA 7653 and applicable jurisprudence require a current
reported by Mr. Wilfredo B. Domo-ong, Director, Department of Rural Banks, , and complete examination of the bank before it can be closed and placed under
which report showed that [RBSM] (a) is unable to pay its liabilities as they become receivership.
due in the ordinary course of business; (b) cannot continue in business without
VIII. RULING: BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner,
vs.
No, a current and complete examination of the bank before it can be closed THE MONETARY BOARD, CENTRAL BANK OF THE PHILIPPINES,
and placed under receivership is not necessary. JOSE B. FERNANDEZ, CARLOTA P. VALENZUELA, ARNULFO B.
The argument of RBSM was in accordance with the ruling in Banco Filipino vs. AURELLANO and RAMON V. TIAOQUI, respondents.
Monetary Board. However, RBSM’s reliance on such ruling is misplaced because the G.R. No. 68878 December 11, 1991
case was decided using Sec. 29 of the old law, RA 265. Thus in Banco Filipino, we
ruled that an "examination [conducted] by the head of the appropriate supervising or V. STATEMENT OF FACTS:
examining department or his examiners or agents into the condition of the bank" is
necessary before the MB can order its closure. However, RA 265, including Section 29 This case involves 9 consolidated cases. The first six cases involve the
thereof, was expressly repealed by RA 7653 which took effect in 1993. Resolution No. common issue of whether or not the liquidator appointed by the respondent Central
105 was issued on January 21, 2000. Hence, petitioners’ reliance on Banco Filipino Bank has the authority to prosecute as well as to defend suits, and to foreclose
which was decided under RA 265 was misplaced. mortgages for and in behalf of the bank while the issue on the validity of the
In RA 7653, only a "report of the head of the supervising or examining department" receivership and liquidation of the latter is pending resolution in G.R. No. 7004. On
is necessary. It is an established rule in statutory construction that where the words of the other hand, the other three (3) cases, namely, G.R. Nos. 70054, which is the main
a statute are clear, plain and free from ambiguity, it must be given its literal meaning case, 78767 and 78894 all seek to annul and set aside M.B. Resolution No. 75 issued
and applied without attempted interpretation. The word "report" has a definite and by respondents Monetary Board and Central Bank on January 25, 1985.
unambiguous meaning which is clearly different from "examination." A report, as a G.R. Nos. 70054
noun, may be defined as "something that gives information" or "a usually detailed Banco Filipino Savings and Mortgage Bank commenced operations on July
account or statement."2 On the other hand, an examination is "a search, investigation 9, 1964. It has 89 operating branches with more than 3 million depositors. It has an
or scrutiny." approved emergency advance of P119.7 million. The Monetary Board placed Banco
What is being raised here as grave abuse of discretion on the part of the Filipino Savings and Mortgage Bank under conservatorship of Basilio Estanislao. He
respondents was the lack of an examination and not the supposed arbitrariness with was later replaced by Gilberto Teodoro as conservator on August 10, 1984. Gilberto
which the conclusions of the director of the Department of Rural Banks Supervision Teodoro submitted a report dated January 8, 1985 to respondent The Monetary
and Examination Sector had been reached in the report which became the basis of Board on the conservatorship of the bank. Subsequently, another report dated
Resolution No. 105. January 23, 1985 was submitted to the Monetary Board by Ramon Tiaoqui regarding
The absence of an examination before the closure of RBSM did not mean the major findings of examination on the financial condition of Banco Filipino
that there was no basis for the closure order. Needless to say, the decision of the MB Savings and Mortgage Bank as of July 31, 1984, finding the bank one of insolvency
and BSP, like any other administrative body, must have something to support itself and and illiquidity and provides sufficient justification for forbidding the bank from
its findings of fact must be supported by substantial evidence. But it is clear under RA engaging in banking. The Monetary Board ordered the closure of Banco Filipino and
7653 that the basis need not arise from an examination as required in the old law. designated Mrs. Carlota P. Valenzuela as Receiver.
We thus rule that the MB had sufficient basis to arrive at a sound conclusion that there Banco Filipino filed a complaint with the RTC to set aside the action of the
were grounds that would justify RBSM’s closure. It relied on the report of Mr. Domo- Monetary Board placing the bank under receivership and filed with the SC the
ong, the head of the supervising or examining department, with the findings that: (1) petition for certiorari and mandamus. Carlota Valenzuela, as Receiver and Arnulfo
RBSM was unable to pay its liabilities as they became due in the ordinary course of Aurellano and Ramon Tiaoqui as Deputy Receivers of Banco Filipino submitted their
business and (2) that it could not continue in business without incurring probable report on the receivership of the bank to the Monetary Board, finding that the
losses to its depositors and creditors.The report was a 50- page memorandum condition of the banking institution continues to be one of insolvency, i.e., its
detailing the facts supporting those grounds, an extensive chronology of events realizable assets are insufficient to meet all its liabilities and that the bank cannot
revealing the multitude of problems which faced RBSM and the recommendations resume business with safety to its depositors, other creditors and the general public,
based on those findings and recommends the liquidation of the bank. Banco Filipino filed a motion before the
SC praying that a restraining order or a writ of preliminary injunction be issued to
enjoin respondents from causing the dismantling of Banco Filipino signs in its main
office and 89 branches. The SC ordered the issuance of the temporary restraining paying debts of such institution. We did not prohibit however acts a as receiving
order. The SC directed the Monetary Board and Central Bank hold hearings at which collectibles and receivables or paying off credits claims and other transactions
the Banco Filipino should be heard. pertaining to normal operate of a bank.
There is no doubt that the prosecution of suits collection and the foreclosure of
VI. STATEMENT OF THE CASE: 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
This refers to nine (9) consolidated cases concerning the legality of the in the same resolution dated August 25, 1985 for the designation by the Central Bank
closure and receivership of petitioner Banco Filipino Savings and Mortgage Bank of a comptroller Banco Filipino alter the powers and functions; of the liquid insofar as
(Banco Filipino for brevity) pursuant to the order of respondent Monetary Board. Six the management of the assets of the bank is concerned. The mere duty of the
(6) of these cases, namely, G.R. Nos. 68878, 77255-68, 78766, 81303, 81304 and comptroller is to supervise counts and finances undertaken by the liquidator and to d
90473 involve the common issue of whether or not the liquidator appointed by the mine the propriety of the latter's expenditures incurred behalf of the bank.
respondent Central Bank (CB for brevity) has the authority to prosecute as well as to Notwithstanding this, the liquidator is empowered under the law to continue the
defend suits, and to foreclose mortgages for and in behalf of the bank while the issue functions of receiver is preserving and keeping intact the assets of the bank in
on the validity of the receivership and liquidation of the latter is pending resolution in substitution of its former management, and to prevent the dissipation of its assets to
G.R. No. 7004. Corollary to this issue is whether the CB can be sued to fulfill financial the detriment of the creditors of the bank. These powers and functions of the
commitments of a closed bank pursuant to Section 29 of the Central Bank Act. On liquidator in directing the operations of the bank in place of the former management
the other hand, the other three (3) cases, namely, G.R. Nos. 70054, which is the main or former officials of the bank include the retaining of counsel of his choice in actions
case, 78767 and 78894 all seek to annul and set aside M.B. Resolution No. 75 issued and proceedings for purposes of administration. Clearly, in G.R. Nos. 68878,
by respondents Monetary Board and Central Bank on January 25, 1985. 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
VII. ISSUES: the bank. In G.R. No. 81303, the liquidator is likewise authorized to resist or defend
1. Whether or not the liquidator appointed by the respondent Central Bank has the suits instituted against the bank by debtors and creditors of the bank and by other
authority to prosecute as well as to defend suits, and to foreclose mortgages for and in private persons. Similarly, in G.R. No. 81304, due to the aforestated reasons, the
behalf of the bank while the issue on the validity of the receivership and liquidation Central Bank cannot be compelled to fulfill financial transactions entered into by
of the latter is pending resolution in G.R. No. 7004 Banco Filipino when the operations of the latter were suspended by reason of its
2. Whether or not the Central Bank and the Monetary Board acted arbitrarily and in closure. The Central Bank possesses those powers and functions only as provided for
bad faith in finding and thereafter concluding that petitioner bank is insolvent, and in in Sec. 29 of the Central Bank Act.
ordering its closure on January 25, 1985.
2. Yes, the Monetary Board acted arbitrarily and in bad faith in finding and thereafter
VIII. RULING: concluding that petitioner bank is insolvent, and in ordering its closure on January 25,
1985. There is no question that under Section 29 of the Central Bank Act, the
1. Yes, the liquidator appointed by the respondent Central Bank has the authority to following are the mandatory requirements to be complied with before a bank found to
prosecute as well as to defend suits, and to foreclose mortgages for and in behalf of be insolvent is ordered closed and forbidden to do business in the Philippines: Firstly,
the bank while the issue on the validity of the receivership and liquidation of the latter an examination shall be conducted by the head of the appropriate supervising or
is pending resolution in G.R. No. 7004. When the issue on the validity of the closure examining department or his examiners or agents into the condition of the bank;
and receivership of Banco Filipino bank was raised in G.R. No. 70054, pendency of secondly, it shall be disclosed in the examination that the condition of the bank is one
the case did not diminish the powers and authority of the designated liquidator to of insolvency, or that its continuance in business would involve probable loss to its
effectuate and carry on the administration of the bank. In fact when We adopted a depositors or creditors; thirdly, the department head concerned shall inform the
resolute on August 25, 1985 and issued a restraining order to respondents Monetary Monetary Board in writing, of the facts; and lastly, the Monetary Board shall find the
Board and Central Bank, We enjoined further acts of liquidation. Such acts of statements of the department head to be true. Anent the first requirement, the
liquidation, as explained in Sec. 29 of the Central Bank Act are those which constitute Tiaoqui report, submitted on January 23, 1985, revealed that the finding of insolvency
the conversion of the assets of the banking institution to money or the sale, of petitioner was based on the partial list of exceptions and findings on the regular
assignment or disposition of the s to creditors and other parties for the purpose of examination of the bank as of July 31, 1984 conducted by the Supervision and
Examination Sector II of the Central Bank of the Philippines Central Bank. Clearly, PHILIPPINE VETERANS BANK EMPLOYEES UNION-N.U.B.E. and
Tiaoqui based his report on an incomplete examination of petitioner bank and PERFECTO V. FERNANDEZ, petitioners,
outrightly concluded therein that the latter's financial status was one of insolvency or vs.
illiquidity. It is evident from the foregoing circumstances that the examination HONORABLE BENJAMIN VEGA, Presiding Judge of Branch 39 of the
contemplated in Sec. 29 of the CB Act as a mandatory requirement was not REGIONAL TRIAL COURT of Manila, the CENTRAL BANK OF THE
completely and fully complied with. Despite the existence of the partial list of findings
PHILIPPINES and THE LIQUIDATOR OF THE PHILIPPINE VETERANS
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 BANK, respondents
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 KAPUNAN, J.:
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 May a liquidation court continue with liquidation proceedings of the Philippine
actuation of the Monetary Board in closing petitioner bank on January 25, 1985 Veterans Bank (PVB) when Congress had mandated its rehabilitation and reopening?
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 This is the sole issue raised in the instant Petition for Prohibition with Petition for
Examination Procedures. Said manual provides that only after the examination is Preliminary Injunction and application for Ex Parte Temporary Restraining Order.
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 The antecedent facts of the case are as follows:
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 Sometime in 1985, the Central Bank of the Philippines (Central Bank, for brevity)
of Examination Procedures, General Instruction, p. 14). It is hard to understand how filed with Branch 39 of the Regional Trial Court of Manila a Petition for Assistance in
a period of four days after the conference could be a reasonable opportunity for a the Liquidation of the Philippine Veterans Bank, the same docketed as Case No.
bank to undertake a responsive and corrective action on the partial list of findings of SP-32311. Thereafter, the Philipppine Veterans Bank Employees Union-N.U.B.E.,
the examiner-in-charge. In the instant case, the basic standards of substantial due herein petitioner, represented by petitioner Perfecto V. Fernandez, filed claims for
process were not observed. Time and again, We have held in several cases, that the accrued and unpaid employee wages and benefits with said court in SP-32311.1
procedure of administrative tribunals must satisfy the fundamentals of fair play and
that their judgment should express a well-supported conclusion. After lengthy proceedings, partial payment of the sums due to the employees were
In view of the foregoing premises, We believe that the closure of the petitioner bank made. However, due to the piecemeal hearings on the benefits, many remain unpaid.2
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 On March 8, 1991, petitioners moved to disqualify the respondent judge from hearing
fact that petitioner bank was suffering from serious financial problems should not the above case on grounds of bias and hostility towards petitioners.3
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 On January 2, 1992, the Congress enacted Republic Act No. 7169 providing for the
permitted to resume business with safety to its depositors, creditors and the general rehabilitation of the Philippine Veterans Bank.4
public.
Thereafter, petitioners filed with the labor tribunals their residual claims for benefits
and for reinstatement upon reopening of the bank.5

Sometime in May 1992, the Central Bank issued a certificate of authority allowing the
PVB to reopen.6

Despite the legislative mandate for rehabilitation and reopening of PVB, respondent
G.R. No. 105364* June 28, 2001 judge continued with the liquidation proceedings of the bank. Moreover, petitioners
learned that respondents were set to order the payment and release of employee
benefits upon motion of another lawyer, while petitioners’ claims have been frozen to And For Other Purposes", which was signed into law by President Corazon C. Aquino
their prejudice. on January 2, 1992 and which was published in the Official Gazette on February 24,
1992, provides in part for the reopening of the Philippine Veterans Bank together with
Hence, the instant petition. all its branches within the period of three (3) years from the date of the reopening of
the head office.7 The law likewise provides for the creation of a rehabilitation
Petitioners argue that with the passage of R.A. 7169, the liquidation court became committee in order to facilitate the implementation of the provisions of the same.8
functus officio, and no longer had the authority to continue with liquidation
proceedings. Pursuant to said R.A. No. 7169, the Rehabilitation Committee submitted the
proposed Rehabilitation Plan of the PVB to the Monetary Board for its approval.
In a Resolution, dated June 8, 1992, the Supreme Court resolved to issue a Temporary Meanwhile, PVB filed a Motion to Terminate Liquidation of Philippine Veterans
Restraining Order enjoining the trial court from further proceeding with the case. Bank dated March 13, 1992 with the respondent judge praying that the liquidation
proceedings be immediately terminated in view of the passage of R.A. No. 7169.
On June 22, 1992, VOP Security & Detective Agency (VOPSDA) and its 162 security
guards filed a Motion for Intervention with prayer that they be excluded from the On April 10, 1992, the Monetary Board issued Monetary Board Resolution No. 348
operation of the Temporary Restraining Order issued by the Court. They alleged that which approved the Rehabilitation Plan submitted by the Rehabilitaion Committee.
they had filed a motion before Branch 39 of the RTC of Manila, in SP-No. 32311,
praying that said court order PVB to pay their backwages and salary differentials by Thereafter, the Monetary Board issued a Certificate of Authority allowing PVB to
authority of R.A. No 6727, Wage Orders No. NCR-01 and NCR-01-Ad and Wage reopen.
Orders No. NCR-02 and NCR-02-A; and, that said court, in an Order dated June 5,
1992, approved therein movants’ case and directed the bank liquidator or PVB itself On June 3, 1992, the liquidator filed A Motion for the Termination of the Liquidation
to pay the backwages and differentials in accordance with the computation Proceedings of the Philippine Veterans Bank with the respondent judge.
incorporated in the order. Said intervenors likewise manifested that there was an error
in the computation of the monetary benefits due them. As stated above, the Court, in a Resolution dated June 8, 1992, issued a temporary
restraining order in the instant case restraining respondent judge from further
On August 18, 1992, petitioners, pursuant to the Resolution of this Court, dated July proceeding with the liquidation of PVB.
6, 1992, filed their Comment opposing the Motion for Leave to File Intervention and
for exclusion from the operation of the T.R.O. on the grounds that the movants have On August 3, 1992, the Philippine Veterans Bank opened its doors to the public and
no legal interest in the subject matter of the pending action; that allowing intervention started regular banking operations.
would only cause delay in the proceedings; and that the motion to exclude the
movants from the T.R.O. is without legal basis and would render moot the relief Clearly, the enactment of Republic Act No. 7169, as well as the subsequent
sought in the petition. developments has rendered the liquidation court functus officio. Consequently,
respondent judge has been stripped of the authority to issue orders involving acts of
On September 3, 1992, the PVB filed a Petition-In-Intervention praying for the liquidation.
issuance of the writs of certiorari and prohibition under Rule 65 of the Rules of
Court in connection with the issuance by respondent judge of several orders involving Liquidation, in corporation law, connotes a winding up or settling with creditors and
acts of liquidation of PVB even after the effectivity of R.A. No. 7169. PVB further debtors.9 It is the winding up of a corporation so that assets are distributed to those
alleges that respondent judge clearly acted in excess of or without jurisdiction when he entitled to receive them. It is the process of reducing assets to cash, discharging
issued the questioned orders. liabilities and dividing surplus or loss.

We find for the petitioners. On the opposite end of the spectrum is rehabilitation which connotes a reopening or
reorganization. Rehabilitation contemplates a continuance of corporate life and
Republic Act No. 7169 entitled "An Act To Rehabilitate The Philippine Veterans activities in an effort to restore and reinstate the corporation to its former position of
Bank Created Under Republic Act No. 3518, Providing The Mechanisms Therefor, successful operation and solvency.10
 DOMINGO R. MANALO, petitioner, vs. COURT OF APPEALS (Special
It is crystal clear that the concept of liquidation is diametrically opposed or contrary Twelfth Division) and PAIC SAVINGS AND MORTGAGE BANK,
to the concept of rehabilitation, such that both cannot be undertaken at the same respondents. G.R. No. 141297. October 8, 2001
time. To allow the liquidation proceedings to continue would seriously hinder the
rehabilitation of the subject bank. STATEMENT OF FACTS:
Anent the claim of respondents Central Bank and Liquidator of PVB that R.A. No. S. Villanueva Enterprise thru its president, Therese Vargas, obtained a loan
7169 became effective only on March 10, 1992 or fifteen (15) days after its publication of 3M and 1M from the respondent PAIC Savings and Mortgage Bank and the
in the Official Gazette; and, the contention of intervenors VOP Security, et. al. that Philippine American Investments Corporation (PAIC) respectively. As a security,
the effectivity of said law is conditioned on the approval of a rehabilitation plan by the Vargas executed a Joint First Mortgage over her two parcels of land in favor of the
Monetary Board, among others, the Court is of the view that both contentions are respondent and PAIC. S. Villanueva Enterprise failed to settle its loan obligation
bereft of merit. which prompted the respondent to institute an extrajudicial foreclosure proceeding
over the mortgage lots. A public sale was held and the property was sold to the
While as a rule, laws take effect after fifteen (15) days following the completion of their respondent. A certificate of sale was issued and it’s duly annotated in the title of the
publication in the Official Gazette or in a newspaper of general circulation in the land. Vargas failed to redeem the property, thus, the title was consolidated in
Philippines, the legislature has the authority to provide for exceptions, as indicated in respondent’s name. Meanwhile, the respondent bank was put under liquidation a
the clause "unless otherwise provided." petition for assistance was granted by the RTC. Vargas tried to negotiate with the
liquidator of the bank to repurchase the property but she cannot afford the same.
In the case at bar, Section 10 of R.A. No. 7169 provides: Vargas then filed a case for annulment of the mortgage and the extrajudicial
foreclosure which was later on dismissed by the RTC. Vargas appealed before the CA
Sec. 10. Effectivity. - This Act shall take effect upon its approval. but the decision of the RTC was affirmed and later on, this decision became final and
executory.
Hence, it is clear that the legislature intended to make the law effective immediately
upon its approval. It is undisputed that R.A. No. 7169 was signed into law by VI. STATEMENT OF THE CASE
President Corazon C. Aquino on January 2, 1992. Therefore, said law became
effective on said date. In the meantime, the respondent bank filed a petition before the RTC for the
issuance of a writ of possession for the subject property. Vargas and the Villanueva
Assuming for the sake of argument that publication is necessary for the effectivity of Enterprise filed an opposition. While the case was still pending, Vargas sold the
R.A. No. 7169, then it became legally effective on February 24, 1992, the date when disputed property to a certain Armando Angsico. After this sale, Vargas, representing
the same was published in the Official Gazette, and not on March 10, 1992, as herself as the lawful owner of the same property, leased it to Doming R. Manalo for a
erroneously claimed by respondents Central Bank and Liquidator. period of 10 years. Later on, Angsico assigned his rights over the property to Manalo.
Then, the RTC granted the petition and issued the writ of possession and ordered
WHEREFORE, in view of the foregoing, the instant petition is hereby GIVEN DUE Vargas and any and all persons claiming rights under her title to vacate the property.
COURSE and GRANTED. Respondent Judge is hereby PERMANENTLY Villanueva Enterprise and Vargas moved for the quashal of the said writ. Manalo filed
ENJOINED from further proceeding with Civil Case No. SP- 32311. a motion to intervene. The RTC denied both the said motions. Manalo filed a Motion
for Reconsideration which was also denied. Manalo filed a Petition for Certiorari
SO ORDERED. before the CA. Petitioner contended that the lower court should have dismissed
respondents Ex-Parte Petition for Issuance of Writ of Possession for want of
jurisdiction over the subject matter of the claim. The power to hear the same, he
insists, exclusively vests with the Liquidation Court pursuant to Section 29 of Republic
Act No. 265, otherwise known as The Central Bank Act. He then cites the decision in
Valenzuela v. Court of Appeals, where it was held that if there is a judicial liquidation
of an insolvent bank, all claims against the bank should be filed in the liquidation
proceeding. For going to another court, the respondent, he accuses, is guilty of forum such situation, banks in liquidation would lose what justly belongs to them through a
shopping. While this case was pending, Manalo entered into a lease agreement with mere technicality.
the respondent over the same property. The CA dismissed the petition of Manalo.
Hence, this appeal before the SC.

VII. ISSUE/S:
1. Whether or not the Liquidation Court has the exclusive jurisdiction over the
petition for the issuance of writ of possession filed by the respondent bank in another
court? BANGKO SENTRAL NG PILIPINAS MONETARY BOARD and CHUCHI
2. Whether or not the respondent bank can still file and maintain a suit despite the FONACIER, Petitioners,
fact that it is already under liquidation? vs.
HON. NINA G. ANTONIO-VALENZUELA, in her capacity as Regional
VIII. Ruling: Trial Court Judge of Manila, Branch 28; RURAL BANK OF PARAÑAQUE,
INC.; RURAL BANK OF SAN JOSE (BATANGAS), INC.; RURAL BANK OF
1. NO. The pertinent provision of the law which states the liquidation court “shall
have jurisdiction in the same proceedings to assist in the adjudication of disputed CARMEN (CEBU), INC.; PILIPINO RURAL BANK, INC.; PHILIPPINE
claims against the bank...xxx” only finds operation in cases where there are claims COUNTRYSIDE RURAL BANK, INC.; RURAL BANK OF CALATAGAN
against an insolvent bank. In fine, the exclusive jurisdiction of the liquidation court (BATANGAS), INC. (now DYNAMIC RURAL BANK); RURAL BANK OF
pertains only to the adjudication of claims against the bank. It does not cover the DARBCI, INC.; RURAL BANK OF KANANGA (LEYTE), INC. (now FIRST
reverse situation where it is the bank which files a claim against another person or INTERSTATE RURAL BANK); RURAL BANK OF BISAYAS MINGLANILLA
legal entity. This interpretation of Section 29 becomes more obvious in the light of its (now BANK OF EAST ASIA); and SAN PABLO CITY DEVELOPMENT
intent. The requirement that all claims against the bank be pursued in the liquidation BANK, INC.
proceedings filed by the Central Bank is intended to prevent multiplicity of actions III. PONENTE: Justice Velasco Jr.
against the insolvent bank and designed to establish due process and orderliness in the IV. TOPIC: The New Central Bank Act
liquidation of the bank, to obviate the proliferation of litigations and to avoid injustice
and arbitrariness. The lawmaking body contemplated that for convenience, only one V. STATEMENT OF FACTS:
court, if possible, should pass upon the claims against the insolvent bank and that the
liquidation court should assist the Superintendents of Banks and regulates his Supervision and Examination Department (SED) of the Bangko Sentral ng
operations. It then ought to follow that petitioner’s reliance on Section 29 and the Pilipinas (BSP) conducted examinations of the books of the following banks:
Valenzuela case is misplaced. The Petition for the Issuance of a Writ of Possession in Rural Bank of Parañaque, Inc. (RBPI), Rural Bank of San Jose (Batangas), Inc., Rural
Civil Case No. 9011 is not in the nature of a disputed claim against the bank. On the Bank of Carmen (Cebu), Inc., Pilipino Rural Bank, Inc., Philippine Countryside Rural
contrary, it is an action instituted by the respondent bank itself for the preservation of Bank, Inc., Rural Bank of Calatagan (Batangas), Inc. (now Dynamic Rural Bank),
its asset and protection of its property. It was filed upon the instance of the Rural Bank of Darbci, Inc., Rural Bank of Kananga (Leyte), Inc. (now First Interstate
respondent’s liquidator in order to take possession of a tract of land over which it has Rural Bank), Rural Bank de Bisayas Minglanilla (now Bank of East Asia), and San
ownership claims. To be sure, the liquidator took the proper course of action when it Pablo City Development Bank, Inc.
applied for a writ in the Pasay City RTC because under Act 3135, it is mandated that After the examinations, exit conferences were held with the officers of the
jurisdiction over a Petition for Writ of Possession lies with the court of the province, banks wherein SED provided copies of Lists of Findings containing the deficiencies
city, or municipality where the property subject thereof is situated. discovered during the examinations. Banks were then required to comment and to
undertake the remedial measures which included the infusion of additional capital.
2. YES. A bank which had been ordered closed by the monetary board retains its Though the banks claimed that they made the additional capital infusions, petitioner
juridical personality which can sue and be sued through its liquidator. The only Chuchi Fonacier, officer-in-charge of the SED, sent separate letters to the Board of
limitation being that the prosecution or defense of the action must be done through Directors of each bank, informing them that the SED found that the banks failed to
the liquidator. Otherwise, no suit for or against an insolvent entity would prosper. In carry out the required remedial measures. In response, the banks requested that they
be given time to obtain BSP approval to amend their Articles of Incorporation, that MB then prohibited the respondent banks from transacting business and placed them
they have an opportunity to seek investors. They requested as well that the basis for under receivership
the capital infusion figures be disclosed, and noted that none of them had received the
Report of Examination (ROE) which finalizes the audit findings. In response, Fonacier VII. ISSUES/S:
reiterated the banks’ failure to comply with the directive for additional capital a. Whether or not the TRO issued by the RTC violated section 25 of the New Central
infusions. Bank Act that prevented the MB to discharge functions.
RBPI filed a complaint for nullification of the BSP ROE with application for b. Whether or not the respondents are required to be given copies of the ROEs before
a TRO and writ of preliminary injunction before the RTC. Praying that Fonacier, her submission of such to the Monetary Board.
subordinates, agents, or any other person acting in her behalf be enjoined from
submitting the ROE or any similar report to the Monetary Board (MB), or if the ROE VIII. RULING:
had already been submitted, the MB be enjoined from acting on the basis of said
ROE, on the allegation that the failure to furnish the bank with a copy of the ROE (A.)YES, Requisites for preliminary injunctive relief are: (a) the invasion of right
violated its right to due process. sought to be protected is material and substantial; (b) the right of the complainant is
The rest of the banks followed suit filing complaints with the RTC clear and unmistakable; and (c) there is an urgent and paramount necessity for the
substantially similar to that of RBPI. writ to prevent serious damage.The twin requirements of a valid injunction are the
RTC denied the prayer for a TRO of Pilipino Rural Bank, Inc. The bank filed a existence of a right and its actual or threatened violations. Thus, to be entitled to an
motion for reconsideration the next day.Respondent Judge Nina Antonio-Valenzuela injunctive writ, the right to be protected and the violation against that right must be
of Branch 28 granted RBPI’s prayer for the issuance of a TRO. shown. These requirements are absent in the present case.
The other banks separately filed motions for consolidation of their cases in Branch 28, The issuance by the RTC of writs of preliminary injunction is an unwarranted
which motions were granted. Petitioners assailed the validity of the consolidation of interference with the powers of the MB refer to the appointment of a conservator or a
the nine cases before the RTC, alleging that the court had already prejudged the case receiver for a bank, which is a power of the MB for which they need the ROEs done
by the earlier issuance of a TRO and moved for the inhibition of respondent judge. by the supervising or examining department. The writs of preliminary injunction
Petitioners filed a motion for reconsideration regarding the consolidation of the issued by the trial court hinder the MB from fulfilling its function under the law. The
subject cases. actions of the MB under Secs. 29 and 30 of RA 7653 "may not be restrained or set
aside by the court except on petition for certiorari on the ground that the action taken
VI. STATEMENT OF THE CASE: was in excess of jurisdiction or with such grave abuse of discretion as to amount to
The Ruling of the RTC The banks were entitled to the writs of preliminary lack or excess of jurisdiction. The respondent banks have shown no necessity for the
injunction prayed for. It held that it had been the practice of the SED to provide the writ of preliminary injunction to prevent serious damage. The serious damage
ROEs to the banks before submission to the MB. It further held that as the banks are contemplated by the trial court was the possibility of the imposition of sanctions upon
the subjects of examinations, they are entitled to copies of the ROEs. The denial by respondent banks, even the sanction of closure. Under the law, the sanction of closure
petitioners of the banks’ requests for copies of the ROEs was held to be a denial of could be imposed upon a bank by the BSP even without notice and hearing. This
the banks’ right to due process. "close now, hear later" scheme is grounded on practical and legal considerations to
The Ruling of the CA prevent unwarranted dissipation of the bank’s assets and as a valid exercise of police
Petitioners claims grave abuse of discretion on the part of Judge Valenzuela. The CA power to protect the depositors, creditors, stockholders, and the general public.
ruled that the RTC committed no grave abuse of discretion when it ordered the Judicial review enters the picture only after the MB has taken action; it cannot prevent
issuance of a writ of preliminary injunction and when it ordered the consolidation of such action by the MB. The threat of the imposition of sanctions, even that of
the 10 cases. It held that petitioners should have first filed a motion for reconsideration closure, does not violate their right to due process, and cannot be the basis for a writ
of the assailed orders, and failed to justify why they resorted to a special civil action of of preliminary injunction.
certiorari instead. The "close now, hear later" doctrine has already been justified as a measure for the
protection of the public interest.
On November 24, 2008, a TRO was issued by this Court, restraining the CA, RTC,
and respondents from implementing and enforcing the CA Decision. By reason of the (B) NO,The respondent banks have failed to show that they are entitled to copies of
TRO issued by this Court, the SED was able to submit their ROEs to the MB. The the ROEs. They can point to no provision of law, no section in the procedures of the
BSP that shows that the BSP is required to give them copies of the ROEs. Sec. 28 of reorganization and rehabilitation program. Meanwhile, Director Odra, as receiver,
RA 7653, provides that the ROE shall be submitted to the MB; the bank examined is took possession and control of the assets and records of the rural bank
not mentioned as a recipient of the ROE. As Libmanan Bank failed to submit the required acceptable reorganization
The respondent banks cannot claim a violation of their right to due process if they are and rehabilitation plan, the Monetary Board issued a resolution ordering its
not provided with copies of the ROEs. The same ROEs are based on the lists of liquidation. On August 3, 1981, the Solicitor General, filed in the then Court of First
findings/exceptions containing the deficiencies found by the SED examiners when Instance of Camarines Sur, presided over by respondent Judge Rafael De la Cruz, a
they examined the books of the respondent banks. As found by the RTC, these lists of petition for Assistance in the Liquidation of Libmanan Bank. Libmanan Bank,
findings/exceptions were furnished to the officers or representatives of the respondent opposed the Central Bank’s petition. On September 23, 1981, Libmanan Bank filed, a
banks, and the respondent banks were required to comment and to undertake separate complaint for prohibition, mandamus and injunction praying the Court to
remedial measures stated in said lists. Despite these instructions, respondent banks enjoin and dismiss the liquidation proceeding on the ground that the Central Bank
failed to comply with the SED’s directive. gravely abused its discretion in ordering the liquidation of said rural bank.
Respondent banks are already aware of what is required of them by the BSP, and
cannot claim violation of their right to due process simply because they are not
furnished with copies of the ROEs.
VI. STATEMENT OF THE CASE:

On August 3, 1981, the Solicitor General, filed in the then Court of First
Instance of Camarines Sur, presided over by respondent Judge Rafael De la Cruz, a
petition for Assistance in the Liquidation of Libmanan Bank. Libmanan Bank,
opposed the Central Bank’s petition. On September 23, 1981, Libmanan Bank filed, a
separate complaint for prohibition, mandamus and injunction praying the Court to
enjoin and dismiss the liquidation proceeding on the ground that the Central Bank
CENTRAL BANK OF PHILIPPINES petitioners, vs. RAFAEL DE LA gravely abused its discretion in ordering the liquidation of said rural Bank. Thereafter,
CRUZ, respondent. GR No. 59957, Nov 12, 1990, Judge De la Cruz declared the CB, Et Al., in default for failure to file a responsive
pleading. He pointed out that "the projected move to bring the court’s denial of the
IV. TOPIC: The New Central Bank Act motion to dismiss to the Supreme Court on certiorari did not stop the period given to
the respondents to answer. “Respondent Judge then granted Libmanan Bank’s ex
V. STATEMENT OF FACTS: parte motion dated March 29, 1982 for authority to withdraw money from its bank
deposits. Hence, the present recourse.
In 1979, the Department of Rural Banks and Savings and Loan Associations
(DRBSLA) of the Central Bank of the Philippines (or CB) conducted examinations of VII. ISSUES:
the books and affairs of Rural Bank of Libmanan. DRBSLA director, found serious Whether or not respondent Judge acted with grave abuse of discretion or without or
irregularities in its lending and deposit operations, including false entries and false in excess of his jurisdiction in issuing the following:
statements in the bank’s records to give it the appearance of solidity and soundness 1. restraining order;
which it did not possess. As a result of its questionable transactions, the bank became 2. denying the CB’s Motion to Dismiss; and
insolvent. 3. authorizing Libmanan bank to withdraw money from its bank depositss
In her Memorandum to the Monetary Board, Director Odra recommended,
among other things, that: (1) Libmanan Bank be prohibited from doing business; (2) VIII. RULING
that it be placed under receivership in accordance and (3) that the Director of 1. YES, the judge acted with grave abuse of discretion in issuing a restraining order.
DRBSLA be designated as receiver. Finding the report to be true, the Monetary The authority for the receivership of Libmanan Bank is found in Section 29 of the
Board placed Libmanan Bank under statutory receivership and designating Director Central Bank Act (P.D. 1827). It is noteworthy that the actions of the Monetary Board
Consolacion V. Odra, as Receiver. Libmanan Bank was informed of the Monetary in proceedings on insolvency are explicitly declared by law to be "final and executory."
Board Resolution, and advised to submit to the Monetary Board an acceptable They may not be set aside, or restrained, or enjoined by the courts, except upon
"convincing proof that the action is plainly arbitrary and made in bad faith" (Salud v.
Central Bank of the Philippines, 143 SCRA 590). Respondent Judge acted in plain
disregard of the fourth paragraph of Section 29 of the Central Bank Act, when he
restrained the petitioners from closing and liquidating the Rural Bank of Libmanan,
prevented them from performing their functions, and ordered them to return the
management and control of the rural bank to its board of directors without receiving
convincing proof that the action of the CB was plainly arbitrary and made in bad
faith. By using his own standards, instead of the standards set forth in Section 29 of
the law, as basis for issuing a restraining order against the CB, respondent Judge
committed a grave abuse of discretion tantamount to excess, or lack of jurisdiction. It
is a basic procedural postulate that a preliminary injunction should never be used to
transfer the possession or control of a thing to a party who did not have such
possession or control at the inception of the case. Its proper function is simply to
maintain the status quo at the commencement of the action. The status quo at the
time of filing Civil Case No. 1309 was that Libmanan Bank was under the control of
the DRBSLA Director, with Consolacion V. Odra, as liquidator appointed by the
Central Bank.

2. Yes, respondent judge erred in denying the Central Bank’s motion to dismiss the
complaint for prohibition and mandamus filed by Libmanan. This Court ruled in
previous cases that a bank’s claim that the resolution of the Monetary Board under
Section 29 is plainly arbitrary and done in bad faith should be asserted as an
affirmative defense or counter-claim in the proceedings for assistance in liquidation. It
may be filed as a separate action if no petition for assistance in liquidation has been
instituted yet. Since the Central Bank’s petition for assistance in liquidation had been
filed on August 3, 1981, the Libmanan Bank’s filing on September 23, 1981 of a
complaint for prohibition and mandamus attacking the Central Bank’s resolution
appointing a receiver and liquidator for the bank should have been asserted as a
counterclaim in instead of as a separate special civil action for prohibition against the
Central Bank. The separate action should have been either dismissed or consolidated.

3. Yes, Respondent Judge abused his discretion in authorizing the Libmanan Bank to
withdraw funds from its deposits in other banks. The Rural Bank had become
insolvent as a result of mismanagement, frauds, irregularities and violations of
banking laws, rules, and regulations by its officers. Its remaining assets should
therefore be conserved to pay its creditors. Allowing the Rural Bank to withdraw its
deposits in other banks would result in the further diminution and dissipation of its
assets to the prejudice of its depositors and creditors, and to the unlawful advantage
of the very officers who brought about the bank’s insolvency.