G.R. No.
191424 August 7, 2013 (ISD II) of the BSP conducted a general examination on ECBI with the
ALFEO D. VIVAS, ON HIS BEHALF AND ON BEHALF OF THE
SHAREHOLDERS OF EUROCREDIT COMMUNITY BANK, PETITIONER,
vs.
THE MONETARY BOARD OF THE BANGKO SENTRAL NG PILIPINAS
AND THE PHILIPPINE DEPOSIT INSURANCE
CORPORATION, RESPONDENTS.
DECISION
MENDOZA, J.:
This is a petition for prohibition with prayer for the issuance of a status
quo ante order or writ of preliminary injunction ordering the respondents
to desist from closing EuroCredit Community Bank, Incorporated (ECBI)
and from pursuing the receivership thereof. The petition likewise prays
that the management and operation of ECBI be restored to its Board of
Directors (BOD) and its officers.
The Facts
The Rural Bank of Faire, Incorporated (RBFI) was a duly registered rural
banking institution with principal office in Centro Sur, Sto. Niño,
Cagayan. Record shows that the corporate life of RBFI expired on May
31, 2005.1Notwithstanding, petitioner Alfeo D. Vivas (Vivas) and his
principals acquired the controlling interest in RBFI sometime in January
2006. At the initiative of Vivas and the new management team, an
internal audit was conducted on RBFI and results thereof highlighted the
dismal operation of the rural bank. In view of those findings, certain
measures calculated to revitalize the bank were allegedly
introduced. 2 On December 8, 2006, the Bangko Sentral ng Pilipinas (BSP)
issued the Certificate of Authority extending the corporate life of RBFI for
another fifty (50) years. The BSP also approved the change of its
corporate name to EuroCredit Community Bank, Incorporated, as well as
the increase in the number of the members of its BOD, from five (5) to
eleven (11).3
Pursuant to Section 28 of Republic Act (R.A.) No. 7653, otherwise known
as The New Central Bank Act, the Integrated Supervision Department II
cut-off date of December 31, 2007. Shortly after the completion of the
general examination, an exit conference was held on March 27, 2008 at
the BSP during which the BSP officials and examiners apprised Vivas, the
Chairman and President of ECBI, as well as the other bank officers and
members of its BOD, of the advance findings noted during the said
examination. The ECBI submitted its comments on BSP’s consolidated
findings and risk asset classification through a letter, dated April 8,
2008.4
Sometime in April 2008, the examiners from the Department of Loans
and Credit of the BSP arrived at the ECBI and cancelled the rediscounting
line of the bank. Vivas appealed the cancellation to BSP. 5 Thereafter, the
Monetary Board (MB) issued Resolution No. 1255, dated September 25,
2008, placing ECBI under Prompt Corrective Action (PCA) framework
because of the following serious findings and supervisory concerns noted
during the general examination: 1] negative capital of ?14.674 million
and capital adequacy ratio of negative 18.42%; 2] CAMEL (Capital Asset
Management Earnings Liquidity) composite rating of "2" with a
Management component rating of "1"; and 3] serious supervisory
concerns particularly on activities deemed unsafe or unsound. 6 Vivas
claimed that the BSP took the above courses of action due to the joint
influence exerted by a certain hostile shareholder and a former BSP
examiner.7
Through its letter, dated September 30, 2008, the BSP furnished ECBI
with a copy of the Report of Examination (ROE) as of December 31,
2007. In addition, the BSP directed the bank’s BOD and senior
management to: 1] infuse fresh capital of ?22.643 million; 2] book the
amount of ?28.563 million representing unbooked valuation reserves on
classified loans and other risks assets on or before October 31, 2008;
and 3] take appropriate action necessary to address the
violations/exceptions noted in the examination. 8
Vivas moved for a reconsideration of Resolution No. 1255 on the grounds
of non-observance of due process and arbitrariness. The ISD II, on
several instances, had invited the BOD of ECBI to discuss matters
pertaining to the placement of the bank under PCA framework and other
supervisory concerns before making the appropriate recommendations
to the MB. The proposed meeting, however, did not materialize due to
postponements sought by Vivas.9
In its letter, dated February 20, 2009, the BSP directed ECBI to explain
why it transferred the majority shares of RBFI without securing the prior
approval of the MB in apparent violation of Subsection X126.2 of the
Manual of Regulation for Banks (MORB). 10 Still in another letter,11 dated
March 31, 2009, the ISD II required ECBI to explain why it did not obtain
the prior approval of the BSP anent the establishment and operation of
the bank’s sub-offices.
Also, the scheduled March 31, 2009 general examination of the books,
records and general condition of ECBI with the cut-off date of December
31, 2008, did not push through. According to Vivas, ECBI asked for the
deferment of the examination pending resolution of its appeal before the
MB. Vivas believed that he was being treated unfairly because the letter
of authority to examine allegedly contained a clause which pertained to
the Anti-Money Laundering Law and the Bank Secrecy Act.12
The MB, on the other hand, posited that ECBI unjustly refused to allow
the BSP examiners from examining and inspecting its books and records,
in violation of Sections 25 and 34 of R.A. No. 7653. In its letter, 13 dated
May 8, 2009, the BSP informed ECBI that it was already due for another
annual examination and that the pendency of its appeal before the MB
would not prevent the BSP from conducting another one as mandated by
Section 28 of R.A. No. 7653.
In view of ECBI’s refusal to comply with the required examination, the
MB issued Resolution No. 726, 14 dated May 14, 2009, imposing monetary
penalty/fine on ECBI, and referred the matter to the Office of the Special
Investigation (OSI) for the filing of appropriate legal action. The BSP also
wrote a letter,15 dated May 26, 2009, advising ECBI to comply with MB
Resolution No. 771, which essentially required the bank to follow its
directives. On May 28, 2009, the ISD II reiterated its demand upon the
ECBI BOD to allow the BSP examiners to conduct a general examination
on June 3, 2009.16
In its June 2, 2009 Letter-Reply, 17 ECBI asked for another deferment of
the examination due to the pendency of certain unresolved issues
subject of its appeal before the MB, and because Vivas was then out of
the country. The ISD II denied ECBI’s request and ordered the general
examination to proceed as previously scheduled. 18
Thereafter, the MB issued Resolution No. 823,19 dated June 4, 2009,
approving the issuance of a cease and desist order against ECBI, which
enjoined it from pursuing certain acts and transactions that were
considered unsafe or unsound banking practices, and from doing such
other acts or transactions constituting fraud or might result in the
dissipation of its assets.
On June 10, 2009, the OSI filed with the Department of Justice (DOJ) a
complaint for Estafa Through Falsification of Commercial Documents
against certain officials and employees of ECBI. Meanwhile, the MB
issued Resolution No. 1164, 20 dated August 13, 2009, denying the appeal
of ECBI from Resolution No. 1255 which placed it under PCA framework.
On November 18, 2009, the general examination of the books and
records of ECBI with the cut-off date of September 30, 2009, was
commenced and ended in December 2009. Later, the BSP officials and
examiners met with the representatives of ECBI, including Vivas, and
discussed their findings. 21 On December 7, 2009, the ISD II reminded
ECBI of the non-submission of its financial audit reports for the years
2007 and 2008 with a warning that failure to submit those reports and
the written explanation for such omission shall result in the imposition of
a monetary penalty.22 In a letter, dated February 1, 2010, the ISD II
informed ECBI of MB Resolution No. 1548 which denied its request for
reconsideration of Resolution No. 726.
On March 4, 2010, the MB issued Resolution No. 276 23 placing ECBI
under receivership in accordance with the recommendation of the ISD II
which reads:
On the basis of the examination findings as of 30 September 2009 as
reported by the Integrated Supervision Department (ISD) II, in its
memorandum dated 17 February 2010, which findings showed that the
Eurocredit Community Bank, Inc. – a Rural Bank (Eurocredit Bank) (a) is
unable to pay its liabilities as they become due in the ordinary course of
business; (b) has insufficient realizable assets to meet liabilities; (c)
cannot continue in business without involving probable losses to its
depositors and creditors; and (d) has willfully violated a cease and desist
order of the Monetary Board for acts or transactions which are
considered unsafe and unsound banking practices and other acts or
transactions constituting fraud or dissipation of the assets of the
institution, and considering the failure of the Board of
Directors/management of Eurocredit Bank to restore the bank’s financial
health and viability despite considerable time given to address the
bank’s financial problems, and that the bank had been accorded due
process, the Board, in accordance with Section 30 of Republic Act No.
7653 (The New Central Bank Act), approved the recommendation of ISD
II as follows:
To prohibit the Eurocredit Bank from doing business in the Philippines
and to place its assets and affairs under receivership; and
To designate the Philippine Deposit Insurance Corporation as Receiver of
the bank.
Assailing MB Resolution No. 276, Vivas filed this petition for prohibition
before this Court, ascribing grave abuse of discretion to the MB for
prohibiting ECBI from continuing its banking business and for placing it
under receivership. The petitioner presents the following
ARGUMENTS:
(a)
It is grave abuse of discretion amounting to loss of jurisdiction to apply
the general law embodied in Section 30 of the New Central Bank Act as
opposed to the specific law embodied in Sections 11 and 14 of the Rural
Banks Act of 1992.
(b)
Even if it assumed that Section 30 of the New Central Bank Act is
applicable, it is still the gravest abuse of discretion amounting to lack or
excess of jurisdiction to execute the law with manifest arbitrariness,
abuse of discretion, and bad faith, violation of constitutional rights and
to further execute a mandate well in excess of its parameters.
(c)
The power delegated in favor of the Bangko Sentral ng Pilipinas to place
rural banks under receiverships is unconstitutional for being a diminution
or invasion of the powers of the Supreme Court, in violation of Section 2,
Article VIII of the Philippine Constitution. 24
Vivas submits that the respondents committed grave abuse of discretion
when they erroneously applied Section 30 of R.A. No. 7653, instead of
Sections 11 and 14 of the Rural Bank Act of 1992 or R.A. No. 7353. He
argues that despite the deficiencies, inadequacies and oversights in the
conduct of the affairs of ECBI, it has not committed any financial fraud
and, hence, its placement under receivership was unwarranted and
improper. He posits that, instead, the BSP should have taken over the
management of ECBI and extended loans to the financially distrained
bank pursuant to Sections 11 and 14 of R.A. No. 7353 because the BSP’s
power is limited only to supervision and management take-over of
banks.
He contends that the implementation of the questioned resolution was
tainted with arbitrariness and bad faith, stressing that ECBI was placed
under receivership without due and prior hearing in violation of his and
the bank’s right to due process. He adds that respondent PDIC actually
closed ECBI even in the absence of any directive to this effect. Lastly,
Vivas assails the constitutionality of Section 30 of R.A. No. 7653 claiming
that said provision vested upon the BSP the unbridled power to close
and place under receivership a hapless rural bank instead of aiding its
financial needs. He is of the view that such power goes way beyond its
constitutional limitation and has transformed the BSP to a sovereign in
its own "kingdom of banks."25
The Court’s Ruling
The petition must fail.
Vivas Availed of the Wrong Remedy
To begin with, Vivas availed of the wrong remedy. The MB issued
Resolution No. 276, dated March 4, 2010, in the exercise of its power
under R.A. No. 7653. Under Section 30 thereof, any act of the MB placing
a bank under conservatorship, receivership or liquidation may not be
restrained or set aside except on a petition for certiorari. Pertinent
portions of R.A. 7653 read:
Section 30. –
x x x x.
The actions of the Monetary Board taken under this section or under
Section 29 of this Act shall be final and executory, and may not be
restrained or set aside by the court except on petition for certiorari on
the ground that the action taken was in excess of jurisdiction or with
such grave abuse of discretion as to amount to lack or excess of
jurisdiction. The petition for certiorari may only be filed by the
stockholders of record representing the majority of the capital stock
within ten (10) days from receipt by the board of directors of the
institution of the order directing receivership, liquidation or
conservatorship.
x x x x. [Emphases supplied]
Prohibition is already unavailing
Granting that a petition for prohibition is allowed, it is already an
ineffective remedy under the circumstances obtaining. Prohibition or a
"writ of prohibition" is that process by which a superior court prevents
inferior courts, tribunals, officers, or persons from usurping or exercising
a jurisdiction with which they have not been vested by law, and confines
them to the exercise of those powers legally conferred. Its office is to
restrain subordinate courts, tribunals or persons from exercising
jurisdiction over matters not within its cognizance or exceeding its
jurisdiction in matters of which it has cognizance. 26 In our jurisdiction,
the rule on prohibition is enshrined in Section 2, Rule 65 of the Rules on
Civil Procedure, to wit:
Sec. 2. Petition for prohibition - When the proceedings of any tribunal,
corporation, board, officer or person, whether exercising judicial, quasi-
judicial or ministerial functions, are without or in excess of its or his
jurisdiction, or with grave abuse of discretion amounting to lack or
excess of jurisdiction, and there is no appeal or any other plain, speedy,
and adequate remedy in the ordinary course of law, a person aggrieved
thereby may file a verified petition in the proper court, alleging the facts
with certainty and praying that the judgment be rendered commanding
the respondent to desist from further proceedings in the action or matter
specified therein, or otherwise granting such incidental reliefs as the law
and justice require.
x x x x.
Indeed, prohibition is a preventive remedy seeking that a judgment be
rendered which would direct the defendant to desist from continuing
with the commission of an act perceived to be illegal. 27 As a rule, the
proper function of a writ of prohibition is to prevent the doing of an act
which is about to be done. It is not intended to provide a remedy for acts
already accomplished.28
Though couched in imprecise terms, this petition for prohibition
apparently seeks to prevent the acts of closing of ECBI and placing it
under receivership. Resolution No. 276, however, had already been
issued by the MB and the closure of ECBI and its placement under
receivership by the PDIC were already accomplished. Apparently, the
remedy of prohibition is no longer appropriate. Settled is the rule that
prohibition does not lie to restrain an act that is already a fait accompli. 29
The Petition Should Have Been Filed in the CA
Even if treated as a petition for certiorari, the petition should have been
filed with the CA. Section 4 of Rule 65 reads:
Section 4. When and where petition filed. — The petition shall be filed
not later than sixty (60) days from notice of the judgment, order or
resolution. In case a motion for reconsideration or new trial is timely
filed, whether such motion is required or not, the sixty (60) day period
shall be counted from notice of the denial of said motion.
The petition shall be filed in the Supreme Court or, if it relates to the acts
or omissions of a lower court or of a corporation, board, officer or
person, in the Regional Trial Court exercising jurisdiction over the
territorial area as defined by the Supreme Court. It may also be filed in
the Court of Appeals whether or not the same is in aid of its appellate
jurisdiction, or in the Sandiganbayan if it is in aid of its appellate
jurisdiction. If it involves the acts or omissions of a quasi-judicial agency,
unless otherwise provided by law or these Rules, the petition shall be
filed in and cognizable only by the Court of Appeals. [Emphases
supplied]
That the MB is a quasi-judicial agency was already settled and reiterated
in the case of Bank of Commerce v. Planters Development Bank And
Bangko Sentral Ng Pilipinas.30
Doctrine of Hierarchy of Courts
Even in the absence of such provision, the petition is also dismissible
because it simply ignored the doctrine of hierarchy of courts. True, the
Court, the CA and the RTC have original concurrent jurisdiction to issue
writs of certiorari, prohibition and mandamus. The concurrence of
jurisdiction, however, does not grant the party seeking any of the
extraordinary writs the absolute freedom to file a petition in any court of
his choice. The petitioner has not advanced any special or important
reason which would allow a direct resort to this Court. Under the Rules of
Court, a party may directly appeal to this Court only on pure questions of
law.31 In the case at bench, there are certainly factual issues as Vivas is
questioning the findings of the investigating team.
Strict observance of the policy of judicial hierarchy demands that where
the issuance of the extraordinary writs is also within the competence of
the CA or the RTC, the special action for the obtainment of such writ
must be presented to either court. As a rule, the Court will not entertain
direct resort to it unless the redress desired cannot be obtained in the
appropriate lower courts; or where exceptional and compelling
circumstances, such as cases of national interest and with serious
implications, justify the availment of the extraordinary remedy of writ of
certiorari, prohibition, or mandamus calling for the exercise of its
primary jurisdiction.32 The judicial policy must be observed to prevent an
imposition on the precious time and attention of the Court.
The MB Committed No Grave Abuse of Discretion
In any event, no grave abuse of discretion can be attributed to the MB
for the issuance of the assailed Resolution No. 276.
Vivas insists that the circumstances of the case warrant the application
of Section 11 of R.A. No. 7353, which provides:
Sec. 11. The power to supervise the operation of any rural bank by the
Monetary Board as herein indicated shall consist in placing limits to the
maximum credit allowed to any individual borrower; in prescribing the
interest rate, in determining the loan period and loan procedures, in
indicating the manner in which technical assistance shall be extended to
rural banks, in imposing a uniform accounting system and manner of
keeping the accounts and records of rural banks; in instituting periodic
surveys of loan and lending procedures, audits, test-check of cash and
other transactions of the rural banks; in conducting training courses for
personnel of rural banks; and, in general, in supervising the business
operations of the rural banks.
The Central Bank shall have the power to enforce the laws, orders,
instructions, rules and regulations promulgated by the Monetary Board,
applicable to rural banks; to require rural banks, their directors, officers
and agents to conduct and manage the affairs of the rural banks in a
lawful and orderly manner; and, upon proof that the rural bank or its
Board of Directors, or officers are conducting and managing the affairs of
the bank in a manner contrary to laws, orders, instructions, rules and
regulations promulgated by the Monetary Board or in a manner
substantially prejudicial to the interest of the Government, depositors or
creditors, to take over the management of such bank when specifically
authorized to do so by the Monetary Board after due hearing process
until a new board of directors and officers are elected and qualified
without prejudice to the prosecution of the persons responsible for such
violations under the provisions of Sections 32, 33 and 34 of Republic Act
No. 265, as amended.
x x x x.
The thrust of Vivas’ argument is that ECBI did not commit any financial
fraud and, hence, its placement under receivership was unwarranted
and improper. He asserts that, instead, the BSP should have taken over
the management of ECBI and extended loans to the financially distrained
bank pursuant to Sections 11 and 14 of R.A. No. 7353 because the BSP’s
power is limited only to supervision and management take-over of
banks, and not receivership.
Vivas argues that implementation of the questioned resolution was
tainted with arbitrariness and bad faith, stressing that ECBI was placed
under receivership without due and prior hearing, invoking Section 11 of
R.A. No. 7353 which states that the BSP may take over the management
of a rural bank after due hearing.33 He adds that because R.A. No. 7353
is a special law, the same should prevail over R.A. No. 7653 which is a
general law.
The Court has taken this into account, but it appears from all over the
records that ECBI was given every opportunity to be heard and improve
on its financial standing. The records disclose that BSP officials and
examiners met with the representatives of ECBI, including Vivas, and
discussed their findings.34 There were also reminders that ECBI submit its
financial audit reports for the years 2007 and 2008 with a warning that
failure to submit them and a written explanation of such omission shall
result in the imposition of a monetary penalty. 35 More importantly, ECBI
was heard on its motion for reconsideration. For failure of ECBI to
comply, the MB came out with Resolution No. 1548 denying its request
for reconsideration of Resolution No. 726. Having been heard on its
motion for reconsideration, ECBI cannot claim that it was deprived of its
right under the Rural Bank Act.
Close Now, Hear Later
At any rate, if circumstances warrant it, the MB may forbid a bank from
doing business and place it under receivership without prior notice and
hearing. Section 30 of R.A. No. 7653 provides, viz:
Sec. 30. Proceedings in Receivership and Liquidation. – Whenever, upon
report of the head of the supervising or examining department, the
Monetary Board finds that a bank or quasi-bank:
(a) is unable to pay its liabilities as they become due in the
ordinary course of business: Provided, That this shall not include
inability to pay caused by extraordinary demands induced by
financial panic in the banking community;
(b) has insufficient realizable assets, as determined by the
Bangko Sentral, to meet its liabilities; or
(c) cannot continue in business without involving probable losses
to its depositors or creditors; or
(d) has wilfully violated a cease and desist order under Section
37 that has become final, involving acts or transactions which
amount to fraud or a dissipation of the assets of the institution;
in which cases, the Monetary Board may summarily and without
need for prior hearing forbid the institution from doing business
in the Philippines and designate the Philippine Deposit Insurance
Corporation as receiver of the banking institution. [Emphases
supplied.]
x x x x.
Accordingly, there is no conflict which would call for the application of
the doctrine that a special law should prevail over a general law. It must
be emphasized that R.A .No. 7653 is a later law and under said act, the
power of the MB over banks, including rural banks, was increased and
expanded. The Court, in several cases, upheld the power of the MB to
take over banks without need for prior hearing. It is not necessary
inasmuch as the law entrusts to the MB the appreciation and
determination of whether any or all of the statutory grounds for the
closure and receivership of the erring bank are present. The MB, under
R.A. No. 7653, has been invested with more power of closure and
placement of a bank under receivership for insolvency or illiquidity, or
because the bank’s continuance in business would probably result in the
loss to depositors or creditors. In the case of Bangko Sentral Ng Pilipinas
Monetary Board v. Hon. Antonio-Valenzuela, 36 the Court reiterated the
doctrine of "close now, hear later," stating that it was justified as a
measure for the protection of the public interest. Thus:
The "close now, hear later" doctrine has already been justified as a
measure for the protection of the public interest. Swift action is called for
on the part of the BSP when it finds that a bank is in dire straits. Unless
adequate and determined efforts are taken by the government against
distressed and mismanaged banks, public faith in the banking system is
certain to deteriorate to the prejudice of the national economy itself, not
to mention the losses suffered by the bank depositors, creditors, and
stockholders, who all deserve the protection of the
government.37[Emphasis supplied]
In Rural Bank of Buhi, Inc. v. Court of Appeals,38 the Court also wrote that
x x x due process does not necessarily require a prior hearing; a hearing
or an opportunity to be heard may be subsequent to the closure. One
can just imagine the dire consequences of a prior hearing: bank runs
would be the order of the day, resulting in panic and hysteria. In the
process, fortunes may be wiped out and disillusionment will run the
gamut of the entire banking community.39
The doctrine is founded on practical and legal considerations to obviate
unwarranted dissipation of the bank’s assets and as a valid exercise of
police power to protect the depositors, creditors, stockholders, and the
general public.40 Swift, adequate and determined actions must be taken
against financially distressed and mismanaged banks by government
agencies lest the public faith in the banking system deteriorate to the
prejudice of the national economy.
Accordingly, the MB can immediately implement its resolution
prohibiting a banking institution to do business in the Philippines and,
thereafter, appoint the PDIC as receiver. The procedure for the
involuntary closure of a bank is summary and expeditious in nature.
Such action of the MB shall be final and executory, but may be later
subjected to a judicial scrutiny via a petition for certiorari to be filed by
the stockholders of record of the bank representing a majority of the
capital stock. Obviously, this procedure is designed to protect the
interest of all concerned, that is, the depositors, creditors and
stockholders, the bank itself and the general public. The protection
afforded public interest warrants the exercise of a summary closure.
In the case at bench, the ISD II submitted its memorandum, dated
February 17, 2010, containing the findings noted during the general
examination conducted on ECBI with the cut-off date of September 30,
2009. The memorandum underscored the inability of ECBI to pay its
liabilities as they would fall due in the usual course of its business, its
liabilities being in excess of the assets held. Also, it was noted that
ECBI’s continued banking operation would most probably result in the
incurrence of additional losses to the prejudice of its depositors and
creditors. On top of these, it was found that ECBI had willfully violated
the cease-and-desist order of the MB issued in its June 24, 2009
Resolution, and had disregarded the BSP rules and directives. For said
reasons, the MB was forced to issue the assailed Resolution No. 276
placing ECBI under receivership. In addition, the MB stressed that it
accorded ECBI ample time and opportunity to address its monetary
problem and to restore and improve its financial health and viability but
it failed to do so.
In light of the circumstances obtaining in this case, the application of the
corrective measures enunciated in Section 30 of R.A. No. 7653 was
proper and justified. Management take-over under Section 11 of R.A. No.
7353 was no longer feasible considering the financial quagmire that
engulfed ECBI showing serious conditions of insolvency and illiquidity.
Besides, placing ECBI under receivership would effectively put a stop to
the further draining of its assets.
No Undue Delegation of Legislative Power
Lastly, the petitioner challenges the constitutionality of Section 30 of
R.A. No. 7653, as the legislature granted the MB a broad and
unrestrained power to close and place a financially troubled bank under
receivership. He claims that the said provision was an undue delegation
of legislative power. The contention deserves scant consideration.
Preliminarily, Vivas’ attempt to assail the constitutionality of Section 30
of R.A. No. 7653 constitutes collateral attack on the said provision of law.
Nothing is more settled than the rule that the constitutionality of a
statute cannot be collaterally attacked as constitutionality issues must
be pleaded directly and not collaterally. 41 A collateral attack on a
presumably valid law is not permissible. Unless a law or rule is annulled
in a direct proceeding, the legal presumption of its validity stands. 42
Be that as it may, there is no violation of the non-delegation of
legislative power.1âwphi1 The rationale for the constitutional
proscription is that "legislative discretion as to the substantive contents
of the law cannot be delegated. What can be delegated is the discretion
to determine how the law may be enforced, not what the law shall be.
The ascertainment of the latter subject is a prerogative of the
legislature. This prerogative cannot be abdicated or surrendered by the
legislature to the delegate." 43
"There are two accepted tests to determine whether or not there is a
valid delegation of legislative power, viz, the completeness test and the
sufficient standard test. Under the first test, the law must be complete in
all its terms and conditions when it leaves the legislature such that when
it reaches the delegate the only thing he will have to do is enforce it.
Under the sufficient standard test, there must be adequate guidelines or
stations in the law to map out the boundaries of the delegate's authority
and prevent the delegation from running riot. Both tests are intended to
prevent a total transference of legislative authority to the delegate, who
is not allowed to step into the shoes of the legislature and exercise a
power essentially legislative."44
In this case, under the two tests, there was no undue delegation of
legislative authority in the issuance of R.A. No. 7653. To address the
growing concerns in the banking industry, the legislature has sufficiently
empowered the MB to effectively monitor and supervise banks and
financial institutions and, if circumstances warrant, to forbid them to do
business, to take over their management or to place them under
receivership. The legislature has clearly spelled out the reasonable
parameters of the power entrusted to the MB and assigned to it only the
manner of enforcing said power. In other words, the MB was given a wide
discretion and latitude only as to how the law should be implemented in
order to attain its objective of protecting the interest of the public, the
banking industry and the economy.
WHEREFORE, the petition for prohibition is DENIED.
SO ORDERED.
[G.R. No. 135706. October 1, 2004]
SPS. CESAR A. LARROBIS, JR. and VIRGINIA S.
LARROBIS, petitioners, vs. PHILIPPINE VETERANS
BANK, respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review of the decision of the Regional Trial
Court (RTC), Cebu City, Branch 24, dated April 17, 1998, [1] and the order
denying petitioners motion for reconsideration dated August 25, 1998,
raising pure questions of law.[2]
The following facts are uncontroverted:
On March 3, 1980, petitioner spouses contracted a monetary loan
with respondent Philippine Veterans Bank in the amount of P135,000.00,
evidenced by a promissory note, due and demandable on February 27,
1981, and secured by a Real Estate Mortgage executed on their lot
together with the improvements thereon.
On March 23, 1985, the respondent bank went bankrupt and was
placed under receivership/liquidation by the Central Bank from April 25,
1985 until August 1992.[3]
On August 23, 1985, the bank, through Francisco Go, sent the
spouses a demand letter for accounts receivable in the total amount
of P6,345.00 as of August 15, 1984, [4] which pertains to the insurance
premiums advanced by respondent bank over the mortgaged property of
petitioners.[5]
On August 23, 1995, more than fourteen years from the time the
loan became due and demandable, respondent bank filed a petition for
extrajudicial foreclosure of mortgage of petitioners property. [6] On
October 18, 1995, the property was sold in a public auction by Sheriff
Arthur Cabigon with Philippine Veterans Bank as the lone bidder.
On April 26, 1996, petitioners filed a complaint with the RTC, Cebu
City, to declare the extra-judicial foreclosure and the subsequent sale
thereof to respondent bank null and void.[7]
In the pre-trial conference, the parties agreed to limit the issue to
whether or not the period within which the bank was placed under
receivership and liquidation was a fortuitous event which suspended the
running of the ten-year prescriptive period in bringing actions. [8]
On April 17, 1998, the RTC rendered its decision, the fallo of which
reads:
WHEREFORE, premises considered judgment is hereby rendered
dismissing the complaint for lack of merit. Likewise the compulsory
counterclaim of defendant is dismissed for being unmeritorious. [9]
 It reasoned that:
defendant bank was placed under receivership by the Central Bank from
April 1985 until 1992. The defendant bank was given authority by the
Central Bank to operate as a private commercial bank and became fully
operational only on August 3, 1992. From April 1985 until July 1992,
defendant bank was restrained from doing its business. Doing business
as construed by Justice Laurel in 222 SCRA 131 refers to:
.a continuity of commercial dealings and arrangements and
contemplates to that extent, the performance of acts or words or the
exercise of some of the functions normally incident to and in progressive
prosecution of the purpose and object of its organization.
The defendant banks right to foreclose the mortgaged property
prescribes in ten (10) years but such period was interrupted when it was
placed under receivership. Article 1154 of the New Civil Code to this
effect provides:
The period during which the obligee was prevented by a fortuitous event
from enforcing his right is not reckoned against him.
In the case of Provident Savings Bank vs. Court of Appeals, 222 SCRA
131, the Supreme Court said.
Having arrived at the conclusion that a foreclosure is part of a banks
activity which could not have been pursued by the receiver then
because of the circumstances discussed in the Central Bank case, we are
thus convinced that the prescriptive period was legally interrupted by
fuerza mayor in 1972 on account of the prohibition imposed by the
Monetary Board against petitioner from transacting business, until the
directive of the Board was nullified in 1981. Indeed, the period during
which the obligee was prevented by a caso fortuito from enforcing his
right is not reckoned against him. (Art. 1154, NCC) When prescription is
interrupted, all the benefits acquired so far from the possession cease
and when prescription starts anew, it will be entirely a new one. This
concept should not be equated with suspension where the past period is
included in the computation being added to the period after the
prescription is presumed (4 Tolentino, Commentaries and Jurisprudence
on the Civil Code of the Philippines 1991 ed. pp. 18-19), consequently,
when the closure of the petitioner was set aside in 1981, the period of
ten years within which to foreclose under Art. 1142 of the N.C.C. began
to run and, therefore, the action filed on August 21, 1986 to compel
petitioner to release the mortgage carried with it the mistaken notion
that petitioners own suit for foreclosure has prescribed.
Even assuming that the liquidation of defendant bank did not affect its
right to foreclose the plaintiffs mortgaged property, the questioned
extrajudicial foreclosure was well within the ten (10) year prescriptive
period. It is noteworthy to mention at this point in time, that defendant
bank through authorized Deputy Francisco Go made the first
extrajudicial demand to the plaintiffs on August 1985. Then on March 24,
1995 defendant bank through its officer-in-charge Llanto made the
second extrajudicial demand. And we all know that a written
extrajudicial demand wipes out the period that has already elapsed and
starts anew the prescriptive period. (Ledesma vs. C.A., 224 SCRA 175.) [10]
Petitioners filed a motion for reconsideration which the RTC denied
on August 25, 1998.[11] Thus, the present petition for review where
petitioners claim that the RTC erred:
I
IN RULING THAT THE PERIOD WITHIN WHICH RESPONDENT BANK WAS
PUT UNDER RECEIVERSHIP AND LIQUIDATION WAS A FORTUITOUS EVENT
THAT INTERRUPTED THE RUNNING OF THE PRESCRIPTIVE PERIOD.
II
IN RULING THAT THE WRITTEN EXTRA-JUDICIAL DEMAND MADE BY
RESPONDENT ON PETITIONERS WIPED OUT THE PERIOD THAT HAD
ALREADY ELAPSED.
III
IN DENYING PETITIONERS MOTION FOR RECONSIDERATION OF ITS
HEREIN ASSAILED DECISION.[12]
Petitioners argue that: since the extra-judicial foreclosure of the real
estate mortgage was effected by the bank on October 18, 1995, which
was fourteen years from the date the obligation became due on
February 27, 1981, said foreclosure and the subsequent sale at public
auction should be set aside and declared null and void ab initio since
they are already barred by prescription; the court a quo erred in
sustaining the respondents theory that its having been placed under
receivership by the Central Bank between April 1985 and August 1992
was a fortuitous event that interrupted the running of the prescriptive
period;[13] the court a quos reliance on the case of Provident Savings
Bank vs. Court of Appeals[14] is misplaced since they have different sets
of facts; in the present case, a liquidator was duly appointed for
respondent bank and there was no judgment or court order that would
legally or physically hinder or prohibit it from foreclosing petitioners
property; despite the absence of such legal or physical hindrance,
respondent banks receiver or liquidator failed to foreclose petitioners
property and therefore such inaction should bind respondent bank;
[15]
foreclosure of mortgages is part of the receivers/liquidators duty of
administering the banks assets for the benefit of its depositors and
creditors, thus, the ten-year prescriptive period which started on
February 27, 1981, was not interrupted by the time during which the
respondent bank was placed under receivership; and the Monetary
Boards prohibition from doing business should not be construed as
barring any and all business dealings and transactions by the bank,
otherwise, the specific mandate to foreclose mortgages under Sec. 29 of
R.A. No. 265 as amended by Executive Order No. 65 would be rendered
nugatory.[16] Said provision reads:
Section 29. Proceedings upon Insolvency Whenever, upon examination
by the head of the appropriate supervising or examining department or
his examiners or agents into the condition of any bank or non-bank
financial intermediary performing quasi-banking functions, it shall be
disclosed that the condition of the same is one of insolvency, or that its
continuance in business would involve probable loss to its depositors or
creditors, it shall be the duty of the department head concerned
forthwith, in writing, to inform the Monetary Board of the facts. The
Board may, upon finding the statements of the department head to be
true, forbid the institution to do business in the Philippines and
designate the official of the Central Bank or a person of recognized
competence in banking or finance, as receiver to immediately take
charge its assets and liabilities, as expeditiously as possible, collect and
gather all the assets and administer the same for the benefit of its
creditors, and represent the bank personally or through counsel as he
may retain in all actions or proceedings for or against the institution,
exercising all the powers necessary for these purposes including, but not
limited to, bringing and foreclosing mortgages in the name of the bank.
Petitioners further contend that: the demand letter, dated March 24,
1995, was sent after the ten-year prescriptive period, thus it cannot be
deemed to have revived a period that has already elapsed; it is also not
one of the instances enumerated by Art. 1115 of the Civil Code when
prescription is interrupted; [17] and the August 23, 1985 letter by
Francisco Go demanding P6,345.00, refers to the insurance premium on
the house of petitioners, advanced by respondent bank, thus such
demand letter referred to another obligation and could not have the
effect of interrupting the running of the prescriptive period in favor of
herein petitioners insofar as foreclosure of the mortgage is concerned. [18]
Petitioners then prayed that respondent bank be ordered to pay
them P100,000.00 as moral damages, P50,000.00 as exemplary
damages and P100,000.00 as attorneys fees.[19]
Respondent for its part asserts that: the period within which it was
placed under receivership and liquidation was a fortuitous event that
interrupted the running of the prescriptive period for the foreclosure of
petitioners mortgaged property; within such period, it was specifically
restrained and immobilized from doing business which includes
foreclosure proceedings; the extra-judicial demand it made on March 24,
1995 wiped out the period that has already lapsed and started anew the
prescriptive period; respondent through its authorized deputy Francisco
Go made the first extra-judicial demand on the petitioners on August 23,
1985; while it is true that the first demand letter of August 1985
pertained to the insurance premium advanced by it over the mortgaged
property of petitioners, the same however formed part of the latters
total loan obligation with respondent under the mortgage instrument
and therefore constitutes a valid extra-judicial demand made within the
prescriptive period.[20]
In their Reply, petitioners reiterate their earlier arguments and add
that it was respondent that insured the mortgaged property thus it
should not pass the obligation to petitioners through the letter dated
August 1985.[21]
To resolve this petition, two questions need to be answered: (1)
Whether or not the period within which the respondent bank was placed
under receivership and liquidation proceedings may be considered a
fortuitous event which interrupted the running of the prescriptive period
in bringing actions; and (2) Whether or not the demand letter sent by
respondent banks representative on August 23, 1985 is sufficient to
interrupt the running of the prescriptive period.
Anent the first issue, we answer in the negative.
One characteristic of a fortuitous event, in a legal sense and
consequently in relations to contract, is that its occurrence must be such
as to render it impossible for a party to fulfill his obligation in a normal
manner.[22]
Respondents claims that because of a fortuitous event, it was not
able to exercise its right to foreclose the mortgage on petitioners
property; and that since it was banned from pursuing its business and
was placed under receivership from April 25, 1985 until August 1992, it
could not foreclose the mortgage on petitioners property within such
period since foreclosure is embraced in the phrase doing business, are
without merit.
While it is true that foreclosure falls within the broad definition of
doing business, that is:
a continuity of commercial dealings and arrangements and contemplates
to that extent, the performance of acts or words or the exercise of some
of the functions normally incident to and in progressive prosecution of
the purpose and object of its organization. [23]
it should not be considered included, however, in the acts prohibited
whenever banks are prohibited from doing business during receivership
and liquidation proceedings.
This we made clear in Banco Filipino Savings & Mortgage Bank vs.
Monetary Board, Central Bank of the Philippines [24] where we explained
that:
Section 29 of the Republic Act No. 265, as amended known as the
Central Bank Act, provides that when a bank is forbidden to do business
in the Philippines and placed under receivership, the person designated
as receiver shall immediately take charge of the banks assets and
liabilities, as expeditiously as possible, collect and gather all the assets
and administer the same for the benefit of its creditors, and represent
the bank personally or through counsel as he may retain in all actions or
proceedings for or against the institution, exercising all the powers
necessary for these purposes including, but not limited to, bringing and
foreclosing mortgages in the name of the bank.[25]
This is consistent with the purpose of receivership proceedings, i.e.,
to receive collectibles and preserve the assets of the bank in substitution
of its former management, and prevent the dissipation of its assets to
the detriment of the creditors of the bank.[26]
When a bank is declared insolvent and placed under receivership,
the Central Bank, through the Monetary Board, determines whether to
proceed with the liquidation or reorganization of the financially
distressed bank. A receiver, who concurrently represents the bank, then
takes control and possession of its assets for the benefit of the banks
creditors. A liquidator meanwhile assumes the role of the receiver upon
the determination by the Monetary Board that the bank can no longer
resume business. His task is to dispose of all the assets of the bank and
effect partial payments of the banks obligations in accordance with legal
priority. In both receivership and liquidation proceedings, the bank
retains its juridical personality notwithstanding the closure of its
business and may even be sued as its corporate existence is assumed
by the receiver or liquidator. The receiver or liquidator meanwhile acts
not only for the benefit of the bank, but for its creditors as well. [27]
In Provident Savings Bank vs. Court of Appeals,[28] we further stated
that:
When a bank is prohibited from continuing to do business by the Central
Bank and a receiver is appointed for such bank, that bank would not be
able to do new business, i.e., to grant new loans or to
accept newdeposits. However, the receiver of the bank is in fact
obliged to collect debts owing to the bank, which debts form
part of the assets of the bank. The receiver must assemble the
assets and pay the obligation of the bank under receivership,
and take steps to prevent dissipation of such assets.
Accordingly, the receiver of the bank is obliged to collect pre-
existing debts due to the bank, and in connection therewith, to
foreclose mortgages securing such debts.[29] (Emphasis supplied.)
It is true that we also held in said case that the period during which
the bank was placed under receivership was deemed fuerza
mayor which validly interrupted the prescriptive period. [30] This is being
invoked by the respondent and was used as basis by the trial court in its
decision. Contrary to the position of the respondent and court a
quo however, such ruling does not find application in the case at bar.
A close scrutiny of the Provident case, shows that the Court arrived
at said conclusion, which is an exception to the general rule, due to the
peculiar circumstances of Provident Savings Bank at the time. In said
case, we stated that:
Having arrived at the conclusion that a foreclosure is part of a banks
business activity which could not have been pursued by the
receiver then because of the circumstances discussed in
the Central Bank case, we are thus convinced that the prescriptive
period was legally interrupted by fuerza mayor in 1972 on account of the
prohibition imposed by the Monetary Board against petitioner from
transacting business, until the directive of the Board was nullified in
1981.[31] (Emphasis supplied.)
Further examination of the Central Bank case reveals that the
circumstances of Provident Savings Bank at the time were peculiar
because after the Monetary Board issued MB Resolution No. 1766 on
September 15, 1972, prohibiting it from doing business in the
Philippines, the banks majority stockholders immediately went to the
Court of First Instance of Manila, which prompted the trial court to issue
its judgment dated February 20, 1974, declaring null and void the
resolution and ordering the Central Bank to desist from liquidating
Provident. The decision was appealed to and affirmed by this Court in
1981. Thus, the Superintendent of Banks, which was instructed to take
charge of the assets of the bank in the name of the Monetary Board, had
no power to act as a receiver of the bank and carry out the obligations
specified in Sec. 29 of the Central Bank Act. [32]
In this case, it is not disputed that Philippine Veterans Bank was
placed under receivership by the Monetary Board of the Central Bank by
virtue of Resolution No. 364 on April 25, 1985, pursuant to Section 29 of
the Central Bank Act on insolvency of banks. [33]
Unlike Provident Savings Bank, there was no legal prohibition
imposed upon herein respondent to deter its receiver and liquidator from
performing their obligations under the law. Thus, the ruling laid down in
the Provident case cannot apply in the case at bar.
There is also no truth to respondents claim that it could not
continue doing business from the period of April 1985 to August 1992,
the time it was under receivership. As correctly pointed out by
petitioner, respondent was even able to send petitioners a demand
letter, through Francisco Go, on August 23, 1985 for accounts receivable
in the total amount of P6,345.00 as of August 15, 1984 for the insurance
premiums advanced by respondent bank over the mortgaged property of
petitioners. How it could send a demand letter on unpaid insurance
premiums and not foreclose the mortgage during the time it was
prohibited from doing business was not adequately explained by
respondent.
Settled is the principle that a bank is bound by the acts, or failure to
act of its receiver.[34] As we held in Philippine Veterans Bank vs. NLRC,
[35]
a labor case which also involved respondent bank,
all the acts of the receiver and liquidator pertain to petitioner, both
having assumed petitioners corporate existence. Petitioner cannot
disclaim liability by arguing that the non-payment of MOLINAs just wages
was committed by the liquidators during the liquidation period. [36]
However, the bank may go after the receiver who is liable to it for
any culpable or negligent failure to collect the assets of such bank and
to safeguard its assets.[37]
Having reached the conclusion that the period within which
respondent bank was placed under receivership and liquidation
proceedings does not constitute a fortuitous event which interrupted the
prescriptive period in bringing actions, we now turn to the second issue
on whether or not the extra-judicial demand made by respondent bank,
through Francisco Go, on August 23, 1985 for the amount of P6,345.00,
which pertained to the insurance premiums advanced by the bank over
the mortgaged property, constitutes a valid extra-judicial demand which
interrupted the running of the prescriptive period. Again, we answer this
question in the negative.
Prescription of actions is interrupted when they are filed before the
court, when there is a written extra-judicial demand by the creditors, and
when there is any written acknowledgment of the debt by the debtor. [38]
Respondents claim that while its first demand letter dated August
23, 1985 pertained to the insurance premium it advanced over the
mortgaged property of petitioners, the same formed part of the latters
total loan obligation with respondent under the mortgage instrument,
and therefore, constitutes a valid extra-judicial demand which
interrupted the running of the prescriptive period, is not plausible.
The real estate mortgage signed by the petitioners expressly states
that:
This mortgage is constituted by the Mortgagor to secure the payment of
the loan and/or credit accommodation granted to the spouses Cesar A.
Larrobis, Jr. and Virginia S. Larrobis in the amount of ONE HUNDRED
THIRTY FIVE THOUSAND (P135,000.00) PESOS ONLY Philippine Currency
in favor of the herein Mortgagee.[39]
The promissory note, executed by the petitioners, also states that:
FOR VALUE RECEIVED, I/WE, JOINTLY AND SEVERALLY, PROMISE TO PAY
THE PHILIPPINE VETERANS BANK, OR ORDER, AT ITS OFFICE AT CEBU
CITY THE SUM OF ONE HUNDRED THIRTY FIVE THOUSAND PESOS
(P135,000.00), PHILIPPINE CURRENCY WITH INTEREST AT THE RATE OF
FOURTEEN PER CENT (14%) PER ANNUM FROM THIS DATE UNTIL FULLY
PAID.[40]
Considering that the mortgage contract and the promissory note
refer only to the loan of petitioners in the amount of P135,000.00, we
have no reason to hold that the insurance premiums, in the amount
of P6,345.00, which was the subject of the August 1985 demand letter,
should be considered as pertaining to the entire obligation of petitioners.
In Quirino Gonzales Logging Concessionaire vs. Court of Appeals,
[41]
we held that the notices of foreclosure sent by the mortgagee to the
mortgagor cannot be considered tantamount to written extrajudicial
demands, which may validly interrupt the running of the prescriptive
period, where it does not appear from the records that the notes are
covered by the mortgage contract.[42]
In this case, it is clear that the advanced payment of the insurance
premiums is not part of the mortgage contract and the promissory note
signed by petitioners. They pertain only to the amount of P135,000.00
which is the principal loan of petitioners plus interest. The arguments of
respondent bank on this point must therefore fail.
As to petitioners claim for damages, however, we find no sufficient
basis to award the same. For moral damages to be awarded, the
claimant must satisfactorily prove the existence of the factual basis of
the damage and its causal relation to defendants acts. [43] Exemplary
damages meanwhile, which are imposed as a deterrent against or as a
negative incentive to curb socially deleterious actions, may be awarded
only after the claimant has proven that he is entitled to moral,
temperate or compensatory damages.[44] Finally, as to attorneys fees, it
is demanded that there be factual, legal and equitable justification for its
award.[45] Since the bases for these claims were not adequately proven
by the petitioners, we find no reason to grant the same.
WHEREFORE, the decision of the Regional Trial Court, Cebu City,
Branch 24, dated April 17, 1998, and the order denying petitioners
motion for reconsideration dated August 25, 1998 are hereby REVERSED
and SET ASIDE. The extra-judicial foreclosure of the real estate mortgage
on October 18, 1995, is hereby declared null and void and respondent is
ordered to return to petitioners their owners duplicate certificate of title.
Costs against respondent.
SO ORDERED.
G.R. No. L-23307 June 30, 1967
DAMASO P. PEREZ and REPUBLIC BANK, ETC., ET AL., petitioners-
appellants,
vs.
MONETARY BOARD, THE SUPERINTENDENT OF BANKS,
CENTRAL BANK OF THE PHILIPPINES and SECRETARY OF
JUSTICE, respondents-appellees.
AURORA R. RECTO, MIGUEL CANIZARES, LEON ANCHETA, PABLO
ROMAN,
VICTORIA B. ROMAN and NORBERTO J. QUISUMBING, intervenors-
appellees.
C. D. Baizas and Associates and Halili, Bolinao and Associates for
petitioners-appellants.
Natalio M. Balboa, F. E. Evangelista and Severo Malvar for respondent-
appellee Central Bank.
Office of the Solicitor General Arturo A. Alafriz and Solicitor C. S. Gaddi
for respondent-appellee Secretary of Justice.
N. J. Quisumbing and E. Quisumbing-Fernando for intervenors-appellees.
BENGZON, J.P., J.:
Petitioner-appellant Damaso P. Perez, for himself and in a derivative
capacity on behalf of the Republic Bank,
instituted mandamus proceedings in the Court of First Instance of Manila
on June 23, 1962, against the Monetary Board, the Superintendent of
Banks, the Central Bank and the Secretary of Justice. His object was to
compel these respondents to prosecute, among others, Pablo Roman
and several other Republic Bank officials for violations of the General
Banking Act (specifically secs. 76-78 and 83 thereof) and the Central
Bank Act, and for falsification of public or commercial documents in
connection with certain alleged anomalous loans amounting to
P1,303,400.00 authorized by Roman and the other bank officials.
Respondents assailed, in their respective answers, the propriety
of mandamus. The Secretary of Justice claimed that it was not their
specific duty to prosecute the persons denounced by Perez. The Central
Bank and its respondent officials, on the other hand, averred that they
had already done their duty under the law by referring to the special
prosecutors of the Department of Justice for criminal investigation and
prosecution those cases involving the alleged anomalous loans. 1
On July 10, 1962, respondents moved for the dismissal of the petition for
lack of cause of action. Petitioners opposed. The lower court denied the
motion.
Subsequently, herein intervenors-appellees, as the incumbent directors
of the Board of the Republic Bank, filed motion to intervene in the
proceedings. Petitioners opposed the motion but the lower court
approved the same.
On January 20, 1964, the Monetary Board of the Central Bank passed
Resolution No. 81 granting the request of Republic Bank for credit
accommodations to cover the unusual withdrawal of deposits by its
depositors in view of the fact that said Bank was under investigation
then by the authorities. The grant, however, was conditioned upon the
execution by the management and controlling stockholders of the
Republic Bank of a voting trust agreement in favor of a Board of Trustees
to be chosen by the latter with the approval of the Central Bank.
Pursuant to this resolution, Pablo Roman and his family, is the controlling
stockholders of Republic Bank, executed a voting trust agreement in
favor of a board of trustees composed of former Chief Justice Ricardo
Paras, Hon. Miguel Cuaderno and Mr. Felix de la Costa. Subsequently, or
on March 13, 1964, this agreement was superseded by another one with
the Philippine National Bank as the trustee. 2
In view of these developments, the intervenors-appellees filed a motion
to dismiss before the lower court claiming that the ouster of Pablo
Roman and his family from the management of the Republic Bank
effected by the voting trust agreement rendered the mandamus case
moot and academic. Respondents-appellees also filed motion to dismiss
in which they again raised the impropriety of mandamus. Acting upon
the two motions and the oppositions thereto filed by petitioners, the
lower court granted the motions and dismissed the case. Hence, this
appeal.
Appellants, contending that the ouster of Pablo Roman from Republic
Bank's management and control has not altered or rendered moot the
issues in the case, argue that the remedy of mandamus lies3 to compel
respondents to prosecute the aforementioned Pablo Roman and
company. Addressing Ourselves directly to this issue raised on the
propriety of the petition for mandamus, We rule that petitioners cannot
seek by mandamus to compel respondents to prosecute criminally those
alleged violators of the banking laws. Although the Central Bank and its
respondent officials may have the duty under the Central Bank Act and
the General Banking Act to cause the prosecution of those alleged
violators, yet We find nothing in said laws that imposes a clear, specific
duty on the former to do the actual prosecution of the latter. The Central
Bank is a government corporation created principally to administer the
monetary and banking system of the Republic, 4 not a prosecution
agency5 like the fiscal's office. Being an artificial person, The Central
Bank is limited to its statutory powers and the nearest power to which
prosecution of violators of banking laws may be attributed is its power to
sue and be sued.6 But this corporate power of litigation evidently refers
to civil cases only.1äwphï1.ñët
The Central Bank and its respondent officials have already done all they
could, within the confines of their powers, to cause the prosecution of
those persons denounced by Perez. Annexes 5 to 7-C CBP of
respondents' answer and even petitioners' opposition to the first motion
to dismiss7 show that the cases of the alleged anomalous loans had
already been referred by the Central Bank to the special prosecutors of
the Department of Justice for criminal investigation and prosecution. For
respondents to do the actual prosecuting themselves, as petitioners
would have it, would be tantamount to an ultra vires act already.
As for the Secretary of Justice, while he may have the power to
prosecute — through the office of the Solicitor General — criminal cases,
yet it is settled rule that mandamus will not lie to compel a prosecuting
officer to prosecute a criminal case in court.8
Moreover, it does not appear from the law that only the Central Bank or
its respondent officials can cause the prosecution of alleged violations of
banking laws. Said violations constitute a public offense, the prosecution
of which is a matter of public interest and hence, anyone — even private
individuals — can denounce such violations before the prosecuting
authorities. Since Perez himself could cause the filing of criminal
complaints against those allegedly involved in the anomalous loans, if
any, then he has a plain, adequate and speedy remedy in the ordinary
course of law, which makes mandamus against respondents improper.
But petitioners-appellants would insist that the impropriety
of mandamus could no longer be raised before the lower court for the
second time since it had already been invoked in previous motion to
dismiss which was denied. This is untenable. The lower court was not
estopped from changing its opinion while it was under its jurisdiction to
do so and on the same ground of lack of cause of action raised before,
because the former order was purely interlocutory and thus remained
constantly subject to alteration, modification or reversal by it before the
rendition of final judgment on its merits.9
Wherefore, the order of dismissal appealed from is, as it is hereby,
affirmed. Costs against petitioner-appellant Perez. So
ordered.1äwphï1.ñët
[G.R. No. 161276. January 31, 2005]
BORLONGAN vs. REYES
THIRD DIVISION
Gentlemen:
Quoted hereunder, for your information, is a resolution of this Court
dated JAN 31 2005.
G.R. No. 161276 (Teodoro C. Borlongan vs. Alberto V. Reyes, Ma. Dolores
B. Yuviengco, Candon B. Guerrero and Tomas S. Aure, Jr.)
At bar is this petition for review on certiorari filed by petitioner Teodoro
C. Borlongan, assailing the decision dated 18 September 2003 [1] of
the Court of Appeals in CA-G.R. SP No. 72234, reversing and setting
aside the Orders dated 2 July 2002 and 30 July 2002 of the Ombudsman
in OMB-ADM-0-00-0867 which respectively declared herein respondents
guilty of simple neglect of duty, and denied both parties' separate
motions for reconsideration.
In a complaint-affidavit filed with Office of the Ombudsman and thereat
docketed as OMB-ADM-0-00-0867, petitioner Teodoro C. Borlongan,
former president and chief executive officer of Union Bank, Inc. (UBI),
administratively charged herein respondent officials of the Bangko
Sentral ng Pilipinas (BSP), for allegedly falsifying statement of facts in
the BSP Supervision and Examination Sector (SES) reports and
tendering incorrect and inaccurate reports and opinions to conjure false
grounds for the closure of UBI and Urbancorp Development Bank and
placing them under receivership, to the detriment of their shareholders,
officers and employees.
In an Order dated 2 July 2002,[2]cralaw the Ombudsman found
respondents 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 30 July 2002,[3]cralawthe Ombudsman
denied both parties' motions for reconsideration.
Therefrom, both parties interposed separate appellate recourses to the
Court of Appeals.
Respondents were the first to appeal via a petition for review, which was
docketed in the Court of Appeals as CA-G.R. SP No. 72234 and raffled
off to its 17th Division.
For his part, petitioner, also thru a petition for review, questioned before prevented from ruling upon SP 72270 according to their own
the Court of Appeals the Ombudsman's absolution of the BSP Governor independent judgment.
and its General Counsel from his affidavit-complaint, and sought the
imposition of a graver penalty against the herein respondents. Docketed The records show that respondent had, indeed, filed with us a motion to
as CA-G.R. SP No. 72270, petitioner's appeal landed to consolidate SP 72270 with our SP 72234. But for reasons only known to
the 5th Division of the appellate court. him, he withdrew the motion for consolidation. He even said that the
5th Division had eventually denied the consolidation of the case with us,
Initially, petitioner filed a motion to consolidate the two (2) cases. Later, again for reasons we do not know.
however, he not only withdrew said motion but even vigorously opposed
the consolidation. Under these circumstances, without a consolidation, both divisions will
have to decide their own cases, and any resulting conflict in the
Unconsolidated, the two (2) cases proceeded separately. And, as it decisions on similar issues of fact and law will have to be resolved
turned out, the two (2) divisions of the Court of Appeals rendered ultimately by the Supreme Court as the supreme arbiter of all justiciable
conflicting decisions. controversies in this jurisdiction.

Thus, in a decision dated 13 August 2003,[4] the But for the respondent to make it appear as if we are to blame for the
5th Division modified the questioned orders of the Ombudsman by conflict between the two divisions of the Court, after the respondent
finding the herein respondents, including the BSP Governor, guilty of refused to consolidate the cases before us, is absurd and comical.
gross neglect of duty and imposing on each of them the penalty of one Absurd, because he is saying in so many words that we should not
(1) year suspension without pay. exercise an independent judgment in our case anymore after the
5th Division happened to decide its case ahead of us and comical,
On the other hand, the 17th Division, in a decision dated 18 because he has reduced the adjudicative process into a race between
September 2003,[5]cralawreversed and set aside the same assailed the cases. If we had only known that this was the kind of ballgame he
orders of the Ombudsman and dismissed the administrative complaints wanted us to observe, we would have considered our case submitted for
against the herein respondents. decision a long time ago, immediately after he filed his comment, and
bar the parties from filling replies, memoranda and other pleadings as a
waste of our time. This is how things would turn out if we pursued his
Petitioner filed a motion for reconsideration, imploring line of thinking ad absurdum.
the 17th Division to set aside its September 18,2003 decision for being
inconsistent with the August 13, 2003 decision of the 5th Division in CA-
G.R. SP No. 72270. To repeat, the respondent refused to have his case in the 5 th Division
consolidated before us. If he is to fault anyone now for the consequence
of this non-consolidation, he should point all his fingers to himself.
In a Resolution dated 17 December 2003,[6]cralaw the 17th Division
denied petitioner's motion for reconsideration, and, in the process,
castigated petitioner for his refusal to have the two (2) cases Later, or on June 14, 2004, the former 5 th Division of the Court of
consolidated: Appeals, this time acting as a Special Division of Five in connection
with the motions for reconsideration therein pending, came out with
an Amended Decision,[7]cralawamending the earlier decision of 12
Without a consolidation, there is no rule of law or jurisprudence that August 2003 in CA-G.R. SP No. 72270 by dismissing the administrative
prevents us, the 17th Division, from deciding SP 72234 according to our complaint against all the respondents therein. Petitioner elevated the
own independent judgment, any more than the 5th Division can be same Amended Decision to this Court via a petition for review on
certiorari in G.R. No. 163765.
In a Resolution promulgated on July 26, 2004,[8]cralaw the Court, thru its
Third Division, denied the petition in G.R. No. 163765 "for failure of the
petitioner to show that a reversible error had been committed by the
appellate court". In a subsequent Resolution promulgated on October 1,
2004, the Court denied petitioner's motion for reconsideration with
finality "as no substantial arguments were raised to warrant a
reconsideration thereof".
Meanwhile, on February 13, 2004, petitioner filed the instant petition for
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.
Perusal of the present petition reveals that it raises substantially the
same issues already passed upon by the two (2) Divisions of the Court of
Appeals and by this Court, no less, in G.R. No. 163765.
Chanting the same tone, the recourse is unavailing.
In Philippine Retirement Authority vs. Rupa,[9]cralaw we laid down the
standard definition of simple neglect of duty, as a disregard of a duty
resulting from carelessness or indifference.
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 submitted to the Monetary Board were anything but
haphazardly or negligently made. As it were, the reports were a
compendium of long years of 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 therein had been patiently
collected and analyzed.
Record reveals that UBI was being monitored by BSP officials for years.
Respondent Dolores Yuvienco had supervised the bank directly since
1999 as Director of DCB II
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 billion minimum capital requirement for a universal bank. For two
(2) months prior to its closure, Urban Bank had been besieged by
liquidity problems, and its declaration of a bank holiday on April 25 only
confirmed its decreasing ability to meet obligations on time.
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
report of the head of the supervising and examining department, the
Monetary Board finds that the Bank or quasi-bank:
(a) is unable to pay its liabilities as they become due in the
ordinary course of business:Provided, that this shall not include
inability to pay caused by extraordinary demands induced by financial
panic in the banking community;
(b) has insufficient realizable asset, as determined by the Bangko
Sentral to meet its liabilities; or
(c) cannot continue in business without involving probable losses to its
creditors; or
(d) has willfully violated a cease and desist order under Section 37
that has become final, involving acts or transactions which amount to
fraud or a dissipation of the assets of the institution; in which cases, the
Monetary Board may summarily and without need for prior
hearing forbid the institution from doing business in the
Philippines and designate the Philippine Deposit Insurance
Corporation as receiver of the Banking institution. xxx. (Emphasis
supplied)
Pertinent, too, is Section 53 of Republic Act No. 8791, [10]cralaw since it
underscores the summary character of the MB's initiative of placing a
bank under receivership. It provides that in case a bank or quasi-
banknotifies the BSP or publicly announces a bank holiday, or in any
manner suspends the payment of its deposit liabilities continuously for
more than 30 days, the MB may summarily and without need of prior
hearing close such banking institution and place it under receivership of
the PDIC.
This authority is beyond review by the courts except on a petition for
certiorari. Here, it is worth to note even the Ombudsman found
significant evidence to rationalize the decision of the Monetary Board to
place UBI under receivership.
Likewise, we agree with the appellate court's 17 th Division in its
ratiocination that it is illogical to hold the respondents administratively
liable for the preparation of reports that are, in their nature, merely
recommendatory and have to be acted upon by superior officials. The
reports were not the final 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 its completion or finality, and when
they do, what is actionable is not the recommendation but the decision
of the official with the competence under the law to issue it. [11]cralaw
The subject reports are only between the Monetary Board and the BSP
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 obligations of diligence and good faith that BSP
officials owe to the public 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 third parties, not any preparatory report or
recommendation.
As earlier noted, UBI's own top management, specifically Bartolome III,
its chairman of the Board, and the petitioner himself, its president,
continually provided the BSP the picture of the worsening situation of
UBI in the four (4) weeks from March 20, 2000 to April 25, 2000, leading
to UBI's unilateral 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 due in the ordinary course of business; (or
that it) has insufficient realizable assets, as determined by the Bangko
Sentral, to meet its liabilities."[13]cralaw While other factors might have
weighed in the analysis of UBI's financial liquidity and in the preparation
of the inevitable Supervisor and Examination Sector (SES) reports, the
MB considered the constant reports of UBI's own top management as the
best proof of its dire liquidity status.
Petitioner would have this Court review and reverse factual findings of
the Court of Appeals. This, of course, the Court cannot and will not do.
Review of factual findings of the appellate court is not a function
ordinarily undertaken by this Court, the rule admitting only a few
exceptions recognized 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 raise "only questions of law which must be
distinctly set forth" in the petition. 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 existence of
"special and important reasons" to warrant review, of which none exists
in this case.
All told, we find that no reversible error was committed by the
17th Division 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.
WHEREFORE, the instant petition is hereby DENIED DUE COURSE.
SO ORDERED.
G.R. No. 114870 May 26, 1995
MIGUELA R. VILLANUEVA, RICHARD R. VILLANUEVA, and
MERCEDITA VILLANUEVA-TIRADOS, petitioners,
vs.
COURT OF APPEALS, CENTRAL BANK OF THE PHILIPPINES,
ILDEFONSO C. ONG, and PHILIPPINE VETERANS
BANK, respondents.
DAVIDE, JR., J.:
Do petitioners have a better right than private respondent Ildefonso Ong
to purchase from the Philippine Veterans Bank (PVB) the two parcels of
land described as Lot No. 210-D-1 and Lot No. 210-D-2 situated at
Muntinglupa, Metro Manila, containing an area of 529 and 300 square
meters, respectively? This is the principal legal issue raised in this
petition.
In its decision of 27 January 1994 in CA-G.R. CV No. 35890, 1 the Court of
Appeals held for Ong, while the trial court, Branch 39 of the Regional
Trial Court (RTC) of Manila, ruled for the petitioners in its joint decision of
31 October 1991 in Civil Case No. 87-42550 2 and Sp. Proc. No. 85-
32311.3
The operative antecedent facts are set forth in the challenged decision
as follows:
The disputed lots were originally owned by the spouses
Celestino Villanueva and Miguela Villanueva, acquired by
the latter during her husband's sojourn in the United
States since 1968. Sometime in 1975, Miguela
Villanueva sought the help of one Jose Viudez, the then
Officer-in-Charge of the PVB branch in Makati if she could
obtain a loan from said bank. Jose Viudez told Miguela
Villanueva to surrender the titles of said lots as
collaterals. And to further facilitate a bigger loan, Viudez,
in connivance with one Andres Sebastian, swayed
Miguela Villanueva to execute a deed of sale covering
the two (2) disputed lots, which she did but without the
signature of her husband Celestino. Miguela Villanueva,
however, never got the loan she was expecting.
Subsequent attempts to contact Jose Viudez proved
futile, until Miguela Villanueva thereafter found out that
new titles over the two (2) lots were already issued in
the name of the PVB. It appeared upon inquiry from the
Registry of Deeds that the original titles of these lots
were canceled and new ones were issued to Jose Viudez,
which in turn were again canceled and new titles issued
in favor of Andres Sebastian, until finally new titles were
issued in the name of PNB [should be PVB] after the lots
were foreclosed for failure to pay the loan granted in the
name of Andres Sebastian.
Miguela Villanueva sought to repurchase the lots from
the PVB after being informed that the lots were about to
be sold at auction. The PVB told her that she can redeem
the lots for the price of P110,416.00. Negotiations for the
repurchase of the lots nevertheless were stalled by the
filing of liquidation proceedings against the PVB on
August of 1985.
Plaintiff-appellant [Ong] on the other hand expounds on
his claim over the disputed lots in this manner:
In October 1984, plaintiff-appellant
offered to purchase two pieces of Land
that had been acquired by PVB through
foreclosure. To back-up plaintiff-
appellant's offer he deposited the sum of
P10,000.00.
In 23 November 1984, while appellant
was still abroad, PVB approved his
subject offer under Board Resolution No.
10901-84. Among the conditions
imposed by PVB is that: "The purchase
price shall be P110,000.00 (Less deposit
of P10,000.00) payable in cash within
fifteen (15) days from receipt of approval
of the offer."
In mid-April 1985, appellant returned to
the country. He immediately verified the
status of his offer with the PVB, now
under the control of CB, where he was
informed that the same had already
been approved. On 16 April 1985,
appellant formally informed CB of his
desire to pay the subject balance
provided the bank should execute in his
favor the corresponding deed of
conveyance. The letter was not
answered.
Plaintiff-appellant sent follow-up Letters
that went unheeded, the last of which
was on 21 May 1987. On 26 May 1987,
appellant's payment for the balance of
 the subject properties were accepted by
CB under Official Receipt #0816.
On 17 September 1987, plaintiff-
appellant through his counsel, sent a
letter to CB demanding for the latter to
execute the corresponding deed of
conveyance in favor of appellant. CB did
not bother to answer the same. Hence,
the instant case.
While appellant's action for specific
performance against CB was pending,
Miguela Villanueva and her children filed
their claims with the Liquidation court.
(Appellant's Brief, pp. 3-4).4
From the pleadings, the following additional or amplificatory facts are
established:
The efforts of Miguela Villanueva to reacquire the property began on 8
June 1983 when she offered to purchase the lots for P60,000.00 with a
20%
downpayment and the balance payable in five years on a quarterly
amortization basis.5
Her offer not having been accepted, 6 Miguela Villanueva increased her
bid to P70,000.00. It was only at this time that she disclosed to the bank
her private transactions with Jose Viudez.7
After this and her subsequent offers were rejected, 8 Miguela sent her
sealed bid of P110,417.00 pursuant to the written advice of the vice
president of the PVB.9
The PVB was placed under receivership pursuant to Monetary Board
(MB) Resolution No. 334 dated 3 April 1985 and later, under liquidation
pursuant to MB Resolution No. 612 dated 7 June 1985. Afterwards, a
petition for liquidation was filed with the RTC of Manila, which was
docketed as Sp. Proc. No. 85-32311 and assigned to Branch 39 of the
said court.
On 26 May 1987, Ong tendered the sum of P100,000.00 representing the
balance of the purchase price of the litigated lots. 10 An employee of the
PVB received the amount conditioned upon approval by the Central
Bank
liquidator. 11 Ong's demand for a deed of conveyance having gone
unheeded, he filed on 23 October 1987 with the RTC of Manila an action
for specific performance against the Central Bank. 12 It was raffled to
Branch 47 thereof. Upon learning that the PVB had been placed under
liquidation, the presiding judge of Branch 47 ordered the transfer of the
case to Branch 39, the liquidation court.13
On 15 June 1989, then Presiding Judge Enrique B. Inting issued an order
allowing the purchase of the two lots at the price of P150,000.00. 14 The
Central Bank liquidator of the PVB moved for the reconsideration of the
order asserting that it is contrary to law as the disposal of the lots should
be made through public auction. 15
On 26 July 1989, Miguela Villanueva filed her claim with the liquidation
court. She averred, among others, that she is the lawful and registered
owner of the subject lots which were mortgaged in favor of the PVB thru
the falsification committed by Jose Viudez, the manager of the PVB
Makati Branch, in collusion with Andres Sebastian; that upon discovering
this fraudulent transaction, she offered to purchase the property from
the bank; and that she reported the matter to the PC/INP Criminal
Investigation Service Command, Camp Crame, and after investigation,
the CIS officer recommended the filing of a complaint for estafa through
falsification of public documents against Jose Viudez and Andres
Sebastian. She then asked that the lots be excluded from the assets of
the PVB and be conveyed back to her. 16 Later, in view of the death of
her husband, she amended her claim to include her children, herein
petitioners Mercedita Villanueva-Tirados and Richard Villanueva. 17
On 31 October 1991, the trial court rendered judgment 18 holding that
while the board resolution approving Ong's offer may have created in his
favor a vested right which may be enforced against the PVB at the time
or against the liquidator after the bank was placed under liquidation
proceedings, the said right was no longer enforceable, as he failed to
exercise it within the prescribed 15-day period. As to Miguela's claim, the
court ruled that the principle of estoppel bars her from questioning the
transaction with Viudez and the subsequent transactions because she
was a co-participant thereto, though only with respect to her undivided
one-half (1/2) conjugal share in the disputed lots and her one-third (1/3) the signature of Miguela
hereditary share in the estate of her husband. Villanueva and the
falsified signature of
Nevertheless, the trial court allowed her to purchase the lots if only to Celestino [sic] Viudez
restore their status as conjugal properties. It further held that by reason under date May 6, 1975
of estoppel, the transactions having been perpetrated by a responsible and all transactions and
officer of the PVB, and for reasons of equity, the PVB should not be related documents
allowed to charge interest on the price of the lots; hence, the purchase executed thereafter
price should be the PVB's claim as of 29 August 1984 when it considered referring to the two lots
the sealed bids, i.e., P110,416.20, which should be borne by Miguela covered by the above
Villanueva alone. stated titles as null and
void;
The dispositive portion of the decision of the trial court reads as follows:
4. Ordering the Register
of Deeds of Makati which
WHEREFORE, judgment is hereby rendered as follows: has jurisdiction over the
two parcels of land in
1. Setting aside the order question to re-instate in
of this court issued on his land records, TCT No.
June 15, 1989 under the 438073 in the name of
caption Civil Case No. Miguela Villanueva and
87-42550 entitled TCT No. 366364 in the
"Ildefonso Ong vs. name of Celestino
Central Bank of the Villanueva who were the
Phils., et al.; registered owners
thereof, and to cancel all
2. Dismissing the claim subsequent titles
of Ildefonso Ong over the emanating therefrom;
two parcels of land and
originally covered by TCT
No. 438073 and 366364 5. Ordering the
in the names of Miguela Liquidator to reconvey
Villanueva and Celestino the two lots described in
Villanueva, respectively TCT No. 115631 and
which are now covered 115632 and executing
by TCT No. 115631 and the corresponding deed
115632 in the name of of conveyance of the
the PVB; said lots upon the
payment of One Hundred
3. Declaring the Deed of Ten Thousand Four
Absolute Sale bearing Hundred Sixteen and
20/100 (P110,416.20)
 Pesos without interest
and less the amount
deposited by the
claimant, Miguela
Villanueva in connection
with the bidding where
she had participated and
conducted by the PVB on
August 29, 1984.
Cost against Ildefonso Ong and the PVB.
19
SO ORDERED.
Only Ong appealed the decision to the Court of Appeals. The appeal was
docketed as CA-G.R. CV No. 35890. In its decision of 27 January 1994,
the Court of Appeals reversed the decision of the trial court and ruled as
follows:
WHEREFORE, premises considered, the assailed decision
is hereby REVERSED and SET ASIDE, and a new one
entered ordering the disputed-lots be awarded in favor
of plaintiff-appellant Ildefonso Ong upon defendant-
appellee Central Bank's execution of the corresponding
deed of sale in his favor. 20
In support thereof, the Court of Appeals declared that Ong's failure to
pay the balance within the prescribed period was excusable because the
PVB neither notified him of the approval of his bid nor answered his
letters manifesting his readiness to pay the balance, for which reason he
could not have known when to reckon the 15-day period prescribed
under its resolution. It went further to suggest that the Central Bank was
in estoppel because it accepted Ong's late-payment of the balance. As to
the petitioners' claim, the Court of Appeals stated:
The conclusion reached by the lower court favorable to
Miguela Villanueva is, as aptly pointed out by plaintiff-
appellant, indeed confusing. While the lower court's
decision declared Miguela Villanueva as estopped from
recovering her proportionate share and interest in the
two (2) disputed lots for being a "co-participant" in the
fraudulent scheme perpetrated by Jose Viudez and
Andres Sebastian — a factual finding which We conform
to and which Miguela Villanueva does not controvert in
this appeal by not filing her appellee's brief, yet it
ordered the reconveyance of the disputed lots to Miguela
Villanueva as the victorious party upon her payment of
P110,416.20. Would not estoppel defeat the claim of the
party estopped? If so, which in fact must be so, would it
not then be absurd or even defiant for the lower court to
finally entitle Miguela Villanueva to the disputed lots
after having been precluded from assailing their
subsequent conveyance in favor of Jose Viudez by
reason of her own negligence and/or complicity therein?
The intended punitive effect of estoppel would merely be
a dud if this Court leaves the lower court's conclusion
unrectified. 21
Their motion for reconsideration 22 having been denied, 23
the petitioners
filed this petition for review on certiorari. 24
Subsequently, the respondent Central Bank apprised this Court that the
PVB was no longer under receivership or liquidation and that the PVB
has been back in operation since 3 August 1992. It then prayed that it
be dropped from this case or at least be substituted by the PVB, which is
the real party in interest. 25
In its Manifestation and Entry of Appearance, the PVB declared that it
submits to the jurisdiction of this Court and that it has no objection to its
inclusion as a party respondent in this case in lieu of the Central
Bank. 26 The petitioners did not object to the substitution. 27
Later, in its Comment dated 10 October 1994, the PVB stated that it
"submits to and shall abide by whatever judgment this Honorable
Supreme Tribunal may announce as to whom said lands may be awarded
without any touch of preference in favor of one or the other party litigant
in the instant
case." 28
In support of their contention that the Court of Appeals gravely erred in
holding that Ong is better entitled to purchase the disputed lots, the
petitioners maintain that Ong is a disqualified bidder, his bid of
P110,000.00 being lower than the starting price of P110,417.00 and his
deposit of P10,000.00 being less than the required 10% of the bid price;
that Ong failed to pay the balance of the price within the 15-day period
from notice of the approval of his bid; and that his offer of payment is
ineffective since it was conditioned on PVB's execution of the deed of
absolute sale in his favor.
On the other hand, Ong submits that his offer, though lower than
Miguela ViIlanueva's bid by P417.00, is much better, as the same is
payable in cash, while Villanueva's bid is payable in installment; that his
payment could not be said to have been made after the expiration of the
15-day period because this period has not even started to run, there
being no notice yet of the approval of his offer; and that he has a legal
right to compel the PVB or its liquidator to execute the corresponding
deed of conveyance.
There is no doubt that the approval of Ong's offer constitutes an
acceptance, the effect of which is to perfect the contract of sale upon
notice thereof to Ong. 29 The peculiar circumstances in this case,
however, pose a legal obstacle to his claim of a better right and deny
support to the conclusion of the Court of Appeals.
Ong did not receive any notice of the approval of his offer. It was only
sometime in mid-April 1985 when he returned from the United States
and inquired about the status of his bid that he came to know of the
approval.
It must be recalled that the PVB was placed under receivership pursuant
to the MB Resolution of 3 April 1985 after a finding that it was insolvent,
illiquid, and could not operate profitably, and that its continuance in
business would involve probable loss to its depositors and creditors. The
PVB was then prohibited from doing business in the Philippines, and the
receiver appointed was directed to "immediately take charge of its
assets and liabilities, as expeditiously as possible collect and gather all
the assets and administer the same for the benefit of its creditors,
exercising all the powers necessary for these purposes."
Under Article 1323 of the Civil Code, an offer becomes ineffective upon
the death, civil interdiction, insanity, or insolvency of either party before
acceptance is conveyed. The reason for this is that:
[T]he contract is not perfected except by the
concurrence of two wills which exist and continue until
the moment that they occur. The contract is not yet
perfected at any time before acceptance is conveyed;
hence, the disappearance of either party or his loss of
capacity before perfection prevents the contractual tie
from being formed. 30
It has been said that where upon the insolvency of a bank a receiver
therefor is appointed, the assets of the bank pass beyond its control into
the possession and control of the receiver whose duty it is to administer
the assets for the benefit of the creditors of the bank. 31 Thus, the
appointment of a receiver operates to suspend the authority of the bank
and of its directors and officers over its property and effects, such
authority being reposed in the receiver, and in this respect, the
receivership is equivalent to an injunction to restrain the bank officers
from intermeddling with the property of the bank in any way. 32
Section 29 of the Central Bank Act, as amended, provides thus:
Sec. 29. Proceedings upon insolvency. — Whenever,
upon examination by the head of the appropriate
supervising or examining department or his examiners
or agents into the condition of any bank or non-bank
financial intermediary performing quasi-banking
functions, it shall be disclosed that the condition of the
same is one of insolvency, or that its continuance in
business would involve probable loss to its depositors or
creditors, shall be the duty of the department head
concerned forthwith, in writing, to inform the Monetary
Board of the facts. The Board may, upon finding the
statements of the department head to be true, forbid the
institution to do business in the Philippines and
designate an official of the Central Bank or a person of
recognized competence in banking or finance as receiver
to immediately take charge of its assets and liabilities,
as expeditiously as possible collect and gather all the
assets and administer the same for the benefit of its
creditors . . . exercising all the powers necessary for
these purposes. . . .
 xxx xxx xxx
The assets of an institution under receivership or
liquidation shall be deemed in custodia legis in the
hands of the receiver or liquidator and shall, from the
moment of such receivership or liquidation, be exemp
from any order of garnishment, levy, attachment, or
execution.
In a nutshell, the insolvency of a bank and the consequent appointment
of a receiver restrict the bank's capacity to act, especially in relation to
its property, Applying Article 1323 of the Civil Code, Ong's offer to
purchase the subject lots became ineffective because the PVB became
insolvent before the bank's acceptance of the offer came to his
knowledge. Hence, the purported contract of sale between them did not
reach the stage of perfection. Corollarily, he cannot invoke the resolution
of the bank approving his bid as basis for his alleged right to buy the
disputed properties.
Nor may the acceptance by an employee of the PVB of Ong's payment of
P100,000.00 benefit him since the receipt of the payment was made
subject to the approval by the Central Bank liquidator of the PVB thus:
Payment for the purchase price of the former property of
Andres Sebastian per approved BR No. 10902-84 dated
11/13/84, subject to the approval of CB liquidator. 33
This payment was disapproved on the ground that the subject
property was already in custodia legis, and hence, disposable
only by public auction and subject to the approval of the
liquidation court. 34
The Court of Appeals therefore erred when it held that Ong had a better
right than the petitioners to the purchase of the disputed lots.
Considering then that only Ong appealed the decision of the trial court,
the PVB and the Central Bank, as well as the petitioners, are deemed to
have fully and unqualifiedly accepted the judgment, which thus became
final as to them for their failure to appeal.
WHEREFORE, the instant petition is GRANTED and the challenged
decision of the Court of Appeals of 27 January 1994 in CA-G.R. CV No.
35890 is hereby SET ASIDE. The decision of Branch 39 of the Regional
Trial Court of Manila of 31 October 1991 in Civil Case No. 87-42550 and
Sp. Proc. No. 85-32311 is hereby REINSTATED.
Respondent Philippine Veterans Bank is further directed to return to
private respondent Ildefonso C. Ong the amount of P100,000.00.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 76118 March 30, 1993
THE CENTRAL BANK OF THE PHILIPPINES and RAMON V.
TIAOQUI, petitioners,
vs.
COURT OF APPEALS and TRIUMPH SAVINGS BANK, respondents.
Sycip, Salazar, Hernandez & Gatmaitan for petitioners.
Quisumbing, Torres & Evangelista for Triumph Savings Bank.
BELLOSILLO, J.:
May a Monetary Board resolution placing a private bank under
receivership be annulled on the ground of lack of prior notice and
hearing?
This petition seeks review of the decision of the Court of Appeals in CA
G.R. S.P. No. 07867 entitled "The Central Bank of the Philippines and
Ramon V. Tiaoqui vs. Hon. Jose C. de Guzman and Triumph Savings
Bank," promulgated 26 September 1986, which affirmed the twin orders
of the Regional Trial Court of Quezon City issued 11 November
19851 denying herein petitioners' motion to dismiss Civil Case No. Q-
45139, and directing petitioner Ramon V. Tiaoqui to restore the private
management of Triumph Savings Bank (TSB) to its elected board of
directors and officers, subject to Central Bank comptrollership. 2
The antecedent facts: Based on examination reports submitted by the
Supervision and Examination Sector (SES), Department II, of the Central
Bank (CB) "that the financial condition of TSB is one of insolvency and its
continuance in business would involve probable loss to its depositors
and creditors,"3 the Monetary Board (MB) issued on 31 May 1985
Resolution No. 596 ordering the closure of TSB, forbidding it from doing
business in the Philippines, placing it under receivership, and appointing
Ramon V. Tiaoqui as receiver. Tiaoqui assumed office on 3 June 1985. 4
On 11 June 1985, TSB filed a complaint with the Regional Trial Court of
Quezon City, 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 the constitutionality of Sec. 29 of
R.A. 269, otherwise known as "The Central Bank Act," as amended,
insofar as it authorizes the Central Bank to take over a banking
institution even if it is not charged with violation of any law or regulation,
much less found guilty thereof. 5
On 1 July 1985, the trial court temporarily restrained petitioners from
implementing MB Resolution No. 596 "until further orders", thus
prompting them to move for the quashal of the restraining order (TRO)
on the ground that it did not comply with said Sec. 29, i.e., that TSB
failed to show convincing proof of arbitrariness and bad faith on the part
of petitioners;' and, that TSB failed to post the requisite bond in favor of
Central Bank.
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. Thereafter, Triumph Savings Bank filed with Us a petition
for certiorariunder Rule 65 of the Rules of Court6 dated 25 July 1985
seeking to enjoin the continued implementation of the questioned MB
resolution.
Meanwhile, on 9 August 1985; Central Bank and Ramon Tiaoqui filed a
motion to dismiss the complaint before the RTC for failure to state a
cause of action, i.e., it did not allege ultimate facts showing
that the action was plainly arbitrary and made in bad faith, which are the
only grounds for the annulment of Monetary Board resolutions placing a
bank under conservatorship, and that TSB was without legal capacity to
sue except through its receiver. 7
On 9 September 1985, TSB filed an urgent motion in the RTC to direct
receiver Ramon V. Tiaoqui to restore TSB to its private management. On
11 November 1985, the RTC in separate orders denied petitioners'
motion to dismiss and ordered receiver Tiaoqui to restore the
management of TSB to its elected board of directors and officers, subject
to CB comptrollership.
Since the orders of the trial court rendered moot the petition
for certiorari then pending before this Court, Central Bank and Tiaoqui
moved on 2 December 1985 for the dismissal of G.R. No. 71465 which
We granted on 18 December 1985.8
Instead of proceeding to trial, petitioners elevated the twin orders of the
RTC to the Court of Appeals on a petition for certiorari and prohibition
under Rule 65.9 On 26 September 1986, the appellate court, upheld the
orders of the trial court thus —
Petitioners' motion to dismiss was premised on two
grounds, namely, that the complaint failed to state a
cause of action and that the Triumph Savings Bank was
without capacity to sue except through its appointed
receiver.
Concerning the first ground, petitioners themselves
admit that the Monetary Board resolution placing the
Triumph Savings Bank under the receivership of the
officials of the Central Bank was done without prior
hearing, that is, without first hearing the side of the
bank. They further admit that said resolution can be the
subject of judicial review and may be set aside should it
be found that the same was issued with arbitrariness
and in bad faith.
The charge of lack of due process in the complaint may
be taken as constitutive of allegations of arbitrariness
and bad faith. This is not of course to be taken as
meaning that there must be previous hearing before the
 Monetary Board may exercise its powers under Section
29 of its Charter. Rather, judicial review of such action
not being foreclosed, it would be best should private
respondent be given the chance to show and prove
arbitrariness and bad faith in the issuance of the
questioned resolution, especially so in the light of the
statement of private respondent that neither the bank
itself nor its officials were even informed of any charge
of violating banking laws.
In regard to lack of capacity to sue on the part of
Triumph Savings Bank, we view such argument as being
specious, for if we get the drift of petitioners' argument,
they mean to convey the impression that only the CB
appointed receiver himself may question the CB
resolution appointing him as such. This may be asking
for the impossible, for it cannot be expected that the
master, the CB, will allow the receiver it has appointed
to question that very appointment. Should the argument
of petitioners be given circulation, then judicial review of
actions of the CB would be effectively checked and
foreclosed to the very bank officials who may feel, as in
the case at bar, that the CB action ousting them from
the bank deserves to be set aside.
xxx xxx xxx
On the questioned restoration order, this Court must say
that it finds nothing whimsical, despotic, capricious, or
arbitrary in its issuance, said action only being in line
and congruent to the action of the Supreme Court in the
Banco Filipino Case (G.R. No. 70054) where management
of the bank was restored to its duly elected directors and
officers, but subject to the Central Bank
comptrollership.10
On 15 October 1986, Central Bank and its appointed receiver, Ramon V.
Tiaoqui, filed this petition under Rule 45 of the Rules of Court praying
that the decision of the Court of Appeals in CA-G.R. SP No. 07867 be set
aside, and that the civil case pending before the RTC of Quezon City,
Civil Case No.
Q-45139, be dismissed. Petitioners allege that the Court of Appeals erred
—
(1) in affirming that an insolvent bank that had been
summarily closed by the Monetary Board should be
restored to its private management supposedly because
such summary closure was "arbitrary and in bad faith"
and a denial of "due process";
(2) in holding that the "charge of lack of due process" for
"want of prior hearing" in a complaint to annul a
Monetary Board receivership resolution under Sec. 29 of
R.A. 265 "may be taken as . . allegations of arbitrariness
and bad faith"; and
(3) in holding that the owners and former officers of an
insolvent bank may still act or sue in the name and
corporate capacity of such bank, even after it had been
ordered closed and placed under receivership. 11
The respondents, on the other hand, allege inter alia that in the Banco
Filipino case,12 We held that CB violated the rule on administrative due
process laid down in Ang Tibay vs. CIR (69 Phil. 635) and Eastern
Telecom Corp. vs. Dans, Jr. (137 SCRA 628) which requires that prior
notice and hearing be afforded to all parties in administrative
proceedings. Since MB Resolution No. 596 was adopted without TSB
being previously notified and heard, according to respondents, the same
is void for want of due process; consequently, the bank's management
should be restored to its board of directors and officers. 13
Petitioners claim that it is the essence of Sec. 29 of R.A. 265 that prior
notice and hearing in cases involving bank closures should not be
required since in all probability a hearing would not only cause
unnecessary delay but also provide bank "insiders" and stockholders the
opportunity to further dissipate the bank's resources, create liabilities for
the bank up to the insured amount of P40,000.00, and even destroy
evidence of fraud or irregularity in the bank's operations to the prejudice
of its depositors and creditors. 14 Petitioners further argue that the
legislative intent of Sec. 29 is to repose in the Monetary Board exclusive
power to determine the existence of statutory grounds for the closure
and liquidation of banks, having the required expertise and specialized
competence to do so.
The first issue raised before Us is whether absence of prior notice and
hearing may be considered acts of arbitrariness and bad faith sufficient
to annul a Monetary Board resolution enjoining a bank from doing
business and placing it under receivership. Otherwise stated, is absence
of prior notice and hearing constitutive of acts of arbitrariness and bad
faith?
Under Sec. 29 of R.A. 265, 15 the Central Bank, through the Monetary
Board, is vested with exclusive authority to assess, evaluate and
determine the condition of any bank, and finding such condition to be
one of insolvency, or that its continuance in business would involve
probable loss to its depositors or creditors, forbid the bank or non-bank
financial institution to do business in the Philippines; and shall designate
an official of the CB or other competent person as receiver to
immediately take charge of its assets and liabilities. The fourth
paragraph,16 which was then in effect at the time the action was
commenced, allows the filing of a case to set aside the actions of the
Monetary Board which are tainted with arbitrariness and bad faith.
Contrary to the notion of private respondent, Sec. 29 does not
contemplate prior notice and hearing before a bank may be directed to
stop operations and placed under receivership. When par. 4 (now par. 5,
as amended by E.O. 289) provides for the filing of a case within ten (10)
days after the receiver takes charge of the assets of the bank, it is
unmistakable that the assailed actions should precede the filing of the
case. Plainly, the legislature could not have intended to authorize "no
prior notice and hearing" in the closure of the bank and at the same time
allow a suit to annul it on the basis of absence thereof.
In the early case of Rural Bank of Lucena, Inc. v. Arca [1965], 17 We held
that a previous hearing is nowhere required in Sec. 29 nor does the
constitutional requirement of due process demand that the correctness
of the Monetary Board's resolution to stop operation and proceed to
liquidation be first adjudged before making the resolution effective. It is
enough that a subsequent judicial review be provided.
Even in Banco Filipino, 18 We reiterated that Sec. 29 of R.A. 265 does not
require a previous hearing before the Monetary Board can implement its
resolution closing a bank, since its action is subject to judicial scrutiny as
provided by law.
It may be emphasized that Sec. 29 does not altogether divest a bank or
a non-bank financial institution placed under receivership of the
opportunity to be heard and present evidence on arbitrariness and bad
faith because within ten (10) days from the date the receiver takes
charge of the assets of the bank, resort to judicial review may be had by
filing an appropriate pleading with the court. Respondent TSB did in fact
avail of this remedy by filing a complaint with the RTC of Quezon City on
the 8th day following the takeover by the receiver of the bank's assets
on 3 June 1985.
This "close now and hear later" scheme is grounded on practical and
legal considerations to prevent unwarranted dissipation of the bank's
assets and as a valid exercise of police power to protect the depositors,
creditors, stockholders and the general public.
In Rural Bank of Buhi, Inc. v. Court of Appeals,19 We stated that —
. . . due process does not necessarily require a prior
hearing; a hearing or an opportunity to be heard may
be subsequent to the closure. One can just imagine the
dire consequences of a prior hearing: bank runs would
be the order of the day, resulting in panic and hysteria.
In the process, fortunes may be wiped out and
disillusionment will run the gamut of the entire banking
community.
We stressed in Central Bank of the Philippines v. Court of Appeals 20 that
—
. . . the banking business is properly subject to
reasonable regulation under the police power of the
state because of its nature and relation to the fiscal
affairs of the people and the revenues of the state (9 CJS
32). Banks are affected with public interest because they
receive funds from the general public in the form of
deposits. Due to the nature of their transactions and
functions, a fiduciary relationship is created between the
banking institutions and their depositors. Therefore,
banks are under the obligation to treat with meticulous
care and utmost fidelity the accounts of those who have
reposed their trust and confidence in them (Simex
International [Manila], Inc., v. Court of Appeals, 183
SCRA 360 [1990]).
It is then the Government's responsibility to see to it that
the financial interests of those who deal with the banks
and banking institutions, as depositors or otherwise, are
protected. In this country, that task is delegated to the
Central Bank which, pursuant to its Charter (R.A. 265, as
amended), is authorized to administer the monetary,
banking and credit system of the Philippines. Under both
the 1973 and 1987 Constitutions, the Central Bank is
tasked with providing policy direction in the areas of
money, banking and credit; corollarily, it shall have
supervision over the operations of banks (Sec. 14, Art.
XV, 1973 Constitution, and Sec. 20, Art. XII, 1987
Constitution). Under its charter, the CB is further
authorized to take the necessary steps against any
banking institution if its continued operation would cause
prejudice to its depositors, creditors and the general
public as well. This power has been expressly recognized
by this Court. In Philippine Veterans Bank Employees
Union-NUBE v. Philippine Veterans Banks (189 SCRA 14
[1990], this Court held that:
. . . [u]nless adequate and determined
efforts are taken by the government
against distressed and mismanaged
banks, public faith in the banking system
is certain to deteriorate to the prejudice
of the national economy itself, not to
mention the losses suffered by the bank
depositors, creditors, and stockholders,
who all deserve the protection of the
government. The government cannot
simply cross its arms while the assets of
a bank are being depleted through
mismanagement or irregularities. It is
the duty of the Central Bank in such an
event to step in and salvage the
remaining resources of the bank so that
they may not continue to be dissipated
or plundered by those entrusted with
their management.
Section 29 of R.A. 265 should be viewed in this light; otherwise, We
would be subscribing to a situation where the procedural rights invoked
by private respondent would take precedence over the substantive
interests of depositors, creditors and stockholders over the assets of the
bank.
Admittedly, the mere filing of a case for receivership by the Central Bank
can trigger a bank run and drain its assets in days or even hours leading
to insolvency even if the bank be actually solvent. The procedure
prescribed in Sec. 29 is truly designed to protect the interest of all
concerned, i.e., the depositors, creditors and stockholders, the bank
itself, and the general public, and the summary closure pales in
comparison to the protection afforded public interest. At any rate, the
bank is given full opportunity to prove arbitrariness and bad faith in
placing the bank under receivership, in which event, the resolution may
be properly nullified and the receivership lifted as the trial court may
determine.
The heavy reliance of respondents on the Banco Filipino case is
misplaced in view of factual circumstances therein which are not
attendant in the present case. We ruled in Banco Filipino that the closure
of the bank was arbitrary and attendant with grave abuse of discretion,
not because of the absence of prior notice and hearing, but that the
Monetary Board had no sufficient basis to arrive at a sound conclusion of
insolvency to justify the closure. In other words, the arbitrariness, bad
faith and abuse of discretion were determined only after the bank was
placed under conservatorship and evidence thereon was received by the
trial court. As this Court found in that case, the Valenzuela, Aurellano
and Tiaoqui Reports contained unfounded assumptions and deductions
which did not reflect the true financial condition of the bank. For
instance, the subtraction of an uncertain amount as valuation reserve
from the assets of the bank would merely result in its net worth or the
unimpaired capital and surplus; it did not reflect the total financial
condition of Banco Filipino.
Furthermore, the same reports showed that the total assets of Banco
Filipino far exceeded its total liabilities. Consequently, on the basis
thereof, the Monetary Board had no valid reason to liquidate the bank;
perhaps it could have merely ordered its reorganization or rehabilitation,
if need be. Clearly, there was in that case a manifest arbitrariness,
abuse of discretion and bad faith in the closure of Banco Filipino by the
Monetary Board. But, this is not the case before Us. For here, what is
being raised as arbitrary by private respondent is the denial of prior
notice and hearing by the Monetary Board, a matter long settled in this
jurisdiction, and not the arbitrariness which the conclusions of the
Supervision and Examination Sector (SES), Department II, of the Central
Bank were reached.
Once again We refer to Rural Bank of Buhi, Inc. v. Court of Appeals,21 and
reiterate Our pronouncement therein that —
. . . the law is explicit as to the conditions prerequisite to
the action of the Monetary Board to forbid the institution
to do business in the Philippines and to appoint a
receiver to immediately take charge of the bank's assets
and liabilities. They are: (a) an examination made by the
examining department of the Central Bank; (b) report by
said department to the Monetary Board; and (c) prima
facie showing that its continuance in business would
involve probable loss to its depositors or creditors.
In sum, appeal to procedural due process cannot just outweigh the evil
sought to be prevented; hence, We rule that Sec. 29 of R.A. 265 is a
sound legislation promulgated in accordance with the Constitution in the
exercise of police power of the state. Consequently, the absence of
notice and hearing is not a valid ground to annul a Monetary Board
resolution placing a bank under receivership. The absence of prior notice
and hearing cannot be deemed acts of arbitrariness and bad faith. Thus,
an MB resolution placing a bank under receivership, or conservatorship
for that matter, may only be annulled after a determination has been
made by the trial court that its issuance was tainted with arbitrariness
and bad faith. Until such determination is made, the status quo shall be
maintained, i.e., the bank shall continue to be under receivership.
As regards the second ground, to rule that only the receiver may bring
suit in behalf of the bank is, to echo the respondent appellate court,
"asking for the impossible, for it cannot be expected that the master, the
CB, will allow the receiver it has appointed to question that very
appointment." Consequently, only stockholders of a bank could file an
action for annulment of a Monetary Board resolution placing the bank
under receivership and prohibiting it from continuing
operations.22 In Central Bank v. Court of Appeals, 23 We explained the
purpose of the law —
. . . in requiring that only the stockholders of record
representing the majority of the capital stock may bring
the action to set aside a resolution to place a bank under
conservatorship is to ensure that it be not frustrated or
defeated by the incumbent Board of Directors or officers
who may immediately resort to court action to prevent
its implementation or enforcement. It is presumed that
such a resolution is directed principally against acts of
said Directors and officers which place the bank in a
state of continuing inability to maintain a condition of
liquidity adequate to protect the interest of depositors
and creditors. Indirectly, it is likewise intended to protect
and safeguard the rights and interests of the
stockholders. Common sense and public policy dictate
then that the authority to decide on whether to contest
the resolution should be lodged with the stockholders
owning a majority of the shares for they are expected to
be more objective in determining whether the resolution
is plainly arbitrary and issued in bad faith.
It is observed that the complaint in this case was filed on 11 June 1985
or two (2) years prior to 25 July 1987 when E.O. 289 was issued, to be
effective sixty (60) days after its approval (Sec. 5). The implication is
that before E.O
. 289, any party in interest could institute court proceedings to question
a Monetary Board resolution placing a bank under receivership.
Consequently, since the instant complaint was filed by parties
representing themselves to be officers of respondent Bank (Officer-in-
Charge and Vice President), the case before the trial court should now
take its natural course. However, after the effectivity of E.O. 289, the
procedure stated therein should be followed and observed.
PREMISES considered, the Decision of the Court of Appeals in CA-G.R. SP
No. 07867 is AFFIRMED, except insofar as it upholds the Order of the trial
court of 11 November 1985 directing petitioner RAMON V. TIAOQUI to
restore the management of TRIUMPH SAVINGS BANK to its elected Board
of Directors and Officers, which is hereby SET ASIDE.
Let this case be remanded to the Regional Trial Court of Quezon City for
further proceedings to determine whether the issuance of Resolution No.
596 of the Monetary Board was tainted with arbitrariness and bad faith
and to decide the case accordingly.
SO ORDERED.
G.R. No. L-44932 April 15, 1988
JOSE CARANDANG and BENITA CARANDANG, petitioners,
vs.
COURT OF APPEALS, RURAL BANK OF LUCENA, INC.,
APRONIANO MLS. MAGSINO, CENTRAL BANK OF THE
PHILIPPINES, HONESTO O. FRANCISCO, and CARLOTA P.
VALENZUEIA, respondents.
Florentino Poonin for petitioners.
The Solicitor General for public respondent.
F.E. Evangelista, Ceceron Angeles, Feliciano Asoy and Restituto
Ventura for respondents.
GANCAYCO, J.:
Before Us is a petition for review of the decision of the Court of
Appeals in CA-G.R. No. 58421-R 1 dated August 16, 1976, and its
Resolution of October 11, 1976, affirming the Resolution of the then
Court of First Instance of Laguna in Civil Case No. SP-1029 declaring
itself to be without jurisdiction to entertain petitioners' complaint for
cancellation and nullification of the promissory note and the deed of
mortgage allegedly executed by petitioners in favor of Rural Bank of
Lucena, Inc. which said court declared earlier to be a forgery in its
Decision of September 10, 1974.
The Rural Bank of Lucena, Inc., one of the respondents herein, is a
banking institution with principal office and place of business in
Lucena City. On February 2, 1962, the Central Bank of the Philippines
through the Monetary Board approved Resolution No. 122 requesting
the Solicitor General to file the necessary petition for liquidation of
the Rural Bank of Lucena. On March 31, 1962, the Solicitor General
filed a petition for liquidation in the then Court of First Instance of
Manila, Branch I, docketed as Civil Case No. 50019. 2 In the Order of
March 28, 1963, then Presiding Judge Francisco Arca directed the
liquidator of the Central Bank to take over the assets, books, papers
and properties of the Rural Bank of Lucena, Inc.
An inventory of the assets, properties, books, etc. of the said bank
was conducted and a corresponding list was prepared. The assets
include among others the uncollected loan allegedly procured by
herein petitioners in the amount of P9,513.56 inclusive of interest as
of December 31, 1971. Said loan appears to have been secured by a
real estate mortgage on a parcel of land covered by Tax Declaration
No. 27410 of the City of San Pablo. The documents of the insolvent
bank show that petitioners filed an application for agricultural loan
for P5,000.00 with 9% interest per annum covered by a promissory
note allegedly executed by petitioners. According to respondent
Central Bank, several demand letters were sent to petitioners but to
no avail. Thus, for failure to settle the said obligation, the designated
receiver * of the bank petitioned the Sheriff of Laguna to sell the
subject property. 3
Meanwhile, on April 26, 1972, petitioners, upon Teaming of the
petition for the sale of their coconut land, flied a complaint for
nullification and cancellation of the promissory note and the
mortgage deed with damages and with prayer for a temporary
restraining order with the Court of First Instance (CFI) of Laguna on
the ground that the said documents were forgeries. On May 2, 1972,
said court issued an order restraining the Sheriff of San Pablo and
Laguna from conducting the public auction sale of the subject
property scheduled on May 11, 1972.
On May 22, 1972, respondent Central Bank of the Philippines filed a
motion for intervention stating its legal interest in the case in that for
reasons of insolvency, Rural Bank of Lucena is under receivership of
the Central Bank. On June 26, 1972, the motion was granted
requiring respondent Central Bank to file its complaint in
intervention. Said respondent filed instead a motion to dismissal s on
the ground of lack of jurisdiction but it was denied. Thus said
respondent filed its answer in intervention maintaining that the CFI
of Laguna has no jurisdiction.
The issues having been joined the court a quo rendered its
decision ** declaring the promissory note in question null and void
and without any effect, and made permanent the restraining order of
May 2, 1972.
On October 4, 1974, respondent Central Bank filed a motion for
reconsideration of the above decision alleging that it is contrary to
law and that the evidence is insufficient to justify the decision.
In the order of March 3, 1975, the court a quo *** set aside its
decision and declared itself to be without jurisdiction to entertain the
action and dismissed the complaint and counterclaims.
From this Order petitioners appealed to the Court of Appeals. On
August 16, 1976 said court rendered a judgment declaring the
documents in question null and void quoting with approval the
observations made by the first judge. 4The appellate court, however,
sustained the second judge in the dismiss of the case on the ground
of lack of jurisdiction. 5
Hence this petition.
Petitioners contend that since the land in question is within the
territorial jurisdiction of Laguna, then it is the Court of First Instance
of Laguna that has jurisdiction over the case. They argue further that
the question of jurisdiction is determined by the allegations of the
complaint, not by the averments in the answer or by the evidence
adduced in the trial. In support of their contention petitioners cited
Section 44(b) Judiciary Act of 1948 and Section 2(e) Rule 4 of the Old
Rules of Court **** as well as the case of Fernandez vs. De Gala
Sison, and Manlapaz vs. Pagdanganan. 6
On the other hand, respondent Central Bank contends that the
pendency of the liquidation proceedings before the Court of First
Instance of Manila vested in the said court exclusive jurisdiction over
all matters pertaining to the assets, properties, funds, etc. of the
Rural Bank of Lucena, Inc. citing Section 29 ***** of Presidential
Decree No. 72. It argued further that the action for cancellation and
nullification of the contract of loan is a personal action and hence the
jurisdiction of the Court of First Instance of Laguna is only concurrent
with the liquidation court, and that since it was the liquidation court
that first acquired jurisdiction over the subject matter of the instant
case, it should retain the same to the exclusion of others.
We will first resolve the nature of the action, Section 2(a), Rule 4 of
the Revised Rules of Court provides that real actions like actions
affecting title to or for recovery of possession, or for partition or
condemnation of or foreclosure of mortgage on real property shall be
commenced and tried in the province where the property or any part
thereof lies. All other civil actions are persona actions which may be
commenced and tried where the defendant or any of the defendants
reside or may be found, or where the plaintiff or any of the plaintiffs
reside at the election of the plaintiff. 7
In the case of Hernandez vs. Rural Bank of Lucena, Inc., 8 this Court
ruled that an action for cancellation of real estate mortgage is a
personal action. The said case was primarily an action to compel the
mortgagee bank to accept payment of the mortgage debt and to
release the mortgage. It appears that no foreclosure of mortgage
took place and that the plaintiffs remained in possession of the
mortgaged lot. Hence it was ruled that the action for cancellation of
real estate mortgage is a personal action as it is not expressly
included in the enumeration found in Section 2(a) of Rule 4, and
does not involve title to the mortgaged lot. 9
However, We are not convinced that the ruling in Hernandez 10 in this
respect is applicable in the case before Us considering that the
subject property herein was already foreclosed extrajudicially. If not
for the timely issuance of a restraining order sought by petitioners
the same would have already been sold at a public auction sale.
Moreover, it should be borne in mind that in the action for
nullification of the mortgage documents petitioners questioned the
validity of the mortgage in favor of the insolvent bank over which
respondent Central Bank claimed title seeking the collection and
eventually the foreclosure of the mortgaged property. Thus, it is a
real action as the action affects the title to a property. Applying the
rules on venue of the matter, the action should be brought before
the court having jurisdiction over the territory in which the subject
Property or part thereof lies which in this case should properly be in
the then Court of First Instance of Laguna. 11
On the other hand, it should be recalled that the subject property
appears to be included in the assets of the Rural Bank of Lucena,
Inc., which is an insolvent bank. Under Section 29 of the Central
Bank Act 12 when the Monetary Board finds out that the insolvent
bank cannot resume business with safety to its creditors, it shall,
through the Solicitor General, file a petition in the Court of First
Instance praying for the assistance and supervision of the court in
the liquidation of the bank's affairs.
In Hernandez, 13 We held that where an insolvent bank is forbidden
to do business, its assets are turned over to the Superintendent of
Banks as receiver for conversion into cash and its liquidation is
undertaken with judicial intervention as far as lawful and practicable
so that all claims against the insolvent bank should be filed in the
liquidation proceeding. This is intended to prevent multiplicity of
actions against the insolvent bank and that for convenience, only
one court should, if possible, pass upon all claims against the
insolvent bank, where the liquidation court should assist the
Superintendent of Banks and control his operations. 14
From the foregoing discussions it appears that both courts have
concurrent jurisdiction over the subject matter. Respondent Central
Bank stressed the rule that where several courts have concurrent
jurisdiction over the same case, the court which first acquired
jurisdiction retains it to the exclusion of the others.
However, this case presents a novel situation so that the accepted
rule on concurrent jurisdiction may not apply. As above stated, in
petitioners' action before the court a quo respondent Central Bank
filed a motion to intervene. After the motion was granted it filed a
motion to dismiss on the ground of lack of jurisdiction, but this was
denied. Respondent Central Bank then filed an answer in
intervention reiterating lack of jurisdiction and at the same time
upholding the authenticity of the mortgage documents. It
participated in the trial. Unfortunately, the mortgage documents
were found by the trial court to be forgeries.
Upon respondent Central Bank's motion for reconsideration the lower
court took a total turn-about by ruling, this time, that it is without
jurisdiction over the case. When petitioners appealed to the Court of
Appeals despite the argument of respondent Central Bank that the
documents in question are genuine and that the mortgage is valid
the appellate court filed the lower court s findings that the
questioned documents are null and void. Nevertheless, the Court of
Appeals also affirmed the dismissal of the case on the ground of lack
of jurisdiction.
The court is not persuaded that the Laguna Court is without
jurisdiction over the case and that it is the Manila Court where the
Central Bank instituted the liquidation proceedings that has
jurisdiction.
Respondent Central Bank's allegation of convenience as that all suits
against the insolvent bank should be brought before the liquidation
court is untenable. The action for nullification of the mortgage deed
before the liquidation court after the case was fully litigated below
would only mean more inconvenience to the parties, en waste of
more money and precious time. Indeed, it is an action in futility
Respondent Central Bank was already accorded a full-dress hearing
in the Laguna court where it defended its cause. However, it failed to
establish its theory upholding the validity of the questioned
documents and the genuineness of petitioners' thumbmarks thereon.
Moreover, the role of the liquidation court which is a court of limited
jurisdiction is to assist the Central Bank in the liquidation of a certain
bank. It cannot pass upon the validity of all contracts as the
mortgage deed in question in this case. This matter should be
litigated before the regular courts with general jurisdiction.
The Court of Appeals affirmed the findings of the lower court on this
aspect as it held:
Upon a factual analysis of the evidence on record, this
Court is by convinced that the real estate mortgage
sought to be foreclosed extra-judicially by
intervenors, the supposed thumbmarks of Jose
Carandang and Benita Carandang, is a forgery (Exhs.
B & 2). As seen on the face of the mortgage deed
itself, Benita Carandang was therein referred to as
widow and Jose Carandang as single. However,
contradicted is the evidence that on August 31, 1959,
when the mortgage deed was supposedly executed,
both Benita and Jose Carandang were very much
married. Obviously, their status entered on the
mortgage deed was the product of mere "guess
work."
Then the testimony of both plaintiff's that
thumbmarks on the mortgage deed were not their
thumbmarks stands unrefuted on the reward. The
evidence moreover shows that they had not appellant
before the Notary Public Jose B. Hernandez to
acknowledge said deed. Neither they have been in
Lucena City at anytime in their lives (sic). They also
had not secured any loan from the Rural Bank of
Lucena. Nor have they authorized anyone to transact
business for and in their behalf.
Ironically, intervenors witnesses even supported
plaintiff cause. The bank examiner, Mr. Napoleon
Cruz, admitted that he was assigned at the Rural
Bank of Lucena City, Inc., as deputy of the receiver
because of numerous anomalies of said bank. In fact,
he testified that all officers of the bank were
prosecuted for the anomalies. And that the filed in the
City Court and Court of First Instance of Lucena, for
falsification of documents and estafa, in connection
with said bank anomalies, y numbered around fifty.
Another intervenors' witness Lucena CFI Clerk of
Court and Notary Public who notarized the mortgage
deed in question, Mr. Jose V. Hernandez (sic)
confirming the aforesaid revelation of Mr. Cruz,
testified that there were around 60 of falsification, or
estafa thru falsification, filed in court regarding
anomalous transactions in said Rural Bank. In fact, he
claimed that the witness to the real estate mortgage
in question are among those charged for the
anomalies. In the atmosphere of such an anomalous
surrounding, and the vehement claims and evidence
of plaintiff that the mortgage dead is a forgery, we
wonder why if it were not so, intervenors did not
counteract plaintiff evidence. Not even the witness to
the deed, nor even the investigators of the bank,
were presented when the authenticity of the
thumbmark in said deed were vigorously denied and
filed by plaintiffs. And the very Notary Public who no
the deed did not say that plaintiff's were the ones
who acknowledged and deed or said the thumbmarks.
What is more, there is no check shown or introduced
by the intervenors to indicate that the plaintiff's or
anyone of them ever received, at least something,
from the mortgage. In the face of all these, the
presumed regularity, validity, or genuineness of the
document is overcome. And the claim of plaintiffs that
they have not borrowed money from different Rural
Bank stands valid. Quite understandably, intervenors,
in their responsive pleading, did not put up
"genuineness" of the document as a defense.
Another circumstance that plaintiffs are not actual
mortgagors nor loan borrowers of defendant Rural
Bank can be gleaned from the fact that even the
purported application for agricultural loan was
falsified (Exhs. a & 1). As so categorically testified by
the plaintiff Jose and Benita Carandang, they never
applied for agricultural loan in said Bank. And again,
no witness was presented by intervenors to show
otherwise. Then contrary to the entries in said
application, plaintifrs clearly proved that they were
not regular credit customers of said bank; they have
not been in said bank or at Lucena City, even for once
in their lifetime; they have no coconut lands at Bo.
Sta. Isabel, San Pablo City, and that the thumbprints
in the application for agriculture loan above were (sic)
not their thumbprints.
Then even the purported report of Inspection and
Credit investigation, submitted by intervenor as part
of defendant Banks (sic) record appeared to be
evident falsification (Exh. 13). For instance, instance
said report, it was made to appear that plaintiffs
owned a riceland at Alaminos, Laguna, and (a) sari-
sari store elsewhere, when the facto clearly show that
they do not own such properties. And neither were
they ever investigated by any bank investigator in
connection with the purported loan.
Plainly, plaintiff were themselves victims of defendant
bank's anomalies. The mortgage deed being an
evident forgery, there is no valid contract to speak of
(Art. 1313, NCC). Consequently, the mortgage deed
become prohibitive in law (sic). It is a deed absolutely
simulated or fictitious, hence inexistent and void from
the beginning. (Art. 1409 (1) & (7) (NCC). A fortiori, it
cannot and will not affect the rights of the plaintiff.
In passing, this Court is not unaware that the
Cacthlosopic report of the NBI shows that (in) so far
as the promissory note is concerned, the thumbprint
in the name of Benita Carandang thereon and her
sample right thumbprint were impressed by the same
answer of the same person. (Exh. "f 01; 6 a). But such
finding is not decisive of the issue, not only because
the NBI examiner was not presented as witness and
his report and conclusion subject to (cross)
examination, but also because of other proof to the
contrary. Thus, considering the established fact that
plaintifrs are not actual mortgagors or loan borrowers
of defendant bank, it is incomprehensible why
Benita's thumbmark should appear in the promissory
note? (sic) What is she to pay for when she is not a
mortgagor or loan borrower? Surely, it would be the
height of injustice to require her to pay and answer
for something she does not owe". pp. 110-114,
Record on Appeal. 15
The foregoing findings of facts of the appellate court are conclusive
in this proceeding.
Considering that the claim to title of respondent Central Bank over
petitioners' property had been found to be null and " Pages 35-38,
Rollo. void, it cannot now lawfully contend that the property is under
receivership as its property and is in custodia legis of the
receivership court. Said court is bereft of jurisdiction over this
property.
WHEREFORE, the petition for review is GRANTED and the questioned
decision of the Court of Appeals in so far as it aimed the decision of
dismiss of the court a quo is hereby REVERSED and SET ASIDE, but it
is aimed in all other respects. The questioned promissory note and
real estate mortage pertaining to the subject property are hereby
declared null and void. No pronouncement as to costs.
SO ORDERED.
G.R. No. 73884 September 24, 1987
SPOUSES ROMEO LIPANA and MILAGROS LIPANA, petitioners,
vs.
DEVELOPMENT BANK OF RIZAL, respondent.

PARAS, J.:
This is a petition for review on certiorari of the August 30, 1985
Order of the Regional Trial Court of Pasig denying petitioners' Motion
to Lift Stay of Execution in Civil Case No. 50802.
During the period from 1982 to January, 1984, herein petitioners
opened and maintained both time and savings deposits with the
herein respondent Development Bank of Rizal all in the aggregate
amount of P939,737.32. When some of the Time Deposit Certificates
matured, petitioners were not able to cash them but instead were
issued a manager's check which was dishonored upon presentment.
Demands for the payment of both time and savings deposits having
failed, on March 14, 1984, petitioners filed with the Regional Trial
Court of Pasig a Complaint With Prayer For Issuance of a Writ of
Preliminary Attachment for collection of a sum of money with
damages, docketed therein as Civil Case No. 50802 (Record, pp. 3-
11).
Respondent Judge, in an Order dated March 19, 1984 (Ibid., p. 19-
21), ordered the issuance of a writ of attachment, and pursuant
thereto, a writ of attachment dated March 20, 1984 was issued in
favor of the petitioners (Ibid., p. 33).
On June 27, 1984, respondent bank filed its Answer (Ibid., p. 58-61).
On July 23, 1984, petitioners filed a Motion For Judgment on the
Pleadings (Ibid., pp. 68-73), opposed by respondent bank (Ibid., pp.
74-76), but respondent judge, in a Decision dated November 13,
1984, rendered judgment in favor of petitioners. The dispositive
portion of the said Decision, reads:
IN VIEW OF ALL THE FOREGOING, the Court renders
judgment in favor of the plaintiffs, ordering the
defendant to pay the total sum of P939,737.32 plus
stipulated interest; the sum equivalent to 15% of the
amount due as attorney's fees; and costs of suit.
The counterclaim is dismissed, for lack of merit.
Meanwhile, on August 10, 1984, the Monetary Board, in its
Resolution No. 1009, finding that the condition of respondent bank
was one of insolvency and that its continuance in business would
result in probable loss to its depositors and creditors, decided to
place it under receivership (Rollo, p. 84).
On December 7, 1984, petitioners filed a Motion for Execution
Pending Appeal (Rcd., pp. 91-93), which was opposed by respondent
bank (Ibid., p. 94-96). On December 27, 1984, petitioners filed their
Reply to the opposition (Ibid., pp. 98-101), to which respondent bank
filed its Rejoinder on January 1, 1985 (Ibid., pp. 102-105).
In an order dated January 29, 1985, respondent judge ordered the
issuance of a writ of execution (Ibid., p. 106).
On February 11, 1985, respondent bank filed a Motion for
Reconsideration of order dated January 29, 1985 and to Stay Writ of
Execution (Ibid., pp. 109-110), opposed by petitioners (Ibid., p. 111)
but in an Order dated March 6, 1985, respondent judge stayed the
execution (Ibid., p. 113).
On August 7, 1985, petitioners filed a Motion to Lift Stay of Execution
(Ibid., pp. 119-122), opposed by respondent bank (Ibid., pp. 123-
127), and in an Order dated August 30, 1985, respondent judge
denied the said motion (Ibid., p. 130). Hence, the instant petition
(Rollo, pp. 8-17).
The Second Division of the Court, in a resolution dated May 5, 1986,
resolved to require the respondent to comment (Ibid., p. 52). In
compliance therewith, respondent bank filed its Comment on June 9,
1986 (Ibid., pp. 53-58).
The petition was given due course in a resolution dated August 11,
1986, and the parties were required to file their respective
memoranda (Ibid., p. 61). In compliance therewith, petitioners filed
their Memorandum on September 19, 1986 (Ibid., p. 63-75), while
respondent bank filed its Memorandum on September 25, 1986
(Ibid., pp. 76-83), and the case was considered submitted for
deliberation in the Resolution dated October 8, 1986 (Ibid., p. 88)
Petitioners raised the following issues:
1. Respondent judge cannot legally stay execution of
judgement that has already become final and
executory;
2. The placing under receivership by the Central Bank
of the respondent bank, long after the complaint was
filed removed it from the application of the doctrine in
Re: Central Bank vs. Morfe (63 SCRA 113);
3. The filing of the complaint for a sum of money With
damages against respondent bank and the
subsequent attachment of its property in Pasig, Metro
Manila long before the receivership took place render
inapplicable the doctrine laid down by this Honorable
Supreme Court in the said Morfe case;
4. The indefinite stay of execution without a ruling as
to how long it will last, amounts to deprivation of
petitioners of their property without due process of
law.
The instant petition is without merit.
I.
The main issue in this case is whether or not respondent judge could
legally stay execution of judgment that has already become final and
executory.
The answer is in the affirmative.
The rule that once a decision becomes final and executory, it is the
ministerial duty of the court to order its execution, admits of certain
exceptions as in cases of special and exceptional nature where it
becomes imperative in the higher interest of justice to direct the
suspension of its execution (Vecine vs. Geronimo, 59 O.G. 579);
whenever it is necessary to accomplish the aims of justice (Pascual
vs. Tan, 85 Phil. 164); or when certain facts and circumstances
transpired after the judgment became final which could render the
execution of the judgment unjust (Cabrias vs. Adil, 135 SCRA 354).
In the instant case, the stay of the execution of judgment is
warranted by the fact that respondent bank was placed under
receivership. To execute the judgment would unduly deplete the
assets of respondent bank to the obvious prejudice of other
depositors and creditors, since, as aptly stated in Central Bank of the
Philippines vs. Morfe (63 SCRA 114), after the Monetary Board has
declared that a bank is insolvent and has ordered it to cease
operations, the Board becomes the trustee of its assets for the equal
benefit of all the creditors, including depositors. The assets of the
insolvent banking institution are held in trust for the equal benefit of
all creditors, and after its insolvency, one cannot obtain an
advantage or a preference over another by an attachment, execution
or otherwise.
Moreover, it will be noted that respondent bank was placed under
receivership on August 10, 1984, and the Decision of respondent
judge is dated November 13, 1984. Accordingly, in line with the
ruling in the aforesaid Morfe case, which reads:
The circumstance that the Fidelity Savings Bank,
having stopped operations since February 19, 1969,
was forbidden to do business (and that ban would
include the payment of time deposits) implies that
suits for the payment of such deposits were
prohibited. What was directly prohibited should not be
encompassed indirectly. ...
petitioners 'complaint should have been dismissed.
II.
It is the contention of petitioners, however, that the placing under
receivership of respondent bank long after the filing of the complaint
removed it from the doctrine in the said Morfe case.
approved the liquidation of respondent bank on April 26, 1985 and
ordered, among others, the filing of a petition in the Regional Trial
Court praying for assistance of said court in the liquidation of the
bank. (Rollo, p. 81). The staying of the writ of execution will be lifted
after approval by the liquidation court of the project of distribution,
and the liquidator or his deputy will authorize payments to all
claimants concerned in accordance with the approved project of
distribution.

This contention is untenable. The time of the filing of the complaint

PREMISES CONSIDERED, the instant petition is hereby DISMISSED.
is immaterial. It is the execution that win obviously prejudice the
other depositors and creditors. Moreover, as stated in the said Morfe
case, the effect of the judgment is only to fix the amount of the debt, SO ORDERED.
and not give priority over other depositors and creditors.

III.

Anent the contention of petitioners that the attachment of one of the

properties of respondent bank was erased by virtue of the delayed
receivership is to expand the power of the Central Bank, Suffice it to
say that in the case of Central Bank of the Philippines, et al. vs.
Court of Appeals, et al. (Resolution of this Court dated September
17, 1984 in G.R. No. 33302), wherein the original plaintiff Algue Inc.
was able to obtain a writ of preliminary attachment against the
original defendant Island Savings Bank, this Court refused to
recognize any preference resulting from such attachment and ruled
that after a declaration of insolvency, the remedy of the depositors is
to intervene in the liquidation proceedings.

IV.

It is also contended by the petitioners that the indefinite stay of

execution without ruling as to how long it will last, amounts to a
deprivation of their property without due process of law.

Said contention, likewise, is devoid of merit. Apart from the fact that
the stay of execution is not only in accordance with law but is also
supported by jurisprudence, such staying of execution is not without
a time limit. In fact, the Monetary Board, in its resolution No. 4-33