1. G.R. No.

191424 August 7, 2013 The examiners from the Department of Loans and Credit of the BSP
arrived at the ECBI and cancelled the rediscounting line of the bank.
ALFEO D. VIVAS, ON HIS BEHALF AND ON BEHALF OF THE Vivas appealed the cancellation to BSP.5
SHAREHOLDERS OF EUROCREDIT COMMUNITY BANK,
PETITIONER, Thereafter, the Monetary Board (MB) issued Resolution No. 1255, dated
vs. September 25, 2008, placing ECBI under Prompt Corrective Action
THE MONETARY BOARD OF THE BANGKO SENTRAL NG (PCA) framework because of serious findings and supervisory concerns
PILIPINAS AND THE PHILIPPINE DEPOSIT INSURANCE noted during the general examination.
CORPORATION, RESPONDENTS.
Vivas moved for a reconsideration of Resolution No. 1255 on the
DECISION grounds of non-observance of due process and arbitrariness.

MENDOZA, J.:
Facts:
The Rural Bank of Faire, Incorporated (RBFI) was a duly registered rural
banking institution.
The corporate life of RBFI expired. Petitioner Alfeo D. Vivas (Vivas) and
his principals acquired the controlling interest in RBFI.
At the initiative of Vivas and the new management team, an internal
audit highlighted the dismal operation of the rural bank.
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.
Pursuant to Section 28 of Republic Act (R.A.) No. 7653, otherwise
known as The New Central Bank Act, the Integrated Supervision
Department II (ISD II) of the BSP conducted a general examination on
ECB.
The ISD II 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
Also, the scheduled March 31, 2009 general examination of the books,
records and general condition of ECBI did not push through. According
to Vivas, ECBI asked for the deferment of the examination pending
resolution of its appeal before the MB.
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.
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, 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.

1
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.
Meanwhile, the MB issued Resolution No. 1164,20 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 was commenced.
On March 4, 2010, the MB issued Resolution No. 276 23 placing ECBI
under receivership in accordance with the recommendation of the ISD
II and 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 (PDIC) as
Receiver of the bank.
Vivas 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.
Vivas contends 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.
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.
Issues:
1. Whether or not the petition for prohibition is proper?
2. Wheter or not there 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.
3. Whether or not 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.
Ruling:
1. No. Petition for 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
2
 appropriate. Settled is the rule that prohibition does not lie to
restrain an act that is already a fait accompli.29
2. No. Under the ‘Close Now, Hear Later’ doctrine, 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.]
The Court, in several cases, upheld the power of the MB to take over
banks without need for prior hearing.
The Court reiterated doctrine of "close now, hear later," stating that it
was justified as a measure for the protection of the public interest.
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
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 and
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 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.
3. No. 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
3
 2. 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 petitioner’s 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
₱135,000.00, 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
₱6,345.00 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."
4
The defendant bank’s 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
bank’s 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 petitioner’s 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
5
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 respondent’s 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 quo’s reliance on the case of Provident Savings
Bank vs. Court of Appeals14 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 bank’s receiver or liquidator failed to foreclose petitioners’
property and therefore such inaction should bind respondent bank;15
foreclosure of mortgages is part of the receiver’s/liquidator’s duty of
administering the bank’s 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
Board’s 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 ₱6,345.00, 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
₱100,000.00 as moral damages, ₱50,000.00 as exemplary damages
and ₱100,000.00 as attorney’s 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
6
1985 pertained to the insurance premium advanced by it over the
mortgaged property of petitioners, the same however formed part of
the latter’s 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 bank’s 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
Respondent’s 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 Philippines24 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 bank’s assets and liabilities, as expeditiously as possible,
collect and gather all the assets and administer the same for the
benefit of its creditors, and represent the bank personally or
through counsel as he may retain in all actions or proceedings for
or against the institution, exercising all the powers necessary for
these purposes including, but not limited to, bringing and
foreclosing mortgages in the name of the bank.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 bank’s
creditors. A liquidator meanwhile assumes the role of the receiver upon
7
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 bank’s 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 new deposits. 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
bank’s 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 bank’s 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 respondent’s claim that it could not continue
doing business from the period of April 1985 to August 1992, the time
8
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 ₱6,345.00 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 petitioner’s corporate existence. Petitioner
cannot disclaim liability by arguing that the non-payment of
MOLINA’s 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 ₱6,345.00, 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
Respondent’s 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 latter’s
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
(₱135,000.00) 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 ₱135,000.00, we have
no reason to hold that the insurance premiums, in the amount of
₱6,345.00, which was the subject of the August 1985 demand letter,
should be considered as pertaining to the entire obligation of
petitioners.
9
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 ₱135,000.00
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 defendant’s 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 attorney’s 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 owner’s
duplicate certificate of title.

Costs against respondent.

SO ORDERED.

10
 3. 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
11
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
12
 4. [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 the Court of Appeals the Ombudsman's absolution of the BSP
Governor and its General Counsel from his affidavit-complaint, and
sought the imposition of a graver penalty against the herein
respondents. Docketed as CA-G.R. SP No. 72270, petitioner's appeal
landed to the 5th Division of the appellate court.
Initially, petitioner filed a motion to consolidate the two (2) cases.
Later, however, he not only withdrew said motion but even vigorously
opposed the consolidation.
Unconsolidated, the two (2) cases proceeded separately. And, as it
turned out, the two (2) divisions of the Court of Appeals rendered
conflicting decisions.
13
Thus, in a decision dated 13 August 2003,[4] the 5th Division
modified the questioned orders of the Ombudsman by finding the herein
respondents, including the BSP Governor, guilty of gross neglect of duty
and imposing on each of them the penalty of one (1) year suspension
without pay.
On the other hand, the 17th Division, in a decision dated 18
September 2003,[5]cralawreversed and set aside the same assailed
orders of the Ombudsman and dismissed the administrative complaints
against the herein respondents.
Petitioner filed a motion for reconsideration, imploring 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.
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
consolidated:
Without a consolidation, there is no rule of law or jurisprudence that
prevents us, the 17th Division, from deciding SP 72234 according to our
own independent judgment, any more than the 5th Division can be
prevented from ruling upon SP 72270 according to their own
independent judgment.
The records show that respondent had, indeed, filed with us a motion
to consolidate SP 72270 with our SP 72234. But for reasons only known
to him, he withdrew the motion for consolidation. He even said that the
5th Division had eventually denied the consolidation of the case with us,
again for reasons we do not know.
Under these circumstances, without a consolidation, both divisions will
have to decide their own cases, and any resulting conflict in the
decisions on similar issues of fact and law will have to be resolved
ultimately by the Supreme Court as the supreme arbiter of all justiciable
controversies in this jurisdiction.
But for the respondent to make it appear as if we are to blame for the
conflict between the two divisions of the Court, after the respondent
refused to consolidate the cases before us, is absurd and comical.
Absurd, because he is saying in so many words that we should not
exercise an independent judgment in our case anymore after the 5 th
Division happened to decide its case ahead of us and comical, because
he has reduced the adjudicative process into a race between the cases.
If we had only known that this was the kind of ballgame he wanted us
to observe, we would have considered our case submitted for 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 line of
thinking ad absurdum.
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.
Later, or on June 14, 2004, the former 5th Division of the Court of
Appeals, this time acting as a Special Division of Five in connection
with the motions for reconsideration therein pending, came out with an
14
Amended Decision,[7]cralawamending the earlier decision of 12
August 2003 in CA-G.R. SP No. 72270 by dismissing the
administrative complaint against all the respondents therein. Petitioner
elevated the 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
15
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-bank
notifies 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 17th 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
16
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 17 th

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.

17
 5. 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. 87-425502 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.
18
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
19
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) hereditary share in the estate of her
husband.
Nevertheless, the trial court allowed her to purchase the lots if only to
restore their status as conjugal properties. It further held that by reason
of estoppel, the transactions having been perpetrated by a responsible
officer of the PVB, and for reasons of equity, the PVB should not be
allowed to charge interest on the price of the lots; hence, the purchase
price should be the PVB's claim as of 29 August 1984 when it considered
the sealed bids, i.e., P110,416.20, which should be borne by Miguela
Villanueva alone.
The dispositive portion of the decision of the trial court reads as follows:
WHEREFORE, judgment is hereby rendered as follows:
1. Setting aside the order of this court issued on June 15, 1989 under
the caption Civil Case No. 87-42550 entitled "Ildefonso Ong vs. Central
Bank of the Phils., et al.;
2. Dismissing the claim of Ildefonso Ong over the two parcels of land
originally covered by TCT No. 438073 and 366364 in the names of
Miguela Villanueva and Celestino Villanueva, respectively which are now
covered by TCT No. 115631 and 115632 in the name of the PVB;
3. Declaring the Deed of Absolute Sale bearing the signature of Miguela
Villanueva and the falsified signature of Celestino [sic] Viudez under
date May 6, 1975 and all transactions and related documents executed
thereafter referring to the two lots covered by the above stated titles
as null and void;
4. Ordering the Register of Deeds of Makati which has jurisdiction over
the two parcels of land in question to re-instate in his land records, TCT
No. 438073 in the name of Miguela Villanueva and TCT No. 366364 in
the name of Celestino Villanueva who were the registered owners
thereof, and to cancel all subsequent titles emanating therefrom; and
5. Ordering the Liquidator to reconvey the two lots described in TCT No.
115631 and 115632 and executing the corresponding deed of
conveyance of the said lots upon the payment of One Hundred Ten
Thousand Four 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.
SO ORDERED. 19
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:
20
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.
21
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
22
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.

23
 6. 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 certiorari under 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.
24
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";
25
(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.
26
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 Appeals20
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
27
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.
28
As regards the second ground, to rule that only the receiver may bring take its natural course. However, after the effectivity of E.O. 289, the
suit in behalf of the bank is, to echo the respondent appellate court, procedure stated therein should be followed and observed.
"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 PREMISES considered, the Decision of the Court of Appeals in CA-G.R.
appointment." Consequently, only stockholders of a bank could file an SP No. 07867 is AFFIRMED, except insofar as it upholds the Order of
action for annulment of a Monetary Board resolution placing the bank the trial court of 11 November 1985 directing petitioner RAMON V.
under receivership and prohibiting it from continuing operations.22 In TIAOQUI to restore the management of TRIUMPH SAVINGS BANK to its
Central Bank v. Court of Appeals, 23 We explained the purpose of the elected Board of Directors and Officers, which is hereby SET ASIDE.
law —
Let this case be remanded to the Regional Trial Court of Quezon City
. . . in requiring that only the stockholders of record representing the for further proceedings to determine whether the issuance of Resolution
majority of the capital stock may bring the action to set aside a No. 596 of the Monetary Board was tainted with arbitrariness and bad
resolution to place a bank under conservatorship is to ensure that it be faith and to decide the case accordingly.
not frustrated or defeated by the incumbent Board of Directors or
officers who may immediately resort to court action to prevent its SO ORDERED.
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
29
 7. 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
30
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. 4 The 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
31
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.
32
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.
33
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.
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.

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.

34
 8. 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).
35
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
36
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.
This contention is untenable. The time of the filing of the complaint 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, and not
give priority over other depositors and creditors.
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
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.
PREMISES CONSIDERED, the instant petition is hereby DISMISSED.
SO ORDERED.

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.

37