.
, • , , , ;:l 1~REME COURT OF THE PHILIPPINES
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~upreme QCourt Jl)
;fllllanila R~
THIRD DIVISION
PHILIPPINE DEPOSIT G.R. No. 273001
INSURANCE CORPORATION,
Petitioner, Present:
CAGUIOA, J., Chairperson,
INTING,
GAERLAN,
- versus - DIMAA~AO, and
SINGH,JJ.
APOLONIA L. ILIO and ARLAN Promulgated:
T.JURADO,
Respondents. October 21, 2024
X - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~ ~~-C..~"'::,t - - - - - - - - - - - - - - X
DECISION
INTING, J.:
This resolves the Petition for Review on Certiorari 1 under Rule 45
of the Rules of Court filed by Philippine Deposit Insurance Corporation
(PDIC), the statutory receiver of LBC Development Bank (LBC Bank),
assailing the Decision2 dated November 13, 2023, and Resolution3 dated
March 21, 2024, of the Court Appeals (CA) in CA-G.R. SP No. 168121
which dismissed the Petition for Review filed by PDIC and affirmed in
Rollo, pp. 10-40.
2 Id. at 50-69. Penned by Associate Justice Jennifer Joy C. Ong and concurred in by Associate
Justices Apolinario D. Bruse las, Jr. and Geraldine C. Fiel-Macaraig of the Fourth Division, Court
of Appeals, Manila.
3 Id. at 71-73 . Penned by Associate Justice Jennifer Joy C. Ong and concurred in by Associate
Justices Apolinario D. Bruselas, Jr. and Geraldine C. Fiel-Macaraig of the Fourth Division, Court
of Appeals, Manila.
(tJ
Decision 2 G.R. No. 273001
toto the Resolution4 dated January 22, 2021 of the Monetary Board of the
Bangko Sentral ng Pilipinas (BSP).
The BSP Monetary Board denied PDIC's appeal for lack of merit
. and affirmed the Resolutions dated March 6, 2018, 5 and September 14,
20_17, 6 of the Office of Special Investigation of the BSP (OSI-BSP).
Antecedents
LBC Bank is an affiliate ofLBC Express, Inc. (LBC Express). Their
parent company was LBC Development Corporation and has interlocking
directors from 2005 to 2010, namely: Santiago G. Araneta (Santiago),
Juan Carlos G. Araneta (Juan Carlos), Fernando G. Araneta (Fernando),
Carlos G. Araneta (Carlos), and Joseph Jeffrey B. Rodriguez
(Rodriguez). 7
In 2005, LBC Bank and LBC Express entered into a Remittance
Service Agreement (RSA) which was annually renewed and amended
accordingly until LBC Bank's closure in 2011. Under the RSA, LBC Bank
would service the remittance transactions for and on behalf of LBC
Express through its facility structure and Automated Teller Machine
network. In return, LBC Express would pay service fees for every
remittance transaction at the rates fixed by the parties. The service fees
were covered by monthly billing statements prepared and signed by Arlan
T. Jurado (respondent Jurado), a cashier at the LBC Bank's Treasury
Department,, and countersigned by Ofelia F. Cuevas (Cuevas), the Head
of the Treasury Department. 8
PDIC alleged that the Board of Directors and officers of LBC Bank
never enforced payment from LBC Express from January 2005 to August
2011 and as a result, LBC Express' unpaid service fees ballooned to
PHP 1,824,686,644.00, excluding interest, penalties, and or surcharges. It
further argued that the net income of LBC Express steadily grew through
4 Id at 970-980. Penned by BSP Senior Assistant Governor and General Counsel Elmore 0. Capule.
5 Id. at 936-952. Penned by Legal Officer IV Russell I. Gerona and recommended by Deputy
Directors Michael C Fonacier and Marie Sally Grace K. Quirino. Approved by Director Jose R.
Fajardo.
6 Id. at 906-928. Penned by Legal Officer IV Russell I. Gerona and recommended by Deputy
Directors Michael C. Fonacier a11d Marie Sally Grace K. Quirino. Approved by Director Jose R.
Fajardo.
7 Id. at 908. ,
8
Id. at 51-52.
Decision 3 G.R. No. 273001
the unyielding assistance and at the expense ofLBC Bank, which reported
losses in its 2009 Audited Financial Statements (AFS). 9
Due to LBC Bank's failure to enforce payment of service fees due
from. LBC Express, PDIC filed an administrative complaint for violation
of Section 2l(f) 10 of Republic Act No. 3591, 11 as amended 12 (PDIC
Charter), in~elation to BSP Circular No. 341, 13 series of 2002, as am.ended
by BSP Circular No. 640, 14 series of 2009, against the aforementioned
interlocking directors of the two corporations and the following bank
officers of LBC Bank: (1) Ma. Eliza G. Berenguer (Berenguer), the
Chairman, President and Chief Executive Officer of LBC Bank; (2)
Cuevas; (3) respondent Jurado; and (3) respondent Apolonia L. Ilio
(respondent Ilio). 15 According to PDIC, their acts or omissions caused
undue injury and material loss to LBC Bank's depositors and creditors. 16
9
Id. at 53.
10
(f) The penalty of prision mayor or a fine of not less than Fifty thousand pesos (P50,000.00) but
not more than Two million pesos (P2,000,000.00),or both, at the discretion of the court, shall be
imposed upon any director, officer, employee or agent of a bank:
I) for any willful refusal to submit reports as required by law, rules and regulations;
2) any unjustified refusal to permit examination and audit of the deposit records or the affairs
of the institution;
3) any willful making of a false statement or entry in any bank report or document required by
the Corporation;
4) submission of false material information in connection with or in relation to any financial
assistance of the Corporation extended to the bank;
5) splitting of deposits or creation of fictitious loans or deposit accounts.
Splitting of deposits occurs whenever a deposit account with an outstanding balance of more
than the statutory maximum amount of insured deposit maintained under the name of natural
or juridical persons is broken down and transferred into two or more accounts in the name/s of
natural or juridical persons or entities who have no beneficial ownership on transferred
deposits in their names within thirty (30) days immediately preceding or during a bank-
declared bank holiday, or immediately preceding a closure order issued by the Monetary Board
of the Bangko Sentral ng Pilipinas for the purpose of availing of the maximum deposit
insurance coverage;
6) refusal to allow the Corporation to takeover a closed bank placed under its receivership or
obstructing such action of the Corporation;
7) refusal to tum over or destroying or tampering bank records;
8) fraudulent disposal, transfer or concealment of any asset, property or liability of the closed
bank under the receivership of the Corporation;
9) violation of, or causing any person to violate, the exemption from garnishment, levy,
attachment or execution provided under this Act and the New Central Bank Act;
I 0) any willfal failure or refusal to comply with, or violation of any provision of this Act, or
commission of any other irregularities and/or conducting business in an unsafe or unsound
manner as may be determined by the Board ofDirectors (Italics supplied)
11 Charter of the Philippine Deposit Insurance Corporation. Approved on June 22, 1963.
12 Amended by 'Republic Act No. 9302. Approved on July 27, 2004.
13 Deposit-Related Activities Which May Be Considered Unsafe and/or Unsound Banking Practices.
Approved on August 6, 2002.
14 Activities Which May Be Considered Unsafe and Uns~und Banking Practices. Approved on
January 16, 2009.
15
Rollo, p. 906.
16
Id. at 909.
Decision 4 G.R. No. 273001
In her counter-affidavit dated June 20, 2016, respondent Ilio stated
that she was the Head of the Finance Department ofLBC Bank from 2006
until she was promoted to become the Vice President of the Finance
Department sometime in 2009. She stressed that the Finance Department
was not in charge of the billing and collection of service fees from LBC
Express and that she was not involved in the negotiation and execution of
the RSAs with LBC Express. She, however, recalled that LBC Express
paid service fees every year and that based on a Consolidated Statement
of Account dated July 6, 2011, its unpaid service fees as of May 2011
was PHP 665,819.80 while the current charges for June 2011 amounted
to PHP 507,604.16 for a total amount of PHP 1,173,423.96. 17 Stated
otherwise, respondent Ilio questioned the correctness of the unpaid service
fees as alleged by PDIC.
Meanwhile, respondent Jurado stated in his counter-affidavit dated
June 20, 2016, that: (1) he was the supervisor at the Treasury Department
of LBC Bank from September 2004 to September 2011; (2) his immediate
supervisor was Cuevas; (3) the Treasury Department prepared billing
statements for LBC Express from January 2005 to August 2011 for service
fees under the RSA; (4) he prepared and signed the billing statements
based on the instructions of Cuevas; (5) the collection and monitoring of
service fees due from LBC Express was not the responsibility of the
Treasury Department; and (6) he had no involvement in the execution of
the RSAs. 18
Ruling of the OSI-BSP
In the Resolution dated September 14, 2017, the OSI-BSP found
prima facie case against Berenguer together with the interlocking
directors of LBC Bank and LBC Express but dismissed the administrative
com.plaint against Cuevas and respondents Ilio and Jurado for
insufficiency of evidence. The dispositive portion read:
·wHEREFORE, premises considered, this Office finds the
existence of prima facie case, and hereby recommends that FORMAL
CHARGES be FILED, against respondent directors Juan Carlos G.
Arai.1.eta, Santiago G. Araneta, Fernando G. Araneta, Carlos G. Araneta,
Ma. Eliza G. Berenguer and Joseph Jeffrey B. Rodriguez of LBC
Development Bank, for violation of Section 56 of R.A. No. 8791, in
relation to BSP Circular No. 341, Series of 2002, as amended, when
17
Id. at 911-912.
18
Id. at 912.
Decision 5 G.R. No. 273001
they o~itted and/or failed to enforce payment of service fees against
LBC Express, Inc., thereby conducting the business of banking in an
unsafe or unsound manner.
The administrative complaint against respondent officers Ofelia
F. Cuevas, Apo.lonio L. Ilio and Arlan T. Jurado, former officers ofLBC
Development Bank, are hereby DISMISSED for insufficiency of
evidence. 19
The OSI-BSP ruled that the omission of the directors ofLBC Bank
to cause the collection of unpaid service fees against LBC Express caused
undue injury to the bank and gave unwarranted benefits to LBC Express.
Anent the bank officers in the case, however, the OSI-BSP held that there
is no sufficient evidence to hold them administratively liable. 20
According to OSI-BSP, bank officers shall promote good
governance by ensuring that policies approved by the Board of Directors
and adopted across the bank, citing Section 142.3 21 of the BSP's 2016
Manual of Regulations for Banks (2016 MorB). Thus, it held that bank
officers cannot be expected to do what the Board of Directors did not set
and approve, which is in the case, the vigorous enforcement of unpaid
service fees against LBC Express. 22
PDIC, Juan Carlos, Santiago, Fernando, and Rodriguez moved for
the reconsideration of the OSI-BSP's Resolution dated September 14,
2014, but the latter denied their respective motions in the Resolution dated
March 6, 2018.
19
Id. at 925-927.
20
Id. at 923-925.
21
§ X142.3 Duties and responsibilities ofofficers.
(1) To set the tone of good governance from the top. Bank officers shall promote the good
governance practices within the bank by ensuring that policies on governance as approved by the
board of directors are consistently adopted across the bank.
(2) To oversee the day-to-day management of the bank. Bank officers shall ensure that bank's
activities and operations are consistent with the bank's strategic objectives, risk strategy, corporate
values and policies as approved by the board of directors. They shall establish a bank-wide
management system characterized by strategically aligned and mutually reinforcing performance
standards across the organization.
(3) To ensure that duties are effectively delegated to the staff and to establish a management
structure that promotes accountability and transparency. Bank officers shall establish measurable
standards, initiatives and specific responsibilities and accountabilities for each bank personnel.
Bank officers shall oversee the performance of these delegated duties and responsibilities and shall
ultimately be responsible to the board of directors for the performance of the bank.
(4) To promote and strengthen checks and balances systems in the bank. Bank officers shall
promote sound internal controls and avoid activities that shall compromise the effective dispense
of their functions. Further, they shall ensure that they give due recognition to the importance of the
internal audit, compliance and external audit functions.
22
Rollo, p. 925.
Decision 6 G.R. No. 273001
Unconvinced, PDIC filed an appeal with the BSP Monetary
Board.23
Ruling of the BSP Monetary Board
In the Resolution dated January 22, 2021, the BSP Monetary Board
denied PDIC's appeal for lack of merit. It held that the corporate powers
of a bank shall be exercised, its business conducted, and all its property,
shall be controlled and held by its Board of Directors.
The BSP Monetary Board noted that Cuevas and respondents Ilio
and Jurado were only officers of LBC Bank; thus, they cannot be expected
to enforce and collect payments of service fees without specific
instructions from the bank's Board of Directors. The BSP Monetary Board
found that there is no evidence that Cuevas, and respondents Ilio and
Jurado, have authority to file a collection suit against LBC Express. 24
Still unconvinced, PDIC filed a Petition for Review under Rule 43
of the Rules of Court with the CA assailing the Resolution dated January
22, 2021, of the BSP Monetary Board.
Ruling of the CA
In the Decision dated November 13, 2023, the CA denied PDIC's
petition and affirmed the assailed BSP Monetary Board Resolution in toto.
The CA ruled that as bank officers of LBC Bank, Cuevas and respondents
Ilio and Jurado cannot question the wisdom of the LBC Board of
Directors' policies which are presumed to have been made in accordance
with sound corporate practices and governance. Thus, they cannot be
personally faulted for LBC Bank's failure to collect unpaid service fees
from LBC Express under the RSA. 25
The CA noted that the late Cuevas regularly informed the LBC
Board of Directors about the unpaid service fees of LBC Express,
however, such information remained unheeded, and no action was done
23
Id. at 970.
24
Id. at 978-980.
25
Id. at 67.
Decision G.R. No. 273001
by the LBC Board of Directors. Considering that PDIC failed to proffer
evidence that respondents Ilio and Jurado were in charge of enforcing the
RSA, the CA found no compelling reason to depart from the ruling of the
BSP Monetary Board. 26
PDIC sought reconsideration of the CA's Decision, but the CA
denied it in the Resolution dated March 21, 2024.
Hence, the present petition.
PDIC's Arguments
PDIC contends that the CA failed to recognize that bank officers
have the duty (1) to uphold the inherent fiduciary obligations of a bank to
the public and (2) to promote and strengthen the checks and balances
systems in a bank independent of the specific policies set by the Board of
Directors. Even assuming that respondents Ilio and Jurado have no
obligation and authority to enforce the RSAs, their continued failure to
report the unpaid billings constitutes prima facie evidence for
administrative liability. 27
Issue
The core issue for the Court's resolution is whether the CA erred in
affirming the assailed Resolution of the BSP Monetary Board in toto,
which in turn, affirmed the Resolutions of the OSI-BSP finding that there
is no primafacie case to hold respondents Ilio and Jurado administratively
liable for the violation of Section 2l(f) of PDIC Charter, in relation to BSP
Circular Nos. 34t series of 2002, and 640, series of 2009.
;
Ruling of the Court
After review, the Court resolves to DE1'.1Y the petition for lack of
merit.
26
Id. at 67-68.
27 Id. at 23-24.
Decision G.R. No. 273001
It is settled that a Rule 45 petition should only raise questions of
law as the Court is not a trier of fact 28 "A question of law arises when
there is doubt as to what the law is on a certain state of facts, while there
is a question of fact when the doubt arises as to the truth or falsity of the
alleged facts." 29
The issue as to whether there is prima facie evidence to hold
respondents Ilio and Jurado administratively liable for violation of Section
2l(f) of PDIC Charter, in relation to BSP Circular Nos. 341, series of
2002, and 640, series of 2009 is a question of fact as it calls for the Court's
review of the evidence presented before the BSP. Thus, this factual
question is beyond the scope of a Rule 45 petition.
More, the CA aptly ruled that as bank officers, respondents Ilio and
Jurado cannot be faulted for LBC Bank's failure to collect its unpaid
service fees against LBC Express, i.e., filing of a collection suit.
Under-Section 141_3;30 .oftp.e 2016 MorJ? (now Section 13231 of the
2021 MoRB ), a bank can. only-_ exerctse its corporate powers through its
board of directors. Verily, distinction must be made between the board of
directors of a -bank and mere bank officers, such as respondents Ilio and
Jurado.
It is elementary that "the power of a corporation to sue and be sued
in any court is lodged with the board of directors that exercises its
corporate powers" 32-"an individual corporate officer cannot solely
exercise any corporate power pertaining to the corporation without
authority from the board of directors." 33 By no stretch of imagination
28
Alberto v. Spouses Flores, 896 Phil. 625, 631 (2021 ).
29
Leoncio v. Vera, 569 Phil 512,516 (2008).
30
§ X 141.3 Powers/responsibilities and duties of directors.
a. Powers ofthe board ofdirectors. The corporate powers of a bank shall be exercised, its business
conducted and all its property controlled and held, by its board of directors. The powers of the
board of directors as conferred by law are original and cannot be revoked by the stockholders. The
directors bold their office charged with the duty to exercise sound and objective judgment for the
best interest of the bank.
31 132 Board of Directors
Powers/Corporate powers ofthe board ofdirectors. The corporate powers ofan institution shall be
exercised, its business conducted, and all its resources controiled through its board of directors.
The powers oft.lie board of directors as conferred by law are original and cannot be revoked by the
stockholders.· The directors shall hold their office charged with the duty to exercise sound and
objective judgment for the best interest of the institution.
32 Philippine Numismatic and Antiquarian Society 1-: Aquino, 804 Phil. 508, 517 (2017).
33
Id., citing Swedish lvfatch Phils., Inc. v. The Tteasurer of the City of Manila, 713 Phil. 240, 247
(2013).
Decision 9 G.R. No. 273001
would the duties and responsibilities of a bank officer under Section 142.3
of the 2016 MoRB (now Section 13434 of the 2021 MoRB) be construed
so as to include the power and duty to file collection suits against a bank's
debtors.
Here, the PDIC failed to proffer any evidence, such as a board
resolution authorizing respondents Ilio and/or Jurado to file a collection
suit against LBC Express on behalf of LBC Bank, in support of its
contention that respondents Ilio, Head of LBC Banks' Finance
Department; and Jurado, cashier at the LBC Bank's Treasury Department,
have the obligation or duty to enforce the collection of LBC Express'
unpaid service fees. 35 Even in cases of ~1ismanagement where the
wrongful acts were committed by the directors, the power or right to file
a derivative suit on behalf of a corporation is with the stockholder.36
Lastly, it is also worth noting that PDIC's complaint failed to state
any specific act of omission by respondents Ilio and Jurado in relation to
the RSAs executed between LBC Bank and LBC Express. It merely
lumped the I-ate Cuevas and respondents Ilio and Jurado with Berenguer
and the interlocking directors of the two entities without specifically
establishing the particular duty or responsibility which they neglected. "It
is basic in the rule of evidence that bare allegations, unsubstantiated by
evidence, are not equivalent to proof." 37
34
134 Officers
Duties and responsibilities of officers.
a. To set the tone of good governance from the top. Bank officers shall promote the good
governance practices within the bank by ensuring that policies on governance as approved by the
board of directors are consistently adopted across the bank.
b. To oversee the day-to-day management of the BSFI. Bank officers shall ensure that bank's
activities and operations are consistent with the bank's strategic objectives, risk strategy, corporate
values and policies as approved by the board of directors. They shall establish a bank-wide
management system characterized by strategically aligned and mutually reinforcing performance
standards across the organization.
c. To ensure that duties are effectively delegated to the staff and to establish a management structure
that promotes accountability and transparency. Bank officers shall establish measurable standards,
initiatives and specific responsibilities and accountabilities for each bank personnel. Bank officers
shall oversee the performance of these delegated duties and responsibilities and shall ultimately be
responsible to the board of directors for the performance of the baIL.1<..
d. To promote and strengthen checks and balances systems fr1 the BSFI. Bank officers shall promote
sound intemal controls and avoid activities that shall compromise the effective dispense of their
functions. Fu..--ther, they shall ensure that they give due recognition to the importa..1ce of the internal
audit, compliance and external audit ftmctions.
35
Rollo, pp. 979-980.
36 Cua, Jr. v. Tan, 622 Phil. 66!, 7] 5-716 (2009).
37 GSIS v. Prudeniial Guarantee and Assurance, Inc., 721 Phil. 740, 753-754 (2013), citing Real v.
Belo, 542 Phil. 109, 122 (2007).
Decision 10 G.R. No. 273001
In fme~ PDIC failed to show any reversible error on the part of the
CA when it affirmed the fmdings of the BSP Board of Governors that there
is no primafacie case to hold respondents llio and Jurado administratively
liable for the violation of Section 2l(f) ofPDIC Charter, in relation to BSP
Circular No. 341, series of 2002, as amended by BSP Circular No. 640,
series of 2009.
ACCORDINGLY, the Petition for Review on Certiorari is
DENIED. The Decision. dated November 13, 2023, and Resolution dated
March 21, 2024, of the Court Appeals in CA-G.R. SP No. 168121 are
AFFIRMED.
SO ORDERED.
HEN
WE CONCUR:
;~L~~
Associate Justice
H
Associate Justice
Decision 11 G.R. No. 273001
ATTESTATION
I attest that the conclusions in the ab e Decision had been reached
in consultation before the case was assi ed to e writer of the opinion
of the Court's Division.
S.CAGUIOA
ice
n, zr, Division
CERTIFICATION
Pursuant to Article VIII, Section 13 of the Constitution and the Division
Chairperson's Attestation, I certify that the conclusions in the above Decision
had been reached in consultation before the case was assigned to the writer of
the opinion of the Court's Division.
