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.

G.R. No. L-23307, EN BANC, June 30, 1967, Bengzon, J

Perez 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
there is 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, not a prosecution agency like the fiscal’s office.

FACTS Damaso 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 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 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, Monetary Board, the Superintendent of Banks, the Central Bank and the Secretary of
Justice 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.

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.

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.

The intervenors-appellees filed a motion to dismiss before the lower court claiming that the ouster of
Pablo Roman and his family from the management of the Republic Bank effected by the voting trust
agreement rendered the mandamus case moot and academic. Respondents-appellees also filed motion
to dismiss in which they again raised the impropriety of mandamus. Acting upon the two motions and
the oppositions thereto filed by petitioners, the lower court granted the motions and dismissed the
case. Hence the petitioner appellant filed an appeal on the supreme court which also affirmed the
dismissal of the case.

ISSUES Whether or not these respondents may be compelled to prosecute criminally the alleged
violators of banking laws.
RULING No. 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.

Perez 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
there is 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, not a prosecution agency 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. But this
corporate power of litigation evidently refers to civil cases only. Central Bank and its officers have
already done what they can by referring the matter to the special prosecutors of the Department of
Justice for prosecution and investigation. Moreover, it is a settled rule that mandamus will not lie to
compel a prosecuting officer, like the Secretary of Justice, to prosecute a case in court.

Violations of banking laws 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. Hence, the order of
the lower court dismissing the petition was affirmed

ROMEO P. BUSUEGO, CATALINO F. BANEZ and RENATO F. LIM, petitioners, vs. THE HONORABLE COURT
OF APPEALS and THE MONETARY BOARD OF THE CENTRAL BANK OF THE PHILIPPINES, respondents.

G.R. No. 95326, THIRD DIVISION, March 11, 1999Purisima, J.

The CB, through the MB, is the government agency charged with the responsibility of administering the
monetary, banking and credit system of the country and is granted the power of supervision and
examination over banks and non-bank financial institutions performing quasi-banking functions of which
savings and loan associations, such as PESALA, form part of. If any irregularity is discovered in the
process, the MB may impose appropriate sanctions, such as suspending the offender from holding office
or from being employed with the CB, or placing the names of the offenders in a watchlist.

FACTS The 16th regular examination of the books and records of PAL Employees Savings and Loan
Association (PESALA) was conducted by a team of CB Examiners.

Several irregularities were found to have been committed by the PESALA officers. Hence, CB sent a letter
to petitioners for them to be present at a meeting specifically for the purpose of investigating said
anomalies. Petitioners did not respond. Hence, the Monetary Board adopted a resolution including the
names of the officers of PESALA in the watchlist to prevent them from holding responsible positions in
any institution under CB supervision.
Petitioners filed a petition for injunction against the MB in order to prevent their names from being
added in the said watchlist. RTC issued the TRO. The MB appealed to the CA which reversed RTC. Hence,
this petition for certiorari with the SC.

Petitioners contend that the MB resolution was null and void for being violative of their right to due
process by imposing administrative sanctions where the MB is not vested with authority to disqualify
persons from occupying positions in institutions under the supervision of CB.

SSUE Whether or not the MB resolution was null and void

RULING NO. The CB, through the MB, is the government agency charged with the responsibility of
administering the monetary, banking and credit system of the country and is granted the power of
supervision and examination over banks and non-bank financial institutions performing quasibanking
functions of which savings and loan associations, such as PESALA, form part of.

The special law governing savings and loan associations is R.A. 3779, the Savings and Loan Association
Act. Said law authorizes the MB to conduct regular yearly examinations of the books and records of
savings and loan associations, to suspend a savings and loan association for violation of law, to decide
any controversy over the obligations and duties of directors and officers, and to take remedial measures.
Hence, the CB, through the MB, is empowered to conduct investigations and examine the records of
savings and loan associations. If any irregularity is discovered in the process, the MB may impose
appropriate sanctions, such as suspending the offender from holding office or from being employed with
the CB, or placing the names of the offenders in a watchlist.
ANA MARIA A. KORUGA, Petitioner, - versus – TEODORO O. ARCENAS, JR., ALBERT C. AGUIRRE, CESAR S.
PAGUIO, FRANCISCO A. RIVERA, and THE HONORABLE COURT OF APPEALS, THIRD DIVISION,
Respondents. x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x TEODORO O. ARCENAS, JR., ALBERT C. AGUIRRE,
CESAR S. PAGUIO, and FRANCISCO A. RIVERA, Petitioners, - versus - HON. SIXTO MARELLA, JR., Presiding
Judge, Branch 138, Regional Trial Courtof Makati City, and ANA MARIA A. KORUGA, Respondents.

G.R. No. 168332/ G.R. No. 169053, THIRD DIVISION, June 19, 2009, Nachura, J

We hold that it is the BSP that has jurisdiction over the case. The acts complained of pertain to the
conduct of Banco Filipino's banking business. The law vests in the BSP the supervision over operations
and activities of banks

Specifically, the BSP's supervisory and regulatory powers include: conduct of examination to determine
compliance with laws and regulations if the circumstances so warrant as determined by the Monetary
Board; Overseeing to ascertain that laws and Regulations are complied with; Regular investigation which
shall not be oftener than once a year from the last date of examination to determine whether an
institution is conducting its business on a safe or sound basis Inquiring into the solvency and liquidity of
the institution.

FACTS Koruga is a minority stockholder of Banco Filipino. On August 20, 2003, she filed a complaint
before the Makati RTC. Koruga's complaint alleged:

1 Violation of Sections 31 to 34 of the Corporation Code ("Code") which prohibit self-dealing and
conflicts of interest of directors and officers.

2.Right of a stockholder to inspect the records of a corporation (including financial statements) under
Sections 74 and 75 of the Code

3.Receivership and Creation of a Management Committee

On September 12, 2003, Arcenas, et al. filed their Answer raising, among others, the trial court's lack of
jurisdiction to take cognizance of the case. They also filed a Manifestation and Motion seeking the
dismissal of the case.

In an Order dated October 18, 2004, the trial court denied the Manifestation and Motion

On February 9, 2005, the CA issued a 60-day TRO enjoining Judge Marella from conducting further
proceedings in the case

On February 22, 2005, the RTC issued a Notice of Pre-trial setting the case for pre-trial on June 2 and 9,
2005. Arcenas, et al. filed a Manifestation and Motion before the CA, reiterating their application for a
writ of... preliminary injunction. Thus, on April 18, 2005, the CA issued the assailed Resolution, which
reads in part:

(C)onsidering that the Temporary Restraining Order issued by this Court on February 9, 2005 expired on
April 10, 2005, it is necessary that a writ of preliminary injunction be issued in order not to render
ineffectual whatever final resolution this Court may render... in this case, after the petitioners shall have
posted a bond.

Dissatisfied, Koruga filed this Petition for Certiorari under Rule 65 of the Rules of Court. Koruga alleged
that the CA effectively gave due course to Arcenas, et al.'s petition when it issued a writ of preliminary
injunction without factual or legal basis

Meanwhile, on March 13, 2006, this Court issued a Resolution granting the prayer for a TRO and
enjoining the Presiding Judge of Makati RTC, Branch 138, from proceeding with the hearing of the case
upon the filing by Arcenas, et al. of a P50,000.00 bond.
In their Petition, Arcenas, et al. asked the Court to set aside the Decision[14] dated July 20, 2005 of the
CA in CA-G.R. SP No. 88422, which denied their petition, having found no grave abuse of discretion on
the part of the Makati RTC. The CA said that... the RTC Orders were interlocutory in nature and, thus,
may be assailed by certiorari or prohibition only when it is shown that the court acted without or in
excess of jurisdiction or with grave abuse of discretion.

ISSUES Which body has jurisdiction over the Koruga Complaint, the RTC or the BSP?

RULING We hold that it is the BSP that has jurisdiction over the case. The acts complained of pertain to
the conduct of Banco Filipino's banking business. The law vests in the BSP the supervision over
operations and activities of banks.

Specifically, the BSP's supervisory and regulatory powers include: conduct of examination to determine
compliance with laws and regulations if the circumstances so warrant as determined by the Monetary
Board; Overseeing to ascertain that laws and Regulations are complied with; Regular investigation which
shall not be oftener than once a year from the last date of examination to determine whether an
institution is conducting its business on a safe or sound basis Inquiring into the solvency and liquidity of
the institution. Correlatively, the General Banking Law of 2000 specifically deals with loans contracted by
bank directors or officers, thus:

SECTION 36. Restriction on Bank Exposure to Directors, Officers, Stockholders and Their Related
Interests.

The Monetary Board may regulate the amount of loans, credit accommodations and guarantees that
may be extended, directly or indirectly, by a bank to its directors, officers, stockholders and their related
interests, as well as investments of such bank in enterprises owned or... controlled by said directors,
officers, stockholders and their related interests.

Furthermore, the authority to determine whether a bank is conducting business in an unsafe or unsound
manner is also vested in the Monetary Board.

Finally, the New Central Bank Act grants the Monetary Board the power to impose administrative
sanctions on the erring bank:

Section 37. The Monetary Board may, at its discretion, impose upon... any bank or quasi-bank, their
directors and/or officers or any commission of irregularities, and/or conducting business in an unsafe or
unsound manner as may be determined by the Monetary Board

Koruga's invocation of the provisions of the Corporation Code is misplaced. In an earlier case with similar
antecedents, we ruled that:

The Corporation Code, however, is a general law applying to all types of corporations, while the New
Central Bank Act regulates specifically banks and other financial institutions, including the dissolution
and liquidation thereof. As between a general and special... law, the latter shall prevail - generalia
specialibus non derogant.

Consequently, it is not the Interim Rules of Procedure on Intra-Corporate Controversies,[32] or Rule 59

of the Rules of Civil Procedure on Receivership, that would apply to this case. Instead, Sections 29 and
30 of the New Central Bank Act should be followed viz.:

Section 30. 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.

Actions of the Monetary Board taken under this section or under Section 29 of this Act shall be final and
executory, and may not be restrained or set aside by the court except on petition for certiorari on the
ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to
amount to lack or excess of jurisdiction. The appointment of a receiver under this section shall be vested
exclusively with the Monetary Board. On the strength of these provisions, it is the Monetary Board that
exercises exclusive jurisdiction over proceedings for receivership of banks.
From the foregoing disquisition, there is no doubt that the RTC has no jurisdiction to hear and decide a
suit that seeks to place Banco Filipino under receivership. The court's jurisdiction could only have been
invoked after the Monetary Board had taken action on the matter and only on the ground that the
action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or
excess of jurisdiction.
BANGKO SENTRAL NG PILIPINAS V. BANCO FILIPINO SAVINGS AND MORTGAGE BANK

G.R. Nos. 178696 & 192607, FIRST DIVISION, July 30, 2018, Leonardo-De Castro, J.

Nothing changed with the enactment of Republic Act No. 7653. BSP, the independent central monetary
authority established by the law, is still given sufficient independence and latitude to carry out its
mandate.

FACTS Pursuant to Resolution No. 223 dated February 14, 1963 of the Monetary Board (MB) of the
Central Bank of the Philippines (CB), Banco Filipino commenced its operations as savings and mortgage
bank on July 9, 1964. However, pursuant to MB Resolution No. 75, MB ordered the closure of Banco
Filipino on the ground that the latter was found to be "insolvent and that its continuance in business
would involve probable loss to its depositors and creditors x x x ".

Banco FIlipino sought to annul MB Resolution No. 75, which was subsequently granted. Central Bank and
the Monetary Board are ordered to reorganize Banco Filipino and allow the latter to resume business in
the Philippines under the comptrollership of both the Central Bank and the Monetary Board.

Consequently, Republic Act No. 7653 abolished the CB and a new central monetary authority was
established known as Bangko Sentral ng Pilipinas (BSP). Under the said law, the CB will continue to exist
under the name Central Bank-Board of Liquidators(CB-BOL) for the sole purpose of administering and
liquidating the assets and liabilities of the CB that were not transferred to the BSP.

During a meeting, BSP-MB resolved to allow Banco Filipino to reopen and resume business under the
comptrollership of BSP. Five years after, BSP and Banco Filipino entered into a Memorandum of
Agreement where the latter was to repay to BSP the amount of P3,673,031,589.36 by way of dacion en
pago of some of its real properties. The amount owed by BFSMB represented the so-called advances
extended to it by the defunct CB. Further, pursuant to the aforementioned agreement, BSP has to lift its
comptrollership over BFSMB on January 20, 2000, and deliver to the latter all collaterals in its custody,
including government securities held by designated comptrollers.

Later on, Banco Filipino experienced massive withdrawals. Thus, it applied for emergency financial
assistance from BSP to maintain liquidity. BSP however refused to assist, reasoning that there are strict
requirements imposed by Republic Act No. 7653. Banco Filipino asserted BSP, “having stepped into the
shoes of the old CB” was obligated to "reorganize" it.

ISSUE Whether or not relief prayed for by Banco Filipino can be mandated by judicial compulsion
through a mere revival of judgment considering that they lie within the discretion of the BSP-MB taking
into account sound banking principles.

RULING No. That the Court purposely left the finer details of the reorganization and the conditions
thereof to the sound discretion of then CB-MB was an acknowledgment of the fact that the CB alone
was vested by statute with the power and/or authority to determine or prescribe the conditions under
which such resumption of business shall take place

Verily, nothing changed with the enactment of Republic Act No. 7653. BSP, the independent central
monetary authority established by the law, is still given sufficient independence and latitude to carry out
its mandate. Sections to of Republic Act No. 7653 bear this out, viz.:

SECTION 1. Declaration of Policy. - The State shall maintain a central monetary authority that shall
function and operate as an independent and accountable body corporate in the discharge of its
mandated responsibilities concerning money, banking and credit. In line with this policy, and considering
its unique functions and responsibilities, the central monetary authority established under this Act,
while being government-owned corporation, shall enjoy fiscal and administrative autonomy.
Accordingly, given that the reliefs prayed for by Banco Filipino are outside the ambit of the judgment
sought to be revived, coupled with its (Banco Filipino) admission in its petition, it is evident that the
judgment obligation imposed by the Decision in G.R. No. 70054 had already been extinguished through
its performance – Banco Filipino had been reopened and reorganized underthe comptrollership of the
BSP-MB, which comptrollership lasted until January 20, 2000, upon the agreement of BSP-MB and Banco
Filipino to implement the Memorandum of Agreement

BANGKO SENTRAL NG PILIPINAS MONETARY BOARD and CHUCHI FONACIER, Petitioners, vs.HON. NINA
G. ANTONIO-VALENZUELA, in her capacity as Regional Trial Court Judge of Manila, Branch 28; RURAL
BANK OF PARAÑAQUE, INC.; RURAL BANK OF SAN JOSE (BATANGAS), INC.; RURAL BANK OF CARMEN
(CEBU), INC.; PILIPINO RURAL BANK, INC.; PHILIPPINE COUNTRYSIDE RURAL BANK, INC.; RURAL BANK OF
CALATAGAN (BATANGAS), INC. (now DYNAMIC RURAL BANK); RURAL BANK OF DARBCI, INC.; RURAL
BANK OF KANANGA (LEYTE), INC. (now FIRST INTERSTATE RURAL BANK); RURAL BANK OF BISAYAS
MINGLANILLA (now BANK OF EAST ASIA); and SAN PABLO CITY DEVELOPMENT BANK, INC.

G.R. No. 184778, THIRD DIVISION, October 2, 2009, Velasco Jr., J

The issuance by the RTC of writs of preliminary injunction is an unwarranted interference with the
powers of the MB refer to the appointment of a conservator or a receiver for a bank, which is a power of
the MB for which they need the ROEs done by the supervising or examining department. The writs of
preliminary injunction issued by the trial court hinder the MB from fulfilling its function under the law.
The "close now, 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.

Moreover, the respondent banks have failed to show that they are entitled to copies of the ROEs. They
can point to no provision of law, no section in the procedures of the BSP that shows that the BSP is
required to give them copies of the ROEs. Sec. 28 of RA 7653, provides that the ROE shall be submitted
to the MB; the bank examined is not mentioned as a recipient of the ROE.
FACTS Supervision and Examination Department (SED) of the Bangko Sentral ng Pilipinas (BSP)
conducted examinations of the books of the following banks:

Rural Bank of Parañaque, Inc. (RBPI), Rural Bank of San Jose (Batangas), Inc., Rural Bank of Carmen
(Cebu), Inc., Pilipino Rural Bank, Inc., Philippine Countryside Rural Bank, Inc., Rural Bank of Calatagan
(Batangas), Inc. (now Dynamic Rural Bank), Rural Bank of Darbci, Inc., Rural Bank of Kananga (Leyte), Inc.
(now First Interstate Rural Bank), Rural Bank de Bisayas Minglanilla (now Bank of East Asia), and San
Pablo City Development Bank, Inc.

After the examinations, exit conferences were held with the officers of the banks wherein SED provided
copies of Lists of Findings containing the deficiencies discovered during the examinations. Banks were
then required to comment and to undertake the remedial measures which included the infusion of
additional capital. Though the banks claimed that they made the additional capital infusions, petitioner
Chuchi Fonacier, officer-in-charge of the SED, sent separate letters to the Board of Directors of each
bank, informing them that the SED found that the banks failed to carry out the required remedial
measures. In response, the banks requested that they be given time to obtain BSP approval to amend
their Articles of Incorporation, that they have an opportunity to seek investors. They requested as well
that the basis for the capital infusion figures be disclosed, and noted that none of them had received the
Report of Examination (ROE) which finalizes the audit findings. In response, Fonacier reiterated the
banks’ failure to comply with the directive for additional capital infusions.

RBPI filed a complaint for nullification of the BSP ROE with application for a TRO and writ of preliminary
injunction before the RTC. Praying that Fonacier, her subordinates, agents, or any other person acting in
her behalf be enjoined from submitting the ROE or any similar report to the Monetary Board (MB), or if
the ROE had already been submitted, the MB be enjoined from acting on the basis of said ROE, on the
allegation that the failure to furnish the bank with a copy of the ROE violated its right to due process.

The rest of the banks followed suit filing complaints with the RTC substantially similar to that of RBPI.

RTC denied the prayer for a TRO of Pilipino Rural Bank, Inc. The bank filed a motion for reconsideration
the next day.Respondent Judge Nina Antonio-Valenzuela of Branch 28 granted RBPI’s prayer for the
issuance of a TRO.

The other banks separately filed motions for consolidation of their cases in Branch 28, which motions
were granted. Petitioners assailed the validity of the consolidation of the nine cases before the RTC,
alleging that the court had already prejudged the case by the earlier issuance of a TRO and moved for
the inhibition of respondent judge. Petitioners filed a motion for reconsideration regarding the
consolidation of the subject cases.

The RTC ruled that the banks were entitled to the writs of preliminary injunction prayed for. It held that
it had been the practice of the SED to provide the ROEs to the banks before submission to the MB. It
further held that as the banks are the subjects of examinations, they are entitled to copies of the ROEs.
The denial by petitioners of the banks’ requests for copies of the ROEs was held to be a denial of the
banks’ right to due process.

Petitioners claims grave abuse of discretion on the part of Judge Valenzuela. The CA ruled that the RTC
committed no grave abuse of discretion when it ordered the issuance of a writ of preliminary injunction
and when it ordered the consolidation of the 10 cases. It held that petitioners should have first filed a
motion for reconsideration of the assailed orders, and failed to justify why they resorted to a special civil
action of certiorari instead.

On November 24, 2008, a TRO was issued by this Court, restraining the CA, RTC, and respondents from
implementing and enforcing the CA Decision. By reason of the TRO issued by this Court, the SED was
able to submit their ROEs to the MB. The MB then prohibited the respondent banks from transacting
business and placed them under receivership

ISSUES a. Whether or not the TRO issued by the RTC violated section 25 of the New Central Bank Act
that prevented the MB to discharge functions.
 b. Whether or not the respondents are required to be given copies of the ROEs before submission of
such to the Monetary Board.

RULING (A.) YES, Requisites for preliminary injunctive relief are: (a) the invasion of right sought to be
protected is material and substantial; (b) the right of the complainant is clear and unmistakable; and (c)
there is an urgent and paramount necessity for the writ to prevent serious damage.The twin
requirements of a valid injunction are the existence of a right and its actual or threatened violations.
Thus, to be entitled to an injunctive writ, the right to be protected and the violation against that right
must be shown. These requirements are absent in the present case.

The issuance by the RTC of writs of preliminary injunction is an unwarranted interference with the
powers of the MB refer to the appointment of a conservator or a receiver for a bank, which is a power of
the MB for which they need the ROEs done by the supervising or examining department. The writs of
preliminary injunction issued by the trial court hinder the MB from fulfilling its function under the law.
The actions of the MB under Secs. 29 and 30 of RA 7653 "may not be restrained or set aside by the court
except on petition for certiorari on the ground that the action taken was in excess of jurisdiction or with
such grave abuse of discretion as to amount to lack or excess of jurisdiction. The respondent banks have
shown no necessity for the writ of preliminary injunction to prevent serious damage. The serious
damage contemplated by the trial court was the possibility of the imposition of sanctions upon
respondent banks, even the sanction of closure. Under the law, the sanction of closure could be
imposed upon a bank by the BSP even without notice and hearing. This "close now, 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.

Judicial review enters the picture only after the MB has taken action; it cannot prevent such action by
the MB. The threat of the imposition of sanctions, even that of closure, does not violate their right to
due process, and cannot be the basis for a writ of preliminary injunction. The "close now, hear later"
doctrine has already been justified as a measure for the protection of the public interest.

(B) NO, The respondent banks have failed to show that they are entitled to copies of the ROEs. They can
point to no provision of law, no section in the procedures of the BSP that shows that the BSP is required
to give them copies of the ROEs. Sec. 28 of RA 7653, provides that the ROE shall be submitted to the MB;
the bank examined is not mentioned as a recipient of the ROE.

The respondent banks cannot claim a violation of their right to due process if they are not provided with
copies of the ROEs. The same ROEs are based on the lists of findings/exceptions containing the
deficiencies found by the SED examiners when they examined the books of the respondent banks. As
found by the RTC, these lists of findings/exceptions were furnished to the officers or representatives of
the respondent banks, and the respondent banks were required to comment and to undertake remedial
measures stated in said lists. Despite these instructions, respondent banks failed to comply with the
SED’s directive. Respondent banks are already aware of what is required of them by the BSP, and cannot
claim violation of their right to due process simply because they are not furnished with copies of the
ROEs.
BANGKO SENTRAL NG PILIPINAS, Petitioner, v. FELICIANO P. LEGASPI, Respondent.

G.R. No. 205966, THIRD DIVISION, March 02, 2016, PERALTA, J.

Under Republic Act No. 7653, or the New Central Bank Act, the BSP Governor is authorized to represent
the Bangko Sentral, either personally or through counsel, including private counsel, as may be
authorized by the Monetary Board, in any legal proceedings, action or specialized legal studies. Under
the same law, the BSP Governor may also delegate his power to represent the BSP to other officers
upon his own responsibility.

FACTS Petitioner BSP filed a Complaint for annulment of title, revocation of certificate and damages
(with application for TRO/writ of preliminary injunction) against Secretary Jose L. Atienza, Jr., Luningning
G. De Leon, Engr. Ramon C. Angelo, Jr., Ex-Mayor Matilde A. Legaspi and respondent Feliciano P. Legaspi
before the RTC of Malolos, Bulacan. Respondent, together with his fellow defendants, filed their Answer
to the complaint. Thereafter, the RTC issued an Order mandating the issuance of preliminary injunction,
enjoining the construction, development and/or operation of a dumpsite or landfill in Barangay San
Mateo, Norzagaray, Bulacan, in an area allegedly covered by OCT No. P858/Free Patent No. 257917, the
property subject of the complaint.

Herein respondent Legaspi filed a Motion to Dismiss alleging that the RTC did not acquire jurisdiction
over the person of the petitioner BSP because the suit is unauthorized by petitioner BSP itself and that
the counsel representing petitioner BSP is not authorized and thus cannot bind the same petitioner. In
addition, respondent Legaspi asserted that the complaint was initiated without the authority of the
Monetary Board and that the complaint was not prepared and signed by the Office of the Solicitor
General (OSG), the statutory counsel of government agencies.

In opposing the Motion to Dismiss, petitioner BSP argued that the complaint was filed pursuant to
Monetary Board Resolution No. 8865. Petitioner BSP further claimed that it is not precluded from being
represented by a private counsel of its own choice.

In denying the Motion to Dismiss, the RTC ruled that it had acquired jurisdiction over the person of the
petitioner when the latter filed with the court the Complaint. Furthermore, the RTC adjudged that in
suits involving the BSP, the Monetary Board may authorize the Governor to represent it personally or
through counsel, even a private counsel, and the authority to represent the BSP may be delegated to
any other officer thereof. It took into account the Monetary Board Resolution No. 900 containing the
Board's approval of the recommendation of the Asset Management Department (AMD) to engage the
services of Ongkiko Kalaw Manhit and Acorda Law Offices (OKMA Law)

Respondent Legaspi filed a motion for reconsideration, adding as its argument that the RTC failed to
acquire jurisdiction over the action because the complaint, a real action, failed to allege the assessed
value of the subject property. As an opposition to respondent Legaspi's additional contention, petitioner
BSP claimed that since the subject property contains an area of 4,838,736 square meters, it is
unthinkable that said property would have an assessed value of less than P20,000.00 which is within the
jurisdiction of the Municipal Trial Courts. Petitioner BSP further stated that a tax declaration showing the
assessed value of P28,538,900.00 and latest zonal value of P145,162,080.00 was attached to the
complaint.

RTC likewise denied respondent Legaspi's motion for reconsideration.

Respondent Legaspi elevated the case to the CA via a petition for certiorari under Rule 65 of the Rules of
Court. CA granted respondent’s motion and dismissed BSP’s complaint.

ISSUES 1. Whether or not The Regional Trial Court of Malolos City has exclusive original jurisdiction over
the subject matter of the action.
2. Whether or not BSP can lawfully engaged the services of a private counsel.

RULING 1. The RTC has exclusive original jurisdiction over the case.

Under Batas Pambansa Bilang 129, as amended by Republic Act No. 7691, the RTC has exclusive original
jurisdiction over civil actions which involve title to possession of real property, or any interest therein,
where the assessed value of the property involved exceeds Twenty Thousand Pesos (P20,000.00).

Petitioner BSP insists that the property involved has an assessed value of more than P20,000.00, as
shown in a Tax Declaration attached to the complaint. Incidentally, the complaint, on its face, is devoid
of any amount that would confer jurisdiction over the RTC. The non-inclusion on the face of the
complaint of the amount of the property, however, is not fatal because attached in the complaint is a
tax declaration (Annex "N" in the complaint) of the property in question showing that it has an assessed
value of P215,320.00. It must be emphasized that annexes to a complaint are deemed part of, and
should be considered together with the complaint.

Since a copy of the tax declaration, which is a public record, was attached to the complaint, the same
document is already considered as on file with the court, thus, the court can now take judicial notice of
such.

2. BSP can lawfully engage the services of a private counsel.

Anent the issue of the legal representation of petitioner BSP, the CA ruled that the BSP, being a
government-owned and controlled corporation, should have been represented by the Office of the
Solicitor General (OSG) or the Office of the Government Corporate Counsel (OGCC) and not a private law
firm or private counsel, as in this case

Under Republic Act No. 7653, or the New Central Bank Act, the BSP Governor is authorized to represent
the Bangko Sentral, either personally or through counsel, including private counsel, as may be
authorized by the Monetary Board, in any legal proceedings, action or specialized legal studies. Under
the same law, the BSP Governor may also delegate his power to represent the BSP to other officers
upon his own responsibility.

As aptly found by the RTC, petitioner BSP was able to justify its being represented by a private counsel,
thus:

BSP's complaint dated April 10, 2008 was verified by Geraldine C. Alag, an officer of the BSP being the
Director of its Asset Management Department. It has been explained that this was authorized by the
Monetary Board, as per Resolution No. 865 dated June 17, 2004, which reads:

To approve delegation of authority to the Director, Asset Management Department (AMD), or in his
absence, the Officer-in-Charge, AMD to sign all documents, contracts, agreements and affidavits relating
to the consolidation of ownership, lease, cancellation of decision, redemption and sale of acquired
assets, and all documents to be filed in court upon clearance by the Office of the General Counsel and
Legal Services x x x.

Also submitted to this Court is the Secretary's Certificate issued by Silvina Q. Mamaril-Roxas, Officer-in-
Charge, Office of the Secretary of BSP's Monetary Board attesting to Monetary Board Resolution No.
900, adopted and passed on July 18, 2008, which reads:

At the regular meeting of the MB on 18 July 2008, the MB adopted and passed MB Resolution No. 900,
to wit: xxx The Board approved the recommendation of the Asset Management Department (AMD) to
engage the services of Ongkiko Kalaw Manhit and Acorda Law Offices (OKMA Law) as follows: xxx To act
as counsel for the Bangko Sentral ng Pilipinas (BSP) in a complaint to be filed against the Department of
Environment and Natural Resources (DENR) Secretary, et al., xxx
FEDERAL EXPRESS CORP. V. ANTONINO

G.R. No. 199455, THIRD DIVISION, June 27, 2018, Leonen, J.

It is settled in jurisprudence that checks, being only negotiable instruments, are only substitutes for
money and are not legal tender; more so when the check has a named payee and is not payable to
bearer. An order instrument, which has to be endorsed by the payee before it may be negotiated,
cannot be a negotiable instrument equivalent to cash.

FACTS In November 2003, monthly common charges on the unit situated in New York, USA and owned
by respondent Eliza Antonino became due. These charges were for the period of July 2003 to November
2003, and were for a total amount of US$9,742.81. On December 2003, respondents Luwalhati and Eliza
were in the Philippines. As the monthly common charges on the Unit had become due, they decided to
send several Citibank checks to Sison, who was based in New York. Citibank checks allegedly amounting
to US$17,726.18 for the payment of monthly charges and US$11,619.35 for the payment of real estate
taxes were sent by Luwalhati through FedEx with Account No. x2546-4948-1 and Tracking No. 8442 4588
4268. The package was addressed to Sison who was tasked to deliver the checks payable to
MaxwellKates, Inc. and to the New York County Department of Finance. Sison allegedly did not receive
the package, resulting in the non-payment of Luwalhati and Eliza's obligations and the foreclosure of the
Unit.

After several follow-ups, Sison was informed that the package was delivered to her neighbor but there
was no signed receipt. On March 14, 2004, respondents, through their counsel, sent a demand letter to
FedEx for payment of damages due to the non-delivery of the package, but FedEx refused to heed their
demand. Hence, on April 5, 2004, they led their Complaint for damages.

FedEx contended that it should be absolved of liability as the respondents shipped prohibited items and
misdeclared these items as "documents." It pointed to conditions under its Air Waybill prohibiting the
"transportation of money (including but not limited to coins or negotiable instruments equivalent to
cash such as endorsed stocks and bonds)."

ISSUE Whether or not the Citibank checks are considered money, within the prohibition of FedEx’s Air
Waybill.

RULING The prohibition has a singular object: money. What follows the phrase "transportation of money
" is a phrase enclosed in parentheses, and commencing with the words "including but not limited to."
The additional phrase, enclosed as it is in parentheses, is not the object of the prohibition, but merely a
postscript to the word "money." Moreover, its introductory words "including but not limited to" signify
that the items that follow are illustrative examples; they are not qualifiers that are integral to or
inseverable from "money." Despite the utterance of the enclosed phrase, the singular prohibition
remains: money.

Money is "what is generally acceptable in exchange for goods." It can take many forms, most commonly
as coins and banknotes. Despite its myriad forms, its key element is its general acceptability. Laws
usually define what can be considered as a generally acceptable medium of exchange.

It is settled in jurisprudence that checks, being only negotiable instruments, are only substitutes for
money and are not legal tender; more so when the check has a named payee and is not payable to
bearer. In Philippine Airlines, Inc. v. Court of Appeals, the Court ruled that the payment of a check to the
sheriff did not satisfy the judgment debt as checks are not considered legal tender. This has been
maintained in other cases decided by the Supreme Court.

The Air Waybill's prohibition mentions "negotiable instruments" only in the course of making an
example. Thus, they are not prohibited items themselves. Moreover, the illustrative example does not
even pertain to negotiable instruments per se but to "negotiable instruments equivalent to cash." The
checks involved here are payable to specific payees, Maxwell-Kates, Inc. and the New York County
Department of Finance. Thus, they are order instruments. They are not payable to their bearer. Order
instruments differ from bearer instruments in their manner of negotiation: Under Section 30 of the
Negotiable Instruments Law, an order instrument requires an indorsement from the payee or holder
before it may be validly negotiated. A bearer instrument, on the other hand, does not require an
indorsement to be validly negotiated. There is no question that checks, whether payable to order or to
bearer, so long as they comply with the requirements under Section 1 of the Negotiable Instruments
Law, are negotiable instruments. The more relevant consideration is whether checks with a specified
payee are negotiable instruments equivalent to cash, as contemplated in the example added to the Air
Waybill's prohibition. The Court thinks they are not. An order instrument, which has to be endorsed by
the payee before it may be negotiated, cannot be a negotiable instrument equivalent to cash. It is worth
emphasizing that the instruments give
CENTRAL BANK OF THE PHILIPPINES and ACTING DIRECTOR ANTONIO T. CASTRO, JR. OF THE
DEPARTMENT OF COMMERCIAL AND SAVINGS BANK, in his capacity as statutory receiver of Island
Savings Bank, petitioners, vs. THE HONORABLE COURT OF APPEALS and SULPICIO M. TOLENTINO,
respondents.

G.R. No. L-45710, SECOND DIVISION, October 3, 1985, Makasiar, J

Since ISB was in default under the agreement, Tolentino may choose between specific performance or
rescission, but since ISB is now prohibited from doing further business, the only remedy left is rescission
only for the P63,000 balance of the loan.

FACTS April 28, 1965 - Island Savings Bank (ISB) approved the loan application for P80,000 of Sulpicio
Tolentino, who, as a security for the loan, also executed a real estate mortgage over his 100-ha land. The
approved loan application called for P80,000 loan, repayable in semi-annual installments for a period of
3 years, with 12% interest.

May 22, 1965 – a mere P17,000 partial release of the loan was made by ISB, and Tolentino and his wife
Edita signed a promissory note for P17,000 at 12% annual interest, payable within 3 years from the date
of execution of the contract at semi-annual installments of P3,459.

An advance interest for the P80,000 loan covering a 6-mo period amounting to P4,800was deducted
from the partial release of P17,000, but this was refunded to Tolentino on July 23, 1965, after being
informed by ISB that there was no fund yet available for the release of the P63,000 balance.

Aug. 13, 1965 – the Monetary Board of the Central Bank issued Resolution No. 1049, which prohibited
ISB from making new loans and investments, after finding that it was suffering liquidity problems.

June 14, 1968 – the Monetary Board issued Resolution No. 967, which prohibited ISB from doing
business in the Philippines, after finding that it failed to put up the required capital to restore its
solvency.

Aug. 1, 1968 – ISB, in view of non-payment of the P17,000 covered by the promissory note, filed an
application for the extra-judicial foreclosure of the real estate mortgage covering the 100-ha land; and
the sheriff scheduled auction.

Tolentino filed a petition with the CFI for injunction, specific performance or rescission and damages
with preliminary injunction, alleging that since ISB failed to deliver the P63,000 remaining balance of the
loan, he is entitled to specific performance by ordering ISB to deliver it with interest of 12% per annum
from April 28, 1965, and if said balance cannot be delivered, to rescind the real estate mortgage.

CFI issued a TRO enjoining ISB from continuing with the foreclosure of the mortgage, however, after
finding Tolentino’s petition unmeritorious, ordered the latter to pay ISB P17,000 plus legal interest and
legal charges and lifting the TRO so the sheriff may proceed with the foreclosure.

CA, on appeal by Tolentino, modified CFI’s decision by affirming dismissal of Tolentino’s petition for
specific performance, but ruled that ISB can neither foreclose the mortgage nor collect the P17,000 loan.

ISSUES

1) WON the action of Tolenitno for specific performance can prosper. NO

. 2) WON Tolentino is liable to pay the P17,000 debt covered by the promissory note. YES.

3) WON Tolentino’s real estate mortgage can be foreclosed to satisfy the P17,000 if his liability to pay
therefor subsists. NO.
RULING 1) Since ISB was in default under the agreement, Tolentino may choose between specific
performance or rescission, but since ISB is now prohibited from doing further business, the only remedy
left is Rescission only for the P63,000 balance of the loan.

2) The bank was deemed to have complied with its reciprocal obligation to furnish a P17,000 loan. The
promissory note gave rise to Tolentino’s reciprocal obligation to pay such loan when it falls due and his
failure to pay the overdue amortizations under the promissory note made him a party in default, hence
not entitled to rescission (Art. 1191, CC). ISB has the right to rescind the promissory note, being the
aggrieved party.

Since both parties were in default in the performance of their reciprocal obligations, both are liable for
damages. In case both parties have committed a breach of their reciprocal obligations, the liability of the
first infractor shall be equirably tempered by the courts (Art. 1192, CC). The liability of ISB for damages
in not furnishing the entire loan is offset by the liability of Tolentino for damages (penalties and
surcharges) for not paying his overdue P17,000 debt. Since Tolentino derived some benefit for his use of
the P17,000, he should account for the interest thereon (interest was not included in the offsetting).

3) The fact that when Tolentino executed his real estate mortgage, no consideration was then in
existence, as there was no debt yet because ISB had not made any release on the loan, does not make
the real estate mortgage void for lack of consideration.

It is not necessary that any consideration should pass at the time of the execution of the contract of real
mortgage. When the consideration is subsequent to the mortgage, the latter can take effect only when
the debt secured by it is created as a binding contract to pay. And when there is partial failure of
consideration, the mortgage becomes unenforceable to the extent of such failure. Where the
indebtedness actually owing to the holder of the mortgage is less than the sum named in the mortgage,
the mortgage cannot be enforced for more than the actual sum due. Since ISB failed to furnish the
P63,000 balance, the real estate mortgage of Tolentino became unenforceable to such extent. P63,000
is 78.75% of P80,000, hence the mortgage covering 100 ha is unenforceable to the extent of 78.75 ha.
The mortgage covering the remainder of 21.25 ha subsists as a security for the P17,000 debt.
CENTRAL BANK OF THE PHILIPPINES and HON. JOSE B. FERNANDEZ, petitioners, vs. HON. COURT OF
APPEALS, RTC JUDGE TEOFILO GUADIZ, JR., PRODUCERS BANK OF THE PHILIPPINES and PRODUCERS
PROPERTIES, INC., respondents. ATTY. LEONIDA G. TANSINSIN-ENCARNACION, as the Acting Conservator
of Producers Bank of the Philippines, and PRODUCERS BANK OF THE PHILIPPINES, petitioners, vs.
PRODUCERS BANK OF THE PHILIPPINES, allegedly represented by HENRY L. CO, HON. COURT OF
APPEALS, HON. TEOFILO GUADIZ, JR., and the "LAW FIRM OF QUISUMBING, TORRES AND EVANGELISTA"
(RAMON J. QUISUMBING, VICENTE TORRES,RAFAEL E. EVANGELISTA, JR. and CHRISTOFER L. LIM),
respondents

. G.R. No. 88353, EN BANC, May 8, 1992, Davide Jr., J

Board of Directors of a bank is not prohibited to file suit to lift the conservatorship over it, to question
the validity of the conservator's fraudulent acts and abuses and the arbitrary action of the MB provided
following requisites should be complied with:

1. The appropriate pleading must be filed by the stockholders of record representing the majority of the
capital stock of the bank in the proper court;

2. Said pleading must be filed within ten (10) days from receipt of notice by said majority stockholders
of the order placing the bank under conservatorship; and

3. There must be convincing proof, after hearing, that the action is plainly arbitrary and made in bad
faith.

In the instant case, however, PBP’s complaint was filed after the expiration of the 10-day period
deferred to above. Accordingly, the order placing PBP under conservatorship had long become final and
its validity could no longer be litigated upon before the trial court. Furthermore, it is important to note
that the action instituted was not for the purpose of having the conservatorship lifted but it is an action
for damage which must nevertheless be dismissed for failure of the PBP to pay the correct docket fees.

FACTS Central Bank (CB) discovered that certain questionable loans extended by Producer’s Bank of the
Philippines (PBP), totalling approximately P300 million (the paid-in capital of PBP amounting only to P
140.544 million, were fictitious as they were extended, without collateral, to certain interests related to
PBP owners themselves.

Subsequently and during the same year, several blind items about a family-owned bank in Binondo
which granted fictitious loans to its stockholders appeared in major newspapers which triggered a bank-
run in PBP and resulted in continuous over-drawings on the bank’s demand deposit account with the
Central Bank; reaching to P 143.955 million. Hence, on the basis of the report submitted by the
Supervision and Examination Sector, the Monetary Board (MB), placed PBP under conservatorship.

PBP submitted a rehabilitation plan to the CB which proposed the transfer to PBP of 3 buildings owned
by Producers Properties, Inc. (PPI), its principal stockholder and the subsequent mortgage of said
properties to the CB as collateral for the bank’s overdraft obligation but which was not approved due to
disagreements between the parties.

Since no other rehabilitation program was submitted by PBP for almost 3 years its overdrafts with the CB
continued to accumulate and swelled to a staggering P1.023 billion. Consequently, the CB Monetary
Board decided to approve in principle what it considered a viable rehabilitation program for PBP. There
being no response from both PBP and PPI on the proposed rehabilitation plan, the MB issued a
resolution instructing Central Bank management to advise the bank that the conservatorship may be
lifted if PBP complies with certain conditions.
Without responding to the communications of the CB, PBP filed a complaint with the Regional Trial
Court of Makati against the CB, the MB and CB Governor alleging that the resolutions issued were
arbitrary and made in bad faith. Respondent Judge issued a temporary restraining order and
subsequently a writ of preliminary injunction. CB filed a motion to dismiss but was denied and ruled that
the MB resolutions were arbitrarily issued. CB filed a petition for certiorari before the Court of Appeals
seeking to annul the orders of the trial court but CA affirmed the said orders. Hence this petition.

The first case, G.R. No. 88353, is a petition for review on certiorari of the decision of 6 October 19882
and the resolution of 17 May 19893 of the respondent Court of Appeals in C.A.-G.R. No. SP13624. The
impugned decision upheld the 21 September 1987 Order of respondent Judge Teofilo Guadiz, Jr. in Civil
Case No. 17692 granting the motion for issuance of a writ of preliminary injunction –– enjoining
petitioners Central Bank of the Philippines (CB), Mr. Jose B. Fernandez, Jr. and the Monetary Board, or
any of their agencies from implementing Monetary Board (MB) Resolutions No. 649 and No. 751, or
from taking the threatened appropriate alternative action –– and the 27 October 1987 Order in the
same case denying petitioners' motion to dismiss and vacate said injunction. The challenged resolution,
on the other hand, denied petitioners' motion for reconsideration of the 6 October 1988 decision.

The second case, G.R. No. 92943, is a petition for review directed principally against the 17 January 1990
decision of the respondent Court of Appeals in C.A.-G.R. SP No. 16972. The said decision dismissed the
petition therein filed and sustained the various Orders of the respondent Judge in Civil Case No. 17692,
but directed the plaintiffs therein to amend the amended complaint by stating in its prayer the specific
amount of damages which Producers Bank of the Philippines (PBP) claims to have sustained as a result
of losses of operation and the conservator's bank frauds and abuses; the Clerk of Court was also ordered
to determine the amount of filing fees which should be paid by the plaintiffs within the applicable
prescriptive or reglementary period.

ISSUES Whether an approval from the CB is necessary for the bank to bring action before the court?
Whether the court is correct in issuing the preliminary injunction?

RULING No, but the Court in this case ruled that the case filed by PB should be dismissed. A conservator,
once appointed, takes over the management of the bank and assumes exclusive powers to oversee
every aspect of the bank's operations and affairs. However, it must be stressed that a bank retains its
juridical personality even if placed under conservatorship; it is neither replaced nor substituted by the
conservator. Hence, the approval of the CB is not necessary where the action was instituted by the bank
through the majority of the bank's stockholders. To contend otherwise would be to defeat the rights of
such stockholders under the fifth paragraph of Section 29 of the Central Bank Act.

Therefore, the rule is the Board of Directors of a bank is not prohibited to file suit to lift the
conservatorship over it, to question the validity of the conservator's fraudulent acts and abuses and the
arbitrary action of the MB provided following requisites should be complied with:

1. The appropriate pleading must be filed by the stockholders of record representing the majority of the
capital stock of the bank in the proper court;

2. Said pleading must be filed within ten (10) days from receipt of notice by said majority stockholders of
the order placing the bank under conservatorship; and

3. There must be convincing proof, after hearing, that the action is plainly arbitrary and made in bad
faith.

In the instant case, however, PBP’s complaint was filed after the expiration of the 10-day period
deferred to above. Accordingly, the order placing PBP under conservatorship had long become final and
its validity could no longer be litigated upon before the trial court. Furthermore, it is important to note
that the action instituted was not for the purpose of having the conservatorship lifted but it is an action
for damage which must nevertheless be dismissed for failure of the PBP to pay the correct docket fees.

The court is not correct in issuing the preliminary injunction. It is well-settled that the closure of a bank
may be considered as an exercise of police power. The action of the MB on this matter is final and
executory. Such exercise may nonetheless be subject to judicial inquiry and can be set aside if found to
be in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of
jurisdiction. The records of this case revealed that there was neither arbitrariness nor bad faith in the
issuance of MB Resolutions ordering for conservatorship.

It must be stressed in this connection 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. It is then Government's responsibility to see to it that the
financial interests of those who deal with banks and banking institutions, as depositors or otherwise, are
protected. Hence, the CB is 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.
FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and MERCURIO
RIVERA, petitioners, vs.COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO DEMETRIA,
and JOSE JANOLO

G.R. No. 115849, THIRD DIVISION, January 24, 1996, Panganiban

While admittedly, the Central Bank law gives vast and far-reaching powers to the conservator of a bank,
it must be pointed out that such powers must be related to the "(preservation of) the assets of the bank,
(the reorganization of) the management thereof and (the restoration of) its viability." Such powers,
enormous and extensive as they are, cannot extend to the post-facto repudiation of perfected
transactions, otherwise they would infringe against the non-impairment clause of the Constitution. In
the case, it is not disputed that the bank was under a conservator placed by the Central Bank of the
Philippines during the time that the negotiation and perfection of the contract of sale took place.
Moreover, there was absolutely no evidence that the Conservator, at the time the contract was
perfected, actually repudiated or overruled said contract of sale. The bank never objected to the sale,
what it unilaterally repudiated was—not the contract —but the authority of Rivera to make a binding
offer —and which unarguably came months after the perfection of the contract.

FACTS Producer Bank of the Philippines acquired six parcels of land located at Laguna. The property
used to be owned by BYME Investment and Development Corporation which had them mortgaged with
the bank as collateral for a loan. The original plaintiffs, Demetrio Demetria and Jose O. Janolo, wanted to
purchase the property and thus initiated negotiations for that purpose. Plaintiffs, met with defendant
Mercurio Rivera, Manager of the Property Management Department of the defendant bank. After the
meeting, plaintiff Janolo made a formal purchase offer to the bank in the amount of 3.5M but counter
offered by Rivera(Bank) with 5.5M. Janolo revised there offer to 4.25M. but received no response but
Luis co and rivera had a meeting and in the end the offer of Mr. Rivera was accepted.

The conservator of the bank was replaced by an Acting Conservator in the person of defendant Leonida
T. Encarnacion whereby they stated that Rivera’s proposal was under study yet as of this time by the
newly created committee for submission to the newly designated Acting Conservator of the
bank.Thereafter transpired was a series of demands by the plaintiffs for compliance by the bank with
what plaintiff considered as a perfected contract of sale, which demands were in one form or another
refused by the bank.

Plaintiffs filed a suit for specific performance with damages against the bank, Acting Conservator
Encarnacion. The basis of the suit was that the transaction had with the bank resulted in a perfected
contract of sale, The defendants took the position that there was no such perfected sale because the
defendant Rivera is not authorized to sell the property, and that there was no meeting of the minds as
to the price.

ISSUE Whether or not the bank conservator has the unilateral power to repudiate the authority of the
bank officers and/or to revoke the said contract

RULING Section 28-A - Whenever, on the basis of a report submitted by the appropriate supervising or
examining department, the Monetary Board finds that a bank or a non-bank financial intermediary
performing quasi-banking functions is in a state of continuing inability or unwillingness to maintain a
state of liquidity deemed adequate to protect the interest of depositors and creditors, the Monetary
Board may appoint a conservator to take charge of the assets, liabilities, and the management of that
institution, collect all monies and debts due said institution and exercise all powers necessary to
preserve the assets of the institution, reorganize the management thereof, and restore its viability. He
shall have the power to overrule or revoke the actions of the previous management and board of
directors of the bank or non-bank financial intermediary performing quasi-banking functions, any
provision of law to the contrary notwithstanding, and such other powers as the Monetary Board shall
deem necessary

While admittedly, the Central Bank law gives vast and far-reaching powers to the conservator of a bank,
it must be pointed out that such powers must be related to the "(preservation of) the assets of the bank,
(the reorganization of) the management thereof and (the restoration of) its viability."

Such powers, enormous and extensive as they are, cannot extend to the post-facto repudiation of
perfected transactions, otherwise they would infringe against the non-impairment clause of the
Constitution.

Section 28-A merely gives the conservator power to revoke contracts that are, under existing law,
deemed to be defective. Hence, the conservator merely takes the place of a bank's board of directors, so
what the board cannot do; the conservator cannot do either. His power is however, not unilateral as he
cannot simply repudiate valid obligations of the Bank. His authority would be only to bring court actions
to assail such contracts.

In the case, it is not disputed that the bank was under a conservator placed by the Central Bank of the
Philippines during the time that the negotiation and perfection of the contract of sale took place.
Moreover, there was absolutely no evidence that the Conservator, at the time the contract was
perfected, actually repudiated or overruled said contract of sale. The bank never objected to the sale,
what it unilaterally repudiated was—not the contract —but the authority of Rivera to make a binding
offer —and which unarguably came months after the perfection of the contract. The conservator’s
authority would be only to bring court actions to assail such contracts —as he has already done so in the
instant case.

EMERITO M. RAMOS, SUSANA B. RAMOS, EMERITO B. RAMOS, JR., JOSEFA RAMOS DE LA RAMA,
HORACIO DE LA RAMA, ANTONIO B. RAMOS, FILOMENA RAMOS LEDESMA, RODOLFO RAMOS, VICTORIA
RAMOS TANJUATCO, and TEOFILO TANJUATCO, petitioners, vs. CENTRAL BANK OF THE PHILIPPINES,
respondent. G.R. No. L-29352, EN BANC, October 4, 1971, Concepcion Jr., J

Even in the absence of contract, the record plainly shows that the CB made express representations to
petitioners herein that it would support the OBM, and avoid its liquidation if the petitioners would
execute (a) the Voting Trust Agreement turning over the management of OBM to the CB or its
nominees, and (b) mortgage or assign their properties to the Central Bank to cover the overdraft
balance of OBM to which petitioners have complied with.

FACTS Respondent bank enforced Monetary Board Resolution No. 1263 excluding the Overseas Bank of
Manila (OBM) from clearing with the Central Bank and from lending operations for various violations of
the banking laws and implementing regulations. Herein petitioners, majority and controlling
stockholders of OBM, alleges that the latter became financially distressed because of this suspension
and the deprivation by respondent of all the usual credit facilities and accommodations accorded to the
other banks. Thereafter, petitioner Ramos and the OBM management finally met with respondent
respondent on the necessity and urgency of rehabilitating the OBM through the extension of necessary
financial assistance. Respondent informed petitioner that if his bank is thrown out of clearing, the
Central Bank will proceed in accordance with the existing policy under which he and other stockholders
representing a majority will have to sign a trusteeship agreement with the Philippine National Bank
pursuant to which the Overseas Bank will be managed by the Philippine National Bank. The petitioners
then executed the Voting Trust Agreement and conveyed by way of mortgage to the CB all their private
properties and holdings to secure the obligations of the OBM to the CB. The Superintendent of Banks
reported that the condition of the OBM was one of insolvency, calling for the liquidation of OBM.
The Central Bank governor wrote to the petitioner Ramos, reiterating the need for the OBM
stockholders to execute a voting trust agreement "to stave of liquidation", and requiring the execution
of the Voting Trust Agreement by the OBM stockholders and of the mortgage of their properties to
secure OBM obligations to the Central Bank and the endorsement of the shares of stock held by them in
their corporations and enterprises. Eventually, however, the Superintendent of Banks recommended to
the Monetary Board that OBM be liquidated, Petitioners aver that no adequate financial assistance was
granted to the OBM after the execution of the Voting Trust Agreement, that adequate and necessary
financial assistance to stave off liquidation, is legally demandable, and that in violation of its obligations,
the CB, "after eight months of delay", adopted the questioned resolutions, without notice to or hearing
the petitioners.

The petitioners file petition Certiorari, Prohibition and Mandamus with prayer for the issuance of a writ
of preliminary injunction to restrain respondent Central Bank of the Philippines (hereinafter designated
as the CB) from enforcing and implementing the Monetary Board Resolution No. 1263, adopted on 30
July 1968, excluding the Overseas Bank of Manila (hereinafter termed the OBM) from clearing with the
Central Bank, that was ordered implemented on 31 July 1968 (Annex "11"), and Resolution No. 1290,
adopted on 1 August 1968, granting authority to the OBM Board of Directors to suspend operations
thereof, which was implemented on 2 August 1968.

ISSUES Whether or not the CB had agreed to rehabilitate, normalize and stabilize OBM.

RULING This Court held that, in addition to requiring a mortgage or assignment of petitioners' personal
properties to CB, the memorandum required the stockholders of OBM to subscribe to an appropriate
trust agreement, with the only difference that instead of the Philippine National Bank, the trust would
be executed in favor of the CB as trustee to enable it to reorganize and transfer management to a
nominee of the Monetary Board. Moreover, the CB Governor stated that as a measure to stave off
liquidation, a voting trust agreement should be executed by petitioner Ramos and his family and the
corporations controlled by petitioner in favor of the Superintendent of Banks, in an instrument similar to
the one executed by stockholders of the Republic Bank in favor of the Philippine National Bank. The
reference to the case of the Republic Bank clarifies the purpose and scope of the demand for a voting
trust agreement "as a measure to stave off liquidation"; for it is well-known, and it is not denied, that
when the Republic Bank previously became distressed, the CB had advanced funds, to rehabilitate it and
allow it to resume operating. While the trust agreement on its face creates obligations only for the
Superintendent of Banks as trustee, his commitments were undeniably those of the Central Bank itself,
since it was the latter that had from the very beginning insisted upon such voting trust being executed.

Considerating the execution of the voting trust agreement by the petitioner stockholders of OBM, and of
the mortgage or assignment of their personal properties to the respondent, the latter had agreed to
announce its readiness to support the new management "in order to allay the fears of depositors and
creditors", and to stave off liquidation" by providing adequate funds for "the rehabilitation,
normalization and stabilization" of the OBM, in a manner similar to what the CB had previously done
with the Republic Bank. While no express terms in the documents refer to the provision of funds by CB
for the purpose, the same is necessarily implied, for in no other way could it rehabilitate, normalize and
stabilize a distressed bank. Even in the absence of contract, the record plainly shows that the CB made
express representations to petitioners herein that it would support the OBM, and avoid its liquidation if
the petitioners would execute (a) the Voting Trust Agreement turning over the management of OBM to
the CB or its nominees, and (b) mortgage or assign their properties to the Central Bank to cover the
overdraft balance of OBM to which petitioners have complied with.

Moreover, respondent's allegation that the Voting Trust agreement was binding only upon the trustee,
the Superintendent of Banks is untenable since the trust could have no private interest in the matters.
Not only that, but CB subsequently caused its own team of nominees to take over the direction and
management of the OBM, through the voting of the shares conveyed to the trustee. Even more the CB
gave notice that it would not extend or renew the voting trust, and attempted to turn back the shares
covered by it to the petitioners, thereby recognizing the obligations under the agreement as its own,
and repudiating its original disclaimer thereof.
This Court is constrained to agree that CB attempted to evade rehabilitating OBM despite its promises.
By the ordered liquidation, depositors and other creditors would have to share in the assets of the OBM,
while the CB's own credits for advances were secured by the new mortgages it had obtained from the
petitioners, thereby gaining for it what amounts to an illegal preference. To cap it all, the CB disregarded
its representations and promises to rehabilitate and normalize the financial condition of OBM, as it had
previously done with the Republic Bank, without even offering to discharge the mortgages, given by
petitioners in consideration for its promises, or notifying petitioners that it desired to rescind its
contract, or bringing action in court for the purpose. And all the while CB knew that the situation of the
OBM was deteriorating daily, with penalties at 3% per month continually accumulating, while its
creditors, depositors and stockholders awaited the promised aid that never came, and which apparently
CB never intended to give.
CENTRAL BANK OF THE PHILIPPINES, Petitioner, vs. HONORABLE COURT OF APPEALS, ISIDRO E.
FERNANDEZ, and JESUS R. JAYME, Respondents.

G.R. No. L-50031-32, SECOND DIVISION, July 27, 1981, Concepcion Jr. J

While the closure and liquidation of a bank may be considered an exercise of police power, the validity
of such exercise of police power is subject to judicial inquiry and could be set aside if it is either
capricious, discriminatory, whimsical, arbitrary, unjust, or a denial of due process and equal protection
clauses of the Constitution.

The arbitrariness and bad faith of Central Bank is evident from the fact that it pressured Fernandez and
Jayme into relinquishing the management and control of Provident Savings Bank to Iglesia Ni Kristo
which did not have any intention of restoring the bank into its former sound financial condition but
whose interest was merely to recover its deposits from the bank and thereafter allowing INK to
mismanage the bank until the bank’s financial deterioration and subsequent closure. Central Bank acted
whimsically and withdrew its commitment to support the bank to the detriment of the latter

FACTS Isidro Fernandez and Jesus Jayme are the majority and controlling stockholders of Provident
Bank. When Provident Savings Bank experienced bankrun, which was triggered off by adverse publicity
in the newspapers, radio and television of investigations conducted by Congress that some banks were
unable to pay deposit withdrawals. The Bank was forced to borrow funds from other banks and the
Central Bank but despite the borrowing, the funds remained insufficient to satisfy the withdrawals

Hence, the Isidro Fernandez and Jesus Jayme appealed to Central Bank for further assistance. However,
the Central Bank replied to them stating that they have to relinquish and turnover the management and
control of the bank to Iglesia ni Kristo (INK) affiliated entity Eagle Broadcasting in order for it to assist the
distressed provident. Under the agreement, EB agreed to purchase 52,000 capital stock with provident.
The Eagle Broadcasting Corporation, however, did not comply with its commitment to purchase 53,000
common shares of stock and to convert its deposits into equity. Instead, the new management of
PROVIDENT caused the conversion of the deposits of Iglesia Ni Kristo into “bills payable” earning 12%
interest, which were subsequently withdrawn. 4 PROVIDENT, under the new management, also failed to
comply with the Monetary Board directives relative to the rehabilitation of the bank so that it restored
the interest rate of 12% on outstanding loans.

These acts were made despite the presence of Central Bank examiners. Subsequently, Central Bank
Monetary Board issued a resolution declaring the closure of Provident Savings Bank and ordering its
liquidation. Hence, Fernandez and Jayme filed with the Court of First Instance a petition for certiorari,
prohibition, and mandamus against Central Bank to annul the resolution and restrain CB from
proceeding with the liquidation which the court granted.

Consequently, on September 28, 1972, Fernandez and Jayme filed a petition for certiorari, prohibition
and mandamus and/or specific performance, with preliminary injunction, against the Central Bank and
Eagle Broadcasting Corporation, with the Court of First Instance of Manila, to annul and set aside the
said Monetary Board Resolution No. 1766, dated September 15, 1972 and to restrain the Central Bank
from liquidating PROVIDENT, and, instead, to order the Central Bank to comply with its commitments to
the petitioners and reorganize and rehabilitate PROVIDENT in the manner it did to the Overseas Bank of
Manila, as well as for damages and costs.
Eagle Broadcasting Corporation, upon the other hand, blames both the Central Bank and Fernandez and
Jayme for the failure of PROVIDENT.

On December 11, 1972, the Central Bank filed a Petition for Assistance and Supervision in Liquidation of
the Provident Savings Bank with the Court of First Instance of Manila, docketed therein as Sp. Proc. No.
89219, entitled: “In re: Liquidation of the Provident Savings Bank; Central Bank of the Philippines,
petitioner.”

Upon motion, the two cases were heard jointly, 14 and on February 20, 1974, judgment was rendered
wherein the writs prayed for in the amended petition, except the writ of mandamus, are hereby
granted, and Resolution No. 1766 dated September 15, 1972 of the Monetary Board of respondent
Central Bank — as well as any and all resolutions issued in pursuance thereof, are hereby annulled and
set aside; and said respondent Central Bank is ordered to desist from liquidating PROVIDENT and is
ordered to specifically perform its obligation to reorganize and rehabilitate the Provident Savings Bank,
following the precedent set in the case of the reorganization or rehabilitation of the Republic Bank and
the course of action expected to be taken in the implementation of the final decision of the Supreme
Court in the case of RAMOS vs. CENTRAL BANK, 41 SCRA 565, with respect to the Overseas Bank of
Manila, within two cranad(2) years from finality of this decision.

The Central Bank and the Eagle Broadcasting Corporation appealed and after appropriate proceedings,
the herein respondent Court of Appeals rendered the disputed decision which affirmed the decision
appealed from but modified to exclude the award of damages and attorney’s fees

ISSUE Whether or not the closure of the bank may be subject to judicial inquiry and whether or not the
resolution was issued arbitrarily and in bad faith.

RULING Yes. Having decided in 1968 that PROVIDENT was salvageable and could be permitted to
continue in business with its support, provided there is change in management and introduction of
reforms, the CB should have been vigilant in its overseeing of the faithful compliance by the parties of
the terms of the Memorandum Agreement, as well as in supervising and controlling the operations of
the bank under the management of EAGLE. The persuasive, nay, compulsory, powers of the CB to
accomplish these cannot be doubted. The CB exercises such control of private banks under its broad
powers that it can decree life or death of any bank by simply withholding from it the facilitates that it
normally accords banks.

While the closure and liquidation of a bank may be considered an exercise of police power, the validity
of such exercise of police power is subject to judicial inquiry and could be set aside if it is either
capricious, discriminatory, whimsical, arbitrary, unjust, or a denial of due process and equal protection
clauses of the Constitution. The arbitrariness and bad faith of Central Bank is evident from the fact that
it pressured Fernandez and Jayme into relinquishing the management and control of Provident Savings
Bank to Iglesia Ni Kristo which did not have any intention of restoring the bank into its former sound
financial condition but whose interest was merely to recover its deposits from the bank and thereafter
allowing INK to mismanage the bank until the bank’s financial deterioration and subsequent closure.
Central Bank acted whimsically and withdrew its commitment to support the bank to the detriment of
the latter. If jurisdiction was already acquired ito delve into the validity of Resolutions 1263 and 1290
(and this the Central Bank admits), there is no cogent reason why, after such jurisdiction had been
acquired, the Court should be deprived thereof by the subsequent adoption of Resolution 1333,
particularly because the latter, in relation to the antecedent facts, appears to be no more than a
deliberate effort to evade the jurisdiction of this Court, and have the case thrown back to the Court of
First Instance. The Central Bank, by promising to rehabilitate the bank, is estopped from closing it down.
The conduct of the Central Bank reveals a calculated attempt to evade rehabilitating OBM despite its
promises. Hence, respondent Central Bank of the Philippines is directed to comply with it obligations
under the voting trust agreement, and to desist from taking action in violation thereof.

The Central Bank made express representations to petitioners herein that it would support the OBM,
and avoid its liquidation if the petitioners would execute (a) the voting trust agreement turning over the
management of OBM to the Central Bank or its nominees, and (b) mortgage or assign their properties to
the Central Bank to cover the overdraft balance of OBM. The petitioners having complied with these
conditions and parted with value to the profit of the CB (which thus acquired additional security for its
own advances), the Central Bank may not now renege on its representations and liquidate the OBM, to
the detriment of its stockholders, depositors and other creditors, under the rule of promissory estoppel.

CENTRAL BANK OF THE PHILIPPINES and ACTING DIRECTOR ANTONIO T. CASTRO, JR. OF THE
DEPARTMENT OF COMMERCIAL AND SAVINGS BANK, in his capacity as statutory receiver of Island
Savings Bank, petitioners, vs. THE HONORABLE COURT OF APPEALS and SULPICIO M. TOLENTINO,
respondents.

G.R. No. L-45710, SECOND DIVISION, October 3, 1985Makasiar, J

Since ISB was in default under the agreement, Tolentino may choose between specific performance or
rescission, but since ISB is now prohibited from doing further business, the only remedy left is rescission
only for the P63,000 balance of the loan.

FACTS

April 28, 1965 - Island Savings Bank (ISB) approved the loan application for P80,000 of Sulpicio Tolentino,
who, as a security for the loan, also executed a real estate mortgage over his 100-ha land. The approved
loan application called for P80,000 loan, repayable in semi-annual installments for a period of 3 years,
with 12% interest.

May 22, 1965 – a mere P17,000 partial release of the loan was made by ISB, and Tolentino and his wife
Edita signed a promissory note for P17,000 at 12% annual interest, payable within 3 years from the date
of execution of the contract at semi-annual installments of P3,459.

An advance interest for the P80,000 loan covering a 6-mo period amounting to P4,800was deducted
from the partial release of P17,000, but this was refunded to Tolentino on July 23, 1965, after being
informed by ISB that there was no fund yet available for the release of the P63,000 balance.

Aug. 13, 1965 – the Monetary Board of the Central Bank issued Resolution No. 1049, which prohibited
ISB from making new loans and investments, after finding that it was suffering liquidity problems.

June 14, 1968 – the Monetary Board issued Resolution No. 967, which prohibited ISB from doing
business in the Philippines, after finding that it failed to put up the required capital to restore its
solvency.

Aug. 1, 1968 – ISB, in view of non-payment of the P17,000 covered by the promissory note, filed an
application for the extra-judicial foreclosure of the real estate mortgage covering the 100-ha land; and
the sheriff scheduled auction.

Tolentino filed a petition with the CFI for injunction, specific performance or rescission and damages
with preliminary injunction, alleging that since ISB failed to deliver the P63,000 remaining balance of the
loan, he is entitled to specific performance by ordering ISB to deliver it with interest of 12% per annum
from April 28, 1965, and if said balance cannot be delivered, to rescind the real estate mortgage.

CFI issued a TRO enjoining ISB from continuing with the foreclosure of the mortgage, however, after
finding Tolentino’s petition unmeritorious, ordered the latter to pay ISB P17,000 plus legal interest and
legal charges and lifting the TRO so the sheriff may proceed with the foreclosure.

CA, on appeal by Tolentino, modified CFI’s decision by affirming dismissal of Tolentino’s petition for
specific performance, but ruled that ISB can neither foreclose the mortgage nor collect the P17,000 loan.

ISSUES 1) WON the action of Tolenitno for specific performance can prosper. NO.

2) WON Tolentino is liable to pay the P17,000 debt covered by the promissory note. YES.
3) WON Tolentino’s real estate mortgage can be foreclosed to satisfy the P17,000 if his liability to pay
therefor subsists. NO.

RULING 1) Since ISB was in default under the agreement, Tolentino may choose between specific
performance or rescission, but since ISB is now prohibited from doing further business, the only remedy
left is Rescission only for the P63,000 balance of the loan.

2) The bank was deemed to have complied with its reciprocal obligation to furnish a P17,000 loan. The
promissory note gave rise to Tolentino’s reciprocal obligation to pay such loan when it falls due and his
failure to pay the overdue amortizations under the promissory note made him a party in default, hence
not entitled to rescission (Art. 1191, CC). ISB has the right to rescind the promissory note, being the
aggrieved party

Since both parties were in default in the performance of their reciprocal obligations, both are liable for
damages. In case both parties have committed a breach of their reciprocal obligations, the liability of the
first infractor shall be equirably tempered by the courts (Art. 1192, CC). The liability of ISB for damages
in not furnishing the entire loan is offset by the liability of Tolentino for damages (penalties and
surcharges) for not paying his overdue P17,000 debt. Since Tolentino derived some benefit for his use of
the P17,000, he should account for the interest thereon (interest was not included in the offsetting).

3) The fact that when Tolentino executed his real estate mortgage, no consideration was then in
existence, as there was no debt yet because ISB had not made any release on the loan, does not make
the real estate mortgage void for lack of consideration.

It is not necessary that any consideration should pass at the time of the execution of the contract of real
mortgage. When the consideration is subsequent to the mortgage, the latter can take effect only when
the debt secured by it is created as a binding contract to pay. And when there is partial failure of
consideration, the mortgage becomes unenforceable to the extent of such failure. Where the
indebtedness actually owing to the holder of the mortgage is less than the sum named in the mortgage,
the mortgage cannot be enforced for more than the actual sum due.

Since ISB failed to furnish the P63,000 balance, the real estate mortgage of Tolentino became
unenforceable to such extent. P63,000 is 78.75% of P80,000, hence the mortgage covering 100 ha is
unenforceable to the extent of 78.75 ha. The mortgage covering the remainder of 21.25 ha subsists as a
security for the P17,000 debt.
SPOUSES ROMEO LIPANA and MILAGROS LIPANA, petitioners, vs. DEVELOPMENT BANK OF RIZAL,
respondent.

G.R. No. 73884, SECOND DIVISION, September 24, 1987, PARAS, J

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; whenever
it is necessary to accomplish the aims of justice; or when certain facts and circumstances transpired
after the judgment became final which could render the execution of the judgment unjust. 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.

FACTS During the period from 1982 to January, 1984, herein petitioners opened and maintained both
time and savings deposits with 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 were made but the bank did not respond. The 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. The respondent Judge ordered the issuance
of a writ of attachment. Thereafter, judgment was rendered in favor of the petitioners.

Meanwhile the Monetary Board issued a resolution 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. Consequently, the bank was placed under receivership. Thereafter, the petitioners filed a
Motion for Execution Pending Appeal. The respondent judge ordered the issuance of a writ of execution.
However, the bank filed for a Stay of execution and the same was granted.

The 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. The respondent Judge
ordered the issuance of a writ of attachment. Thereafter, judgment was rendered in favor of the
petitioners. Thereafter, the petitioners filed a Motion for Execution Pending Appeal. The respondent
judge ordered the issuance of a writ of execution. However, the bank filed for a Stay of execution and
the same was granted. Later on, the petitioners filed a Motion to Lift Stay of Execution it was opposed
by respondent bank and in an order, respondent judge denied the said motion. Hence, the instant
petition. The petition was given due course and the parties were required to file their respective
memoranda which they subsequently complied with.

ISSUE Whether or not respondent judge could legally stay execution of judgment that has already
become final and executory.

RULING Yes. 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;
whenever it is necessary to accomplish the aims of justice; or when certain facts and circumstances
transpired after the judgment became final which could render the execution of the judgment unjust.

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.

OVERSEAS BANK OF MANILA, petitioner, vs.COURT OF APPEALS and NATIONAL WATERWORKS AND
SEWERAGE AUTHORITY, respondents.

G.R. No. L-45866, FIRST DIVISION, April 19, 1989, Narvasa, J

The suspension of operations which took place in August, 1968, could not possibly excuse
noncompliance with the obligations in question which matured in 1966. Again, the claim that the
Central Bank, by suspending the Overseas Bank's banking operations, had made it impossible for the
Overseas Bank to pay its debts, whatever validity might be accorded thereto, or the further claim that it
had fallen into a "distressed financial situation," cannot in any sense excuse it from its obligation to the
NAWASA, which had nothing whatever to do with the Central Bank's actuations or the events leading to
the bank's distressed state.

FACTS A contract of sale was executed between NAWASA and Bonifacio Regalado. By the authority of
NAWASA’s Board of Directors, the purchase price was placed under time deposit with Overseas Bank for
a period of six months. This was made so that refund may quickly be given to Regalado in the event that
his contract with NAWASA be disapproved by the Office of the President. A second payment was made
and the same was also placed under time deposit with Overseas Bank but this time, the maturity date is
after twelve months. Thereafter, NAWASA wrote a letter to the bank to request the withdrawal of the
first time deposit which has already matured. They also manifested that they would withdraw the
second one after 60 days.

Despite demands the bank failed to remit the value of the time deposit. However, they were able to pay
the interest. Upon the maturity of the second time deposit, NAWASA sent demand letters to the bank
but there was no response. NAWASA wrote a letter to Central Bank regarding the issue. Central Bank
ordered the bank to transfer the said funds to Philippine National Bank or to Development Bank of the
Philippines. Still, the bank did not respond. On August 1968, the Central bank released an order of
suspension of operations to Overseas Bank.

NAWASA thus brought suit to recover its deposits and damages. The Overseas Bank failed to file its
answer despite service of summons; it was declared in default; the Court received NAWASA's evidence
ex parte and on the basis thereof, thereafter rendered judgment by default. The Overseas Bank made no
effort whatever to have the order of default lifted, or to have the judgment by default reconsidered.
After being served with notice of the judgment, it i simply brought the case up to the Court of Appeals.

The Court of Appeals, in its own judgment dated January 26, 1 1977, declared the appeal to be without
merit and affirmed the decision against Overseas Bank. The petitioner bank now asks this Court through
a petition for review on certiorari to reverse the judgment by default of the Court of First Instance and
the affirming judgment of the Court of Appeals.

ISSUE Whether or not the order of default be reversed

RULING No. The first argument advanced by the Overseas Bank is that as of July 30,1 968, by reason of
"punitive action taken by the Central Bank," it had been prevented from undertaking banking operations
"which would have generated funds to pay not only its depositors and creditors but likewise, the
interests due on the deposits." The argument is palpably without merit. There is in the first place
absolutely no evidence of these facts in the record: and this is simply because the petitioner bank had
made no effort whatever to set aside the default order against it so that it could present evidence in its
behalf before the Trial Court. Moreover, the suspension of operations which took place in August, 1968,
could not possibly excuse non-compliance with the obligations in question which matured in 1966.
Again, the claim that the Central Bank, by suspending the Overseas Bank's banking operations, had
made it impossible for the Overseas Bank to pay its debts, whatever validity might be accorded thereto,
or the further claim that it had fallen into a "distressed financial situation," cannot in any sense excuse it
from its obligation to the NAWASA, which had nothing whatever to do with the Central Bank's
actuations or the events leading to the bank's distressed state.

Also futile is the petitioner's invocation of this Court's decision in G.R. No. L-29352, "Emerita M. Ramos,
et al. v. Central Bank," promulgated October 4, 1971 and subsequent resolutions 11 ordering the
"rehabilitation, normalization and stabilization of the Overseas Bank of Manila," and allegedly approving
the rehabilitation plan and a proposed procedure for the payment of the bank's obligations. Obviously,
the failure of the Court of Appeals to apply such a rehabilitation program to the case cannot be error, as
the petitioner deposits since the program was approved after the Appellate Court had rendered
judgment. Furthermore, that rehabilitation program or procedure of payment does not in any way
negate or diminish the indebtedness of the Overseas Bank to the NAWASA incurred in 1966, for
conceding full faith and credit to such a prescribed procedure of payment, it constitutes no obstacle to
determining the principal and interests of the debts at issue at this time.
BANCO FILIPINO SAVINGS AND MORTGAGE BANK VS. CENTRAL BANK

G.R. No. 70054, EN BANC, December 11, 1991, Medialdea, J

There is no question that under Section 29 of the Central Bank Act, the following are the mandatory
requirements to be complied with before a bank found to be insolvent is ordered closed and forbidden
to do business in the Philippines: Firstly, an examination shall be conducted by the head of the
appropriate supervising or examining department or his examiners or agents into the condition of the
bank; secondly, it shall be disclosed in the examination that the condition of the bank is one of
insolvency, or that its continuance in business would involve probable loss to its depositors or creditors;
thirdly, the department head concerned shall inform the Monetary Board in writing, of the facts; and
lastly, the Monetary Board shall find the statements of the department head to be true.

In the case at bar, We believe that the closure of the petitioner bank was arbitrary and committed with
grave abuse of discretion. Granting in gratia argumenti that the closure was based on justified grounds
to protect the public, the fact that petitioner bank was suffering from serious financial problems should
not automatically lead to its liquidation. Section 29 of the Central Bank provides that a closed bank may
be reorganized or otherwise placed in such a condition that it may be permitted to resume business with
safety to its depositors, creditors and the general public.

FACTS This case involves 9 consolidated cases. The first six cases involve the common issue of whether
or not the liquidator appointed by the respondent Central Bank has the authority to prosecute as well as
to defend suits, and to foreclose mortgages for and in behalf of the bank while the issue on the validity
of the receivership and liquidation of the latter is pending resolution in G.R. No. 7004. On the other
hand, the other three (3) cases, namely, G.R. Nos. 70054, which is the main case, 78767 and 78894 all
seek to annul and set aside M.B. Resolution No. 75 issued by respondents Monetary Board and Central
Bank on January 25, 1985.

G.R. Nos. 70054

Banco Filipino Savings and Mortgage Bank commenced operations on July 9, 1964. It has 89 operating
branches with more than 3 million depositors. It has an approved emergency advance of P119.7 million.
The Monetary Board placed Banco Filipino Savings and Mortgage Bank under conservatorship of Basilio
Estanislao. He was later replaced by Gilberto Teodoro as conservator on August 10, 1984. Gilberto
Teodoro submitted a report dated January 8, 1985 to respondent The Monetary Board on the
conservatorship of the bank. Subsequently, another report dated January 23, 1985 was submitted to the
Monetary Board by Ramon Tiaoqui regarding the major findings of examination on the financial
condition of Banco Filipino Savings and Mortgage Bank as of July 31, 1984, finding the bank one of
insolvency and illiquidity and provides sufficient justification for forbidding the bank from engaging in
banking. The Monetary Board ordered the closure of Banco Filipino and designated Mrs. Carlota P.
Valenzuela as Receiver.

Banco Filipino filed a complaint with the RTC to set aside the action of the Monetary Board placing the
bank under receivership and filed with the SC the petition for certiorari and mandamus. Carlota
Valenzuela, as Receiver and Arnulfo Aurellano and Ramon Tiaoqui as Deputy Receivers of Banco Filipino
submitted their report on the receivership of the bank to the Monetary Board, finding that the condition
of the banking institution continues to be one of insolvency, i.e., its realizable assets are insufficient to
meet all its liabilities and that the bank cannot resume business with safety to its depositors, other
creditors and the general public, and recommends the liquidation of the bank. Banco Filipino filed a
motion before the SC praying that a restraining order or a writ of preliminary injunction be issued to
enjoin respondents from causing the dismantling of Banco Filipino signs in its main office and 89
branches. The SC ordered the issuance of the temporary restraining order. The SC directed the
Monetary Board and Central Bank hold hearings at which the Banco Filipino should be heard.
This refers to nine (9) consolidated cases concerning the legality of the closure and receivership of
petitioner Banco Filipino Savings and Mortgage Bank (Banco Filipino for brevity) pursuant to the order of
respondent Monetary Board. Six (6) of these cases, namely, G.R. Nos. 68878, 77255-68, 78766, 81303,
81304 and 90473 involve the common issue of whether or not the liquidator appointed by the
respondent Central Bank (CB for brevity) has the authority to prosecute as well as to defend suits, and to
foreclose mortgages for and in behalf of the bank while the issue on the validity of the receivership and
liquidation of the latter is pending resolution in G.R. No. 7004. Corollary to this issue is whether the CB
can be sued to fulfill financial commitments of a closed bank pursuant to Section 29 of the Central Bank
Act. On the other hand, the other three (3) cases, namely, G.R. Nos. 70054, which is the main case,
78767 and 78894 all seek to annul and set aside M.B. Resolution No. 75 issued by respondents
Monetary Board and Central Bank on January 25, 1985.

ISSUES 1. Whether or not the liquidator appointed by the respondent Central Bank has the authority to
prosecute as well as to defend suits, and to foreclose mortgages for and in behalf of the bank while the
issue on the validity of the receivership and liquidation of the latter is pending resolution in G.R. No.
7004

2. Whether or not the Central Bank and the Monetary Board acted arbitrarily and in bad faith in finding
and thereafter concluding that petitioner bank is insolvent, and in ordering its closure on January 25,
1985.

RULING 1. Yes, the liquidator appointed by the respondent Central Bank has the authority to prosecute
as well as to defend suits, and to foreclose mortgages for and in behalf of the bank while the issue on
the validity of the receivership and liquidation of the latter is pending resolution in G.R. No. 7004. When
the issue on the validity of the closure and receivership of Banco Filipino bank was raised in G.R. No.
70054, pendency of the case did not diminish the powers and authority of the designated liquidator to
effect and carry on the administration of the bank. In fact when We adopted a resolute on August 25,
1985 and issued a restraining order to respondents Monetary Board and Central Bank, We enjoined
further acts of liquidation. Such acts of liquidation, as explained in Sec. 29 of the Central Bank Act are
those which constitute the conversion of the assets of the banking institution to money or the sale,
assignment or disposition of the s to creditors and other parties for the purpose of paying debts of such
institution. We did not prohibit however acts a as receiving collectibles and receivables or paying off
credits claims and other transactions pertaining to normal operate of a bank.

There is no doubt that the prosecution of suits collection and the foreclosure of mortgages against
debtors the bank by the liquidator are among the usual and ordinary transactions pertaining to the
administration of a bank. They did Our order in the same resolution dated August 25, 1985 for the
designation by the Central Bank of a comptroller Banco Filipino alter the powers and functions; of the
liquid insofar as the management of the assets of the bank is concerned. The mere duty of the
comptroller is to supervise counts and finances undertaken by the liquidator and to d mine the propriety
of the latter's expenditures incurred behalf of the bank. Notwithstanding this, the liquidator is
empowered under the law to continue the functions of receiver is preserving and keeping intact the
assets of the bank in substitution of its former management, and to prevent the dissipation of its assets
to the detriment of the creditors of the bank. These powers and functions of the liquidator in directing
the operations of the bank in place of the former management or former officials of the bank include
the retaining of counsel of his choice in actions and proceedings for purposes of administration.

Clearly, in G.R. Nos. 68878, 77255-58, 78766 and 90473, the liquidator by himself or through counsel has
the authority to bring actions for foreclosure of mortgages executed by debtors in favor of the bank. In
G.R. No. 81303, the liquidator is likewise authorized to resist or defend suits instituted against the bank
by debtors and creditors of the bank and by other private persons. Similarly, in G.R. No. 81304, due to
the aforestated reasons, the Central Bank cannot be compelled to fulfill financial transactions entered
into by Banco Filipino when the operations of the latter were suspended by reason of its closure. The
Central Bank possesses those powers and functions only as provided for in Sec. 29 of the Central Bank
Act.

2. Yes, the Monetary Board acted arbitrarily and in bad faith in finding and thereafter concluding that
petitioner bank is insolvent, and in ordering its closure on January 25, 1985. There is no question that
under Section 29 of the Central Bank Act, the following are the mandatory requirements to be complied
with before a bank found to be insolvent is ordered closed and forbidden to do business in the
Philippines: Firstly, an examination shall be conducted by the head of the appropriate supervising or
examining department or his examiners or agents into the condition of the bank; secondly, it shall be
disclosed in the examination that the condition of the bank is one of insolvency, or that its continuance
in business would involve probable loss to its depositors or creditors; thirdly, the department head
concerned shall inform the Monetary Board in writing, of the facts; and lastly, the Monetary Board shall
find the statements of the department head to be true. Anent the first requirement, the Tiaoqui report,
submitted on January 23, 1985, revealed that the finding of insolvency of petitioner was based on the
partial list of exceptions and findings on the regular examination of the bank as of July 31, 1984
conducted by the Supervision and Examination Sector II of the Central Bank of the Philippines Central
Bank. Clearly, Tiaoqui based his report on an incomplete examination of petitioner bank and outrightly
concluded therein that the latter's financial status was one of insolvency or illiquidity. It is evident from
the foregoing circumstances that the examination contemplated in Sec. 29 of the CB Act as a mandatory
requirement was not completely and fully complied with. Despite the existence of the partial list of
findings in the examination of the bank, there were still highly significant items to be weighed and
determined such as the matter of valuation reserves, before these can be considered in the financial
condition of the bank

It would be a drastic move to conclude prematurely that a bank is insolvent if the basis for such
conclusion is lacking and insufficient, especially if doubt exists as to whether such bases or findings
faithfully represent the real financial status of the bank. The actuation of the Monetary Board in closing
petitioner bank on January 25, 1985 barely four days after a conference with the latter on the
examiners' partial findings on its financial position is also violative of what was provided in the CB
Manual of Examination Procedures. Said manual provides that only after the examination is concluded,
should a pre-closing conference led by the examiner-in-charge be held with the officers/representatives
of the institution on the findings/exception, and a copy of the summary of the findings/violations should
be furnished the institution examined so that corrective action may be taken by them as soon as
possible (Manual of Examination Procedures, General Instruction, p. 14). It is hard to understand how a
period of four days after the conference could be a reasonable opportunity for a bank to undertake a
responsive and corrective action on the partial list of findings of the examiner-in-charge. In the instant
case, the basic standards of substantial due process were not observed. Time and again, We have held in
several cases, that the procedure of administrative tribunals must satisfy the fundamentals of fair play
and that their judgment should express a wellsupported conclusion.

In view of the foregoing premises, We believe that the closure of the petitioner bank was arbitrary and
committed with grave abuse of discretion. Granting in gratia argumenti that the closure was based on
justified grounds to protect the public, the fact that petitioner bank was suffering from serious financial
problems should not automatically lead to its liquidation. Section 29 of the Central Bank provides that a
closed bank may be reorganized or otherwise placed in such a condition that it may be permitted to
resume business with safety to its depositors, creditors and the general public.
CENTRAL BANK OF THE PHILIPPINES and HON. JOSE B. FERNANDEZ, petitioners, vs. HON. COURT OF
APPEALS, RTC JUDGE TEOFILO GUADIZ, JR., PRODUCERS BANK OF THE PHILIPPINES and PRODUCERS
PROPERTIES, INC., respondents. ATTY. LEONIDA G. TANSINSIN-ENCARNACION, as the Acting Conservator
of Producers Bank of the Philippines, and PRODUCERS BANK OF THE PHILIPPINES, petitioners, vs.
PRODUCERS BANK OF THE PHILIPPINES, allegedly represented by HENRY L. CO, HON. COURT OF
APPEALS, HON. TEOFILO GUADIZ, JR., and the "LAW FIRM OF QUISUMBING, TORRES AND EVANGELISTA"
(RAMON J. QUISUMBING, VICENTE TORRES,RAFAEL E. EVANGELISTA, JR. and CHRISTOFER L. LIM),
respondents.

G.R. No. 88353, EN BANC, May 8, 1992, Davide Jr., J

Board of Directors of a bank is not prohibited to file suit to lift the conservatorship over it, to question
the validity of the conservator's fraudulent acts and abuses and the arbitrary action of the MB provided
following requisites should be complied with:

1. The appropriate pleading must be filed by the stockholders of record representing the majority of the
capital stock of the bank in the proper court;

2. Said pleading must be filed within ten (10) days from receipt of notice by said majority stockholders of
the order placing the bank under conservatorship; and

3. There must be convincing proof, after hearing, that the action is plainly arbitrary and made in bad
faith.

In the instant case, however, PBP’s complaint was filed after the expiration of the 10-day period
deferred to above. Accordingly, the order placing PBP under conservatorship had long become final and
its validity could no longer be litigated upon before the trial court. Furthermore, it is important to note
that the action instituted was not for the purpose of having the conservatorship lifted but it is an action
for damage which must nevertheless be dismissed for failure of the PBP to pay the correct docket fees.

FACTS Central Bank (CB) discovered that certain questionable loans extended by Producer’s Bank of the
Philippines (PBP), totalling approximately P300 million (the paid-in capital of PBP amounting only to P
140.544 million, were fictitious as they were extended, without collateral, to certain interests related to
PBP owners themselves.

Subsequently and during the same year, several blind items about a family-owned bank in Binondo
which granted fictitious loans to its stockholders appeared in major newspapers which triggered a bank-
run in PBP and resulted in continuous over-drawings on the bank’s demand deposit account with the
Central Bank; reaching to P 143.955 million. Hence, on the basis of the report submitted by the
Supervision and Examination Sector, the Monetary Board (MB), placed PBP under conservatorship.

PBP submitted a rehabilitation plan to the CB which proposed the transfer to PBP of 3 buildings owned
by Producers Properties, Inc. (PPI), its principal stockholder and the subsequent mortgage of said
properties to the CB as collateral for the bank’s overdraft obligation but which was not approved due to
disagreements between the parties.

Since no other rehabilitation program was submitted by PBP for almost 3 years its overdrafts with the CB
continued to accumulate and swelled to a staggering P1.023 billion. Consequently, the CB Monetary
Board decided to approve in principle what it considered a viable rehabilitation program for PBP. There
being no response from both PBP and PPI on the proposed rehabilitation plan, the MB issued a
resolution instructing Central Bank management to advise the bank that the conservatorship may be
lifted if PBP complies with certain conditions.
Without responding to the communications of the CB, PBP filed a complaint with the Regional Trial
Court of Makati against the CB, the MB and CB Governor alleging that the resolutions issued were
arbitrary and made in bad faith. Respondent Judge issued a temporary restraining order and
subsequently a writ of preliminary injunction. CB filed a motion to dismiss but was denied and ruled that
the MB resolutions were arbitrarily issued. CB filed a petition for certiorari before the Court of Appeals
seeking to annul the orders of the trial court but CA affirmed the said orders. Hence this petition.

The first case, G.R. No. 88353, is a petition for review on certiorari of the decision of 6 October 19882
and the resolution of 17 May 19893 of the respondent Court of Appeals in C.A.-G.R. No. SP13624. The
impugned decision upheld the 21 September 1987 Order of respondent Judge Teofilo Guadiz, Jr. in Civil
Case No. 17692 granting the motion for issuance of a writ of preliminary injunction –– enjoining
petitioners Central Bank of the Philippines (CB), Mr. Jose B. Fernandez, Jr. and the Monetary Board, or
any of their agencies from implementing Monetary Board (MB) Resolutions No. 649 and No. 751, or
from taking the threatened appropriate alternative action –– and the 27 October 1987 Order in the
same case denying petitioners' motion to dismiss and vacate said injunction. The challenged resolution,
on the other hand, denied petitioners' motion for reconsideration of the 6 October 1988 decision.

The second case, G.R. No. 92943, is a petition for review directed principally against the 17 January 1990
decision of the respondent Court of Appeals in C.A.-G.R. SP No. 16972. The said decision dismissed the
petition therein filed and sustained the various Orders of the respondent Judge in Civil Case No. 17692,
but directed the plaintiffs therein to amend the amended complaint by stating in its prayer the specific
amount of damages which Producers Bank of the Philippines (PBP) claims to have sustained as a result
of losses of operation and the conservator's bank frauds and abuses; the Clerk of Court was also ordered
to determine the amount of filing fees which should be paid by the plaintiffs within the applicable
prescriptive or reglementary period.

ISSUES Whether an approval from the CB is necessary for the bank to bring action before the court?
Whether the court is correct in issuing the preliminary injunction?

RULING No, but the Court in this case ruled that the case filed by PB should be dismissed. A conservator,
once appointed, takes over the management of the bank and assumes exclusive powers to oversee
every aspect of the bank's operations and affairs. However, it must be stressed that a bank retains its
juridical personality even if placed under conservatorship; it is neither replaced nor substituted by the
conservator. Hence, the approval of the CB is not necessary where the action was instituted by the bank
through the majority of the bank's stockholders. To contend otherwise would be to defeat the rights of
such stockholders under the fifth paragraph of Section 29 of the Central Bank Act.

Therefore, the rule is the Board of Directors of a bank is not prohibited to file suit to lift the
conservatorship over it, to question the validity of the conservator's fraudulent acts and abuses and the
arbitrary action of the MB provided following requisites should be complied with:

1. The appropriate pleading must be filed by the stockholders of record representing the majority of the
capital stock of the bank in the proper court;

2. Said pleading must be filed within ten (10) days from receipt of notice by said majority stockholders of
the order placing the bank under conservatorship; and

3. There must be convincing proof, after hearing, that the action is plainly arbitrary and made in bad
faith.

In the instant case, however, PBP’s complaint was filed after the expiration of the 10-day period
deferred to above. Accordingly, the order placing PBP under conservatorship had long become final and
its validity could no longer be litigated upon before the trial court. Furthermore, it is important to note
that the action instituted was not for the purpose of having the conservatorship lifted but it is an action
for damage which must nevertheless be dismissed for failure of the PBP to pay the correct docket fees.

The court is not correct in issuing the preliminary injunction. It is well-settled that the closure of a bank
may be considered as an exercise of police power. The action of the MB on this matter is final and
executory. Such exercise may nonetheless be subject to judicial inquiry and can be set aside if found to
be in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of
jurisdiction. The records of this case revealed that there was neither arbitrariness nor bad faith in the
issuance of MB Resolutions ordering for conservatorship.

It must be stressed in this connection 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. It is then Government's responsibility to see to it that the
financial interests of those who deal with banks and banking institutions, as depositors or otherwise, are
protected. Hence, the CB is 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.
RURAL BANK OF SAN MIGUEL, INC. and HILARIO P. SORIANO, in his capacity as majority stockholder in
the Rural Bankof San Miguel, Inc., Petitioners, vs.MONETARY BOARD, BANGKO SENTRAL NG PILIPINAS
and PHILIPPINE DEPOSIT INSURANCE CORPORATION, Respondents.

G.R. No. 150886, FIRST DIVISION, February 16, 2007, Corona, J.

In RA 7653, only a "report of the head of the supervising or examining department" is necessary. The
absence of an examination before the closure of RBSM did not mean that there was no basis for the
closure order. Needless to say, the decision of the MB and BSP, like any other administrative body, must
have something to support itself and its findings of fact must be supported by substantial evidence. But
it is clear under RA 7653 that the basis need not arise from an examination as required in the old law.

FACTS Petitioner Rural Bank of San Miguel, Inc. (RBSM) was a domestic corporation engaged in banking.
On January 21, 2000, respondent Monetary Board (MB), the governing board of respondent Bangko
Sentral ng Pilipinas (BSP), issued Resolution No. 105 prohibiting RBSM from doing business in the
Philippines, placing it under receivership and designating respondent Philippine Deposit Insurance
Corporation (PDIC) as receiver.

On the basis of the comptrollership/monitoring report as of October 31, 1999 as reported by Mr.
Wilfredo B. Domo-ong, Director, Department of Rural Banks, , which report showed that [RBSM] (a) is
unable to pay its liabilities as they become due in the ordinary course of business; (b) cannot continue in
business without involving probable losses to its depositors and creditors; that the management of the
bank had been accordingly informed of the need to infuse additional capital to place the bank in a
solvent financial condition and was given adequate time within which to make the required infusion and
that no infusion of adequate fresh capital was made. RBSM filed a petition for certiorari and prohibition
to nullify the resolution placing it under receivership.

The Regional Trial Court and the Court of Appeals (CA) dismissed the petition. The CA found that RBSM
was granted with emergency loans as a last trenche. The emergency loan was for the sole purpose of
servicing and meeting withdrawals but RBSM did not use it for that purpose. Thereafter, RBSM declared
a bank holiday which prompted BSP to ecamine its books. The Comptroller report was submitted before
the MB and based on that, a closure and liquidation order was issued.

RBSM now argues that the resolution ordering the closure and liquidation of RBSM is void because there
was no prior complete examination but merely a report.

On January 31, 2000, petitioners filed a petition for certiorari and prohibition in the Regional Trial Court
(RTC) of Malolos, Branch 22 to nullify and set aside Resolution No. 105. However, on February 7, 2000,
petitioners filed a notice of withdrawal in the RTC and, on the same day, filed a special civil action for
certiorari and prohibition in the CA. On February 8, 2000, the RTC dismissed the case pursuant to Section
1, Rule 17 of the Rules of Court. In their petition before the CA, petitioners claimed that respondents MB
and BSP committed grave abuse of discretion in issuing Resolution No. 105. The petition was dismissed
by the CA on March 28, 2000. It held, among others, that the decision of the MB to issue Resolution No.
105 was based on the findings and recommendations of the Department of Rural Banks Supervision and
Examination Sector, the comptroller reports as of October 31, 1999 and December 31, 1999 and the
declaration of a bank holiday. Such could be considered as substantial evidence.

Pertinently, on June 9, 2000, on the basis of reports prepared by PDIC stating that RBSM could not
resume business with sufficient assurance of protecting the interest of its depositors, creditors and the
general public, the MB passed Resolution No. 966 directing PDIC to proceed with the liquidation of
RBSM under Section 30 of RA 7653. Hence this petition.
ISSUE Whether or not Sec. 30 of RA 7653 and applicable jurisprudence require a current and complete
examination of the bank before it can be closed and placed under receivership.

RULING No, a current and complete examination of the bank before it can be closed and placed under
receivership is not necessary.

The argument of RBSM was in accordance with the ruling in Banco Filipino vs. Monetary Board.
However, RBSM’s reliance on such ruling is misplaced because the case was decided using Sec. 29 of the
old law, RA 265. Thus in Banco Filipino, we ruled that an "examination [conducted] by the head of the
appropriate supervising or examining department or his examiners or agents into the condition of the
bank" is necessary before the MB can order its closure. However, RA 265, including Section 29 thereof,
was expressly repealed by RA 7653 which took effect in 1993. Resolution No. 105 was issued on January
21, 2000. Hence, petitioners’ reliance on Banco Filipino which was decided under RA 265 was misplaced.

In RA 7653, only a "report of the head of the supervising or examining department" is necessary. It is an
established rule in statutory construction that where the words of a statute are clear, plain and free
from ambiguity, it must be given its literal meaning and applied without attempted interpretation. The
word "report" has a definite and unambiguous meaning which is clearly different from "examination." A
report, as a noun, may be defined as "something that gives information" or "a usually detailed account
or statement."2 On the other hand, an examination is "a search, investigation or scrutiny."

What is being raised here as grave abuse of discretion on the part of the respondents was the lack of an
examination and not the supposed arbitrariness with which the conclusions of the director of the
Department of Rural Banks Supervision and Examination Sector had been reached in the report which
became the basis of Resolution No. 105.

The absence of an examination before the closure of RBSM did not mean that there was no basis for the
closure order. Needless to say, the decision of the MB and BSP, like any other administrative body, must
have something to support itself and its findings of fact must be supported by substantial evidence. But
it is clear under RA 7653 that the basis need not arise from an examination as required in the old law

We thus rule that the MB had sufficient basis to arrive at a sound conclusion that there were grounds
that would justify RBSM’s closure. It relied on the report of Mr. Domo-ong, the head of the supervising
or examining department, with the findings that: (1) RBSM was unable to pay its liabilities as they
became due in the ordinary course of business and (2) that it could not continue in business without
incurring probable losses to its depositors and creditors.The report was a 50- page memorandum
detailing the facts supporting those grounds, an extensive chronology of events revealing the multitude
of problems which faced RBSM and the recommendations based on those findings
BANGKO SENTRAL NG PILIPINAS MONETARY BOARD and CHUCHI FONACIER, Petitioners, vs.HON. NINA
G. ANTONIO-VALENZUELA, in her capacity as Regional Trial Court Judge of Manila, Branch 28; RURAL
BANK OF PARAÑAQUE, INC.; RURAL BANK OF SAN JOSE (BATANGAS), INC.; RURAL BANK OF CARMEN
(CEBU), INC.; PILIPINO RURAL BANK, INC.; PHILIPPINE COUNTRYSIDE RURAL BANK, INC.; RURAL BANK OF
CALATAGAN (BATANGAS), INC. (now DYNAMIC RURAL BANK); RURAL BANK OF DARBCI, INC.; RURAL
BANK OF KANANGA (LEYTE), INC. (now FIRST INTERSTATE RURAL BANK); RURAL BANK OF BISAYAS
MINGLANILLA (now BANK OF EAST ASIA); and SAN PABLO CITY DEVELOPMENT BANK, INC.

G.R. No. 184778, THIRD DIVISION, October 2, 2009, Velasco Jr., J

The issuance by the RTC of writs of preliminary injunction is an unwarranted interference with the
powers of the MB refer to the appointment of a conservator or a receiver for a bank, which is a power of
the MB for which they need the ROEs done by the supervising or examining department. The writs of
preliminary injunction issued by the trial court hinder the MB from fulfilling its function under the law.
The "close now, 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.

Moreover, the respondent banks have failed to show that they are entitled to copies of the ROEs. They
can point to no provision of law, no section in the procedures of the BSP that shows that the BSP is
required to give them copies of the ROEs. Sec. 28 of RA 7653, provides that the ROE shall be submitted
to the MB; the bank examined is not mentioned as a recipient of the ROE.

FACTS Supervision and Examination Department (SED) of the Bangko Sentral ng Pilipinas (BSP)
conducted examinations of the books of the following banks:

Rural Bank of Parañaque, Inc. (RBPI), Rural Bank of San Jose (Batangas), Inc., Rural Bank of Carmen
(Cebu), Inc., Pilipino Rural Bank, Inc., Philippine Countryside Rural Bank, Inc., Rural Bank of Calatagan
(Batangas), Inc. (now Dynamic Rural Bank), Rural Bank of Darbci, Inc., Rural Bank of Kananga (Leyte), Inc.
(now First Interstate Rural Bank), Rural Bank de Bisayas Minglanilla (now Bank of East Asia), and San
Pablo City Development Bank, Inc.

After the examinations, exit conferences were held with the officers of the banks wherein SED provided
copies of Lists of Findings containing the deficiencies discovered during the examinations. Banks were
then required to comment and to undertake the remedial measures which included the infusion of
additional capital. Though the banks claimed that they made the additional capital infusions, petitioner
Chuchi Fonacier, officer-in-charge of the SED, sent separate letters to the Board of Directors of each
bank, informing them that the SED found that the banks failed to carry out the required remedial
measures. In response, the banks requested that they be given time to obtain BSP approval to amend
their Articles of Incorporation, that they have an opportunity to seek investors. They requested as well
that the basis for the capital infusion figures be disclosed, and noted that none of them had received the
Report of Examination (ROE) which finalizes the audit findings. In response, Fonacier reiterated the
banks’ failure to comply with the directive for additional capital infusions.

RBPI filed a complaint for nullification of the BSP ROE with application for a TRO and writ of preliminary
injunction before the RTC. Praying that Fonacier, her subordinates, agents, or any other person acting in
her behalf be enjoined from submitting the ROE or any similar report to the Monetary Board (MB), or if
the ROE had already been submitted, the MB be enjoined from acting on the basis of said ROE, on the
allegation that the failure to furnish the bank with a copy of the ROE violated its right to due process.

The rest of the banks followed suit filing complaints with the RTC substantially similar to that of RBPI.

RTC denied the prayer for a TRO of Pilipino Rural Bank, Inc. The bank filed a motion for reconsideration
the next day.Respondent Judge Nina Antonio-Valenzuela of Branch 28 granted RBPI’s prayer for the
issuance of a TRO.
The other banks separately filed motions for consolidation of their cases in Branch 28, which motions
were granted. Petitioners assailed the validity of the consolidation of the nine cases before the RTC,
alleging that the court had already prejudged the case by the earlier issuance of a TRO and moved for
the inhibition of respondent judge. Petitioners filed a motion for reconsideration regarding the
consolidation of the subject cases.

The RTC ruled that the banks were entitled to the writs of preliminary injunction prayed for. It held that
it had been the practice of the SED to provide the ROEs to the banks before submission to the MB. It
further held that as the banks are the subjects of examinations, they are entitled to copies of the ROEs.
The denial by petitioners of the banks’ requests for copies of the ROEs was held to be a denial of the
banks’ right to due process.

Petitioners claims grave abuse of discretion on the part of Judge Valenzuela. The CA ruled that the RTC
committed no grave abuse of discretion when it ordered the issuance of a writ of preliminary injunction
and when it ordered the consolidation of the 10 cases. It held that petitioners should have first filed a
motion for reconsideration of the assailed orders, and failed to justify why they resorted to a special civil
action of certiorari instead.

On November 24, 2008, a TRO was issued by this Court, restraining the CA, RTC, and respondents from
implementing and enforcing the CA Decision. By reason of the TRO issued by this Court, the SED was
able to submit their ROEs to the MB. The MB then prohibited the respondent banks from transacting
business and placed them under receivership

ISSUES a. Whether or not the TRO issued by the RTC violated section 25 of the New Central Bank Act
that prevented the MB to discharge functions.

b. Whether or not the respondents are required to be given copies of the ROEs before submission of
such to the Monetary Board.

RULING (A.) YES, Requisites for preliminary injunctive relief are: (a) the invasion of right sought to be
protected is material and substantial; (b) the right of the complainant is clear and unmistakable; and (c)
there is an urgent and paramount necessity for the writ to prevent serious damage.The twin
requirements of a valid injunction are the existence of a right and its actual or threatened violations.
Thus, to be entitled to an injunctive writ, the right to be protected and the violation against that right
must be shown. These requirements are absent in the present case.

The issuance by the RTC of writs of preliminary injunction is an unwarranted interference with the
powers of the MB refer to the appointment of a conservator or a receiver for a bank, which is a power of
the MB for which they need the ROEs done by the supervising or examining department. The writs of
preliminary injunction issued by the trial court hinder the MB from fulfilling its function under the law.
The actions of the MB under Secs. 29 and 30 of RA 7653 "may not be restrained or set aside by the court
except on petition for certiorari on the ground that the action taken was in excess of jurisdiction or with
such grave abuse of discretion as to amount to lack or excess of jurisdiction. The respondent banks have
shown no necessity for the writ of preliminary injunction to prevent serious damage. The serious
damage contemplated by the trial court was the possibility of the imposition of sanctions upon
respondent banks, even the sanction of closure. Under the law, the sanction of closure could be
imposed upon a bank by the BSP even without notice and hearing. This "close now, 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.

Judicial review enters the picture only after the MB has taken action; it cannot prevent such action by
the MB. The threat of the imposition of sanctions, even that of closure, does not violate their right to
due process, and cannot be the basis for a writ of preliminary injunction.

The "close now, hear later" doctrine has already been justified as a measure for the protection of the
public interest.
(B) NO, The respondent banks have failed to show that they are entitled to copies of the ROEs. They can
point to no provision of law, no section in the procedures of the BSP that shows that the BSP is required
to give them copies of the ROEs. Sec. 28 of RA 7653, provides that the ROE shall be submitted to the MB;
the bank examined is not mentioned as a recipient of the ROE.

The respondent banks cannot claim a violation of their right to due process if they are not provided with
copies of the ROEs. The same ROEs are based on the lists of findings/exceptions containing the
deficiencies found by the SED examiners when they examined the books of the respondent banks. As
found by the RTC, these lists of findings/exceptions were furnished to the officers or representatives of
the respondent banks, and the respondent banks were required to comment and to undertake remedial
measures stated in said lists. Despite these instructions, respondent banks failed to comply with the
SED’s directive.

Respondent banks are already aware of what is required of them by the BSP, and cannot claim violation
of their right to due process simply because they are not furnished with copies of the ROEs.
SPOUSES JAIME and MATILDE POON vs. PRIME SAVINGS BANK represented by the PHILIPPINE DEPOSIT
INSURANCE CORPORATION as Statutory Liquidator

G.R. No. 183794, FIRST DIVISION, June 13, 2016, SERENO, CJ

The period during which the bank cannot do business due to insolvency is not a fortuitous event, unless
it is shown that the government's action to place a bank under receivership or liquidation proceedings is
tainted with arbitrariness, or that the regulatory body has acted without jurisdiction.

FACTS Petitioners owned a commercial building in Naga City. On 3 November 2006, Matilde Poon and
respondent executed a 10-year Contract of Lease (Contract) over the building for the latter's use as its
branch office in Naga City. They agreed to a fixed monthly rental of P60,000, with an advance payment
of the rentals for the first 100 months in the amount of P6,000,000. As agreed, the advance payment
was to be applied immediately.

In addition, paragraph 24 of the Contract provides:

Should the leased premises be closed, deserted or vacated by the LESSEE, the LESSOR shall have the
right to terminate the lease without the necessity of serving a court order and to immediately repossess
the leased premises. Xxxxxxxxxxx

The LESSOR shall thereupon have the right to enter into a new contract with another party. All advanced
rentals shall be forfeited in favor of the LESSOR.

Barely three years later, however, the BSP placed respondent under the receivership of the Philippine
Deposit Insurance Corporation (PDIC) for wilfully violating a cease and desist orders that has become
final, involving acts or transactions which amount to fraud or a dissipation of the assets of the
institution, among other grounds. The BSP eventually ordered respondent's liquidation.

On 12 May 2000, respondent vacated the leased premises and surrendered them to petitioners.
Subsequently, the PDIC issued petitioners a demand letter asking for the return of the unused advance
rental amounting to P3,480,000 on the ground that paragraph 24 of the lease agreement had become
inoperative, because respondent's closure constituted force majeure. The PDIC likewise invoked the
principle of rebus sic stantibus under Article 1267 of Republic Act No. 386 (Civil Code) as alternative legal
basis for demanding the refund. Petitioners, however, refused the PDIC's demand. They maintained that
they were entitled to retain the remainder of the advance rentals following paragraph 24 of their
Contract. Consequently, respondent sued petitioners before the RTC of Naga City for a partial rescission
of contract and/or recovery of a sum of money.

RTC ordered the partial rescission of the lease agreement and directed petitioner spouses Jaime and
Matilde Poon to return or refund the sum of One Million Seven Hundred Forty Thousand Pesos
(Pl,740,000) representing one-half of the unused portion of the advance rentals. CA affirmed the RTC
Decision.

ISSUES 1. Whether respondent may be released from its contractual obligations to petitioners on
grounds of fortuitous event under Article 1174 of the Civil Code and unforeseen event under Article
1267 of the Civil Code;

2. Whether the proviso in the parties' Contract allowing the forfeiture of advance rentals was a penal
clause; and

3. Whether the penalty agreed upon by the parties may be equitably reduced under Article 1229 of the
Civil Code.

RULING 1. The closure of respondent's business was neither a fortuitous nor an unforeseen event that
rendered the lease agreement functus officio.

Respondent posits that it should be released from its contract with petitioners, because the closure of
its business upon the BSP' s order constituted a fortuitous event as the Court held in Provident
Savings Bank. The cited case, however, must always be read in the context of the earlier Decision in
Central Bank v. Court of Appeals. The Court ruled in that case that the Monetary Board had acted
arbitrarily and in bad faith in ordering the closure of Provident Savings Bank. Accordingly, in the
subsequent case of Provident Savings Bank it was held that fuerza mayor had interrupted the
prescriptive period to file an action for the foreclosure of the subject mortgage.

In contrast, there is no indication or allegation that the BSP's action in this case was tainted with
arbitrariness or bad faith. Instead, its decision to place respondent under receivership and liquidation
proceedings was pursuant to Section 30 of Republic Act No. 7653. Moreover, respondent was partly
accountable for the closure of its banking business. It cannot be said, then, that the closure of its
business was independent of its will as in the case of Provident Savings Bank. The legal effect is
analogous to that created by contributory negligence in quasi-delict actions.

The period during which the bank cannot do business due to insolvency is not a fortuitous event, unless
it is shown that the government's action to place a bank under receivership or liquidation proceedings is
tainted with arbitrariness, or that the regulatory body has acted without jurisdiction.

The Court cannot also give due course respondent lessee’s invocation of the doctrine of unforeseen
event under Article 1267 of the Civil Code, which provides:

Art. 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the
parties, the obligor may also be released therefrom, in whole or in part.

Tagaytay Realty Co., Inc. v. Gacutan lays down the requisites for the application of Article 1267, as
follows:

1. The event or change in circumstance could not have been foreseen at the time of the execution of the
contract.

2. It makes the performance of the contract extremely difficult but not impossible.

3. It must not be due to the act of any of the parties.

4. The contract is for a future prestation.

The first and the third requisites, however, are lacking. It must be noted that the lease agreement was
for 10 years. As shown by the unrebutted testimony of Jaime Poon during trial, the parties had actually
considered the possibility of a deterioration or loss of respondent's business within that period.
Moreover, the closure of respondent's business was not an unforeseen event. As the lease was long-
term, it was not lost on the parties that such an eventuality might occur, as it was in fact covered by the
terms of their Contract. Besides, the event was not independent of respondent's will.

2. The forfeiture clause in the Contract is penal in nature.

It is settled that a provision is a penal clause if it calls for the forfeiture of any remaining deposit still in
the possession of the lessor, without prejudice to any other obligation still owing, in the event of the
termination or cancellation of the agreement by reason of the lessee's violation of any of the terms and
conditions thereof. This kind of agreement may be validly entered into by the parties. The clause is an
accessory obligation meant to ensure the performance of the principal obligation by imposing on the
debtor a special prestation in case of nonperformance or inadequate performance of the principal
obligation. The forfeiture clauses of the Contract, therefore, served the two functions of a penal clause,
i.e., (1) to provide for liquidated damages and (2) to strengthen the coercive force of the obligation by
the threat of greater responsibility in case of breach.

3. A reduction of the penalty agreed upon by the parties is warranted under Article 1129 of the Civil
Code.

At stake in this case are not just the rights of petitioners and the correlative liabilities of respondent
lessee. Over and above those rights and liabilities is the interest of innocent debtors and creditors of a
delinquent bank establishment. These overriding considerations justify the 50% reduction of the penalty
agreed upon by petitioners and respondent lessee in keeping with Article 1229 of the Civil Code. Under
the circumstances, it is neither fair nor reasonable to deprive depositors and creditors of what could be
their last chance to recoup whatever bank assets or receivables the PDIC can still legally recover.
Besides, nothing has prevented petitioners from putting their building to other profitable uses, since
respondent surrendered the premises immediately after the closure of its business.

Distinguish a deposit substitute under the banking law and deposit substitute under the tax law. The
distinction is on the purpose. If a bank or non-bank financial intermediary sells debt instruments to 20 or
more lenders/placers at any one time, irrespective of outstanding amounts, for the purpose of relending
or purchasing of receivables or obligations, it is considered to be performing a quasi-banking function.
Under the National Internal Revenue Code, however, deposit substitutes include not only the issuances
and sales of banks and quasi-banks for relending or purchasing receivables and other similar obligations,
but also debt instruments issued by commercial, industrial, and other nonfinancial companies to finance
their own needs or the needs of their agents or dealers. Banco de Oro v. Republic of the Philippines, G.R.
No. 198756, August 16, 2016
CENTRAL BANK OF THE PHILIPPINES and ACTING DIRECTOR ANTONIO T. CASTRO, JR. OF THE
DEPARTMENT OF COMMERCIAL AND SAVINGS BANK, in his capacity as statutory receiver of Island
Savings Bank, petitioners, vs. THE HONORABLE COURT OF APPEALS and SULPICIO M. TOLENTINO,
respondents.

G.R. No. L-45710, SECOND DIVISION, October 3, 1985, Makasiar, J

Since ISB was in default under the agreement, Tolentino may choose between specific performance or
rescission, but since ISB is now prohibited from doing further business, the only remedy left is rescission
only for the P63,000 balance of the loan.

FACTS April 28, 1965 - Island Savings Bank (ISB) approved the loan application for P80,000 of Sulpicio
Tolentino, who, as a security for the loan, also executed a real estate mortgage over his 100-ha land. The
approved loan application called for P80,000 loan, repayable in semi-annual installments for a period of
3 years, with 12% interest

May 22, 1965 – a mere P17,000 partial release of the loan was made by ISB, and Tolentino and his wife
Edita signed a promissory note for P17,000 at 12% annual interest, payable within 3 years from the date
of execution of the contract at semi-annual installments of P3,459.

An advance interest for the P80,000 loan covering a 6-mo period amounting to P4,800was deducted
from the partial release of P17,000, but this was refunded to Tolentino on July 23, 1965, after being
informed by ISB that there was no fund yet available for the release of the P63,000 balance.

Aug. 13, 1965 – the Monetary Board of the Central Bank issued Resolution No. 1049, which prohibited
ISB from making new loans and investments, after finding that it was suffering liquidity problems.

June 14, 1968 – the Monetary Board issued Resolution No. 967, which prohibited ISB from doing
business in the Philippines, after finding that it failed to put up the required capital to restore its
solvency.

Aug. 1, 1968 – ISB, in view of non-payment of the P17,000 covered by the promissory note, filed an
application for the extra-judicial foreclosure of the real estate mortgage covering the 100-ha land; and
the sheriff scheduled auction.

Tolentino filed a petition with the CFI for injunction, specific performance or rescission and damages
with preliminary injunction, alleging that since ISB failed to deliver the P63,000 remaining balance of the
loan, he is entitled to specific performance by ordering ISB to deliver it with interest of 12% per annum
from April 28, 1965, and if said balance cannot be delivered, to rescind the real estate mortgage.

CFI issued a TRO enjoining ISB from continuing with the foreclosure of the mortgage, however, after
finding Tolentino’s petition unmeritorious, ordered the latter to pay ISB P17,000 plus legal interest and
legal charges and lifting the TRO so the sheriff may proceed with the foreclosure. CA, on appeal by
Tolentino, modified CFI’s decision by affirming dismissal of Tolentino’s petition for specific performance,
but ruled that ISB can neither foreclose the mortgage nor collect the P17,000 loan.

ISSUES 1) WON the action of Tolenitno for specific performance can prosper. NO.

2) WON Tolentino is liable to pay the P17,000 debt covered by the promissory note. YES.

3) WON Tolentino’s real estate mortgage can be foreclosed to satisfy the P17,000 if his liability to pay
therefor subsists. NO.

RULING 1) Since ISB was in default under the agreement, Tolentino may choose between specific
performance or rescission, but since ISB is now prohibited from doing further business, the only remedy
left is Rescission only for the P63,000 balance of the loan.

2) The bank was deemed to have complied with its reciprocal obligation to furnish a P17,000 loan. The
promissory note gave rise to Tolentino’s reciprocal obligation to pay such loan when it falls due and his
failure to pay the overdue amortizations under the promissory note made him a party in default, hence
not entitled to rescission (Art. 1191, CC). ISB has the right to rescind the promissory note, being the
aggrieved party.

Since both parties were in default in the performance of their reciprocal obligations, both are liable for
damages. In case both parties have committed a breach of their reciprocal obligations, the liability of the
first infractor shall be equirably tempered by the courts (Art. 1192, CC). The liability of ISB for damages
in not furnishing the entire loan is offset by the liability of Tolentino for damages (penalties and
surcharges) for not paying his overdue P17,000 debt. Since Tolentino derived some benefit for his use of
the P17,000, he should account for the interest thereon (interest was not included in the offsetting).

3) The fact that when Tolentino executed his real estate mortgage, no consideration was then in
existence, as there was no debt yet because ISB had not made any release on the loan, does not make
the real estate mortgage void for lack of consideration.

It is not necessary that any consideration should pass at the time of the execution of the contract of real
mortgage. When the consideration is subsequent to the mortgage, the latter can take effect only when
the debt secured by it is created as a binding contract to pay. And when there is partial failure of
consideration, the mortgage becomes unenforceable to the extent of such failure. Where the
indebtedness actually owing to the holder of the mortgage is less than the sum named in the mortgage,
the mortgage cannot be enforced for more than the actual sum due.

Since ISB failed to furnish the P63,000 balance, the real estate mortgage of Tolentino became
unenforceable to such extent. P63,000 is 78.75% of P80,000, hence the mortgage covering 100 ha is
unenforceable to the extent of 78.75 ha. The mortgage covering the remainder of 21.25 ha subsists as a
security for the P17,000 debt.
SPOUSES ROMEO LIPANA and MILAGROS LIPANA, petitioners, vs. DEVELOPMENT BANK OF RIZAL,
respondent.

G.R. No. 73884, SECOND DIVISION, September 24, 1987, PARAS, J

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; whenever
it is necessary to accomplish the aims of justice; or when certain facts and circumstances transpired
after the judgment became final which could render the execution of the judgment unjust. 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.

FACTS During the period from 1982 to January, 1984, herein petitioners opened and maintained both
time and savings deposits with 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 were made but the bank did not respond. The 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. The respondent Judge ordered the issuance
of a writ of attachment. Thereafter, judgment was rendered in favor of the petitioners.

Meanwhile the Monetary Board issued a resolution 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. Consequently, the bank was placed under receivership. Thereafter, the petitioners filed a
Motion for Execution Pending Appeal. The respondent judge ordered the issuance of a writ of execution.
However, the bank filed for a Stay of execution and the same was granted.

The 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. The respondent Judge
ordered the issuance of a writ of attachment. Thereafter, judgment was rendered in favor of the
petitioners. Thereafter, the petitioners filed a Motion for Execution Pending Appeal. The respondent
judge ordered the issuance of a writ of execution. However, the bank filed for a Stay of execution and
the same was granted. Later on, the petitioners filed a Motion to Lift Stay of Execution it was opposed
by respondent bank and in an order, respondent judge denied the said motion. Hence, the instant
petition. The petition was given due course and the parties were required to file their respective
memoranda which they subsequently complied with.

ISSUE Whether or not respondent judge could legally stay execution of judgment that has already
become final and executor

RULING Yes. 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;
whenever it is necessary to accomplish the aims of justice; or when certain facts and circumstances
transpired after the judgment became final which could render the execution of the judgment unjust.

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.
ABACUS REAL ESTATE DEVELOPMENT CENTER, INC., Petitioners, vs. THE MANILA BANKING
CORPORATION, Respondents. G.R. No. 162270. THIRD DIVISION, April 06, 2005, GARCIA, J.

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.”

With respondent bank having been already placed under receivership, its officers, inclusive of its acting
president, Vicente G. Puyat, were no longer authorized to transact business in connection with the
bank’s assets and property. Clearly then, the "exclusive option to purchase" granted by Vicente G. Puyat
was and still is unenforceable against Manila Bank.

Moreover, the receiver has no power to ratify the “exclusive option to purchase” agreements entered
into by the parties

FACTS Manila Bank owns a parcel of land located along Gil Puyat Avenue Extension, Makati City. Prior to
1984, the bank started constructing a building on the said land but it was left unfinished because the
bank encountered some financial difficulties. Later on, Central Bank (now BSP) ordered the closure of
the bank and placed it under the receivership. Feliciano Miranda was appointed receiver. Thereafter, the
Central Bank ordered the liquidation of Manila Bank. Atty. Renan V. Santos was appointed as Liquidator
(later, the designation was amended to Statutory Receiver). The Liquidation was held in abeyance
pending the result of the suit filed by the bank questioning the legality of the closure.

Meanwhile, Vicente G. Puyat (the then acting president of the Bank) started scouting for possible
investors who could finance the completion of the building. A group of investors (referred to as the
Laureano group) offered to lease the building for ten (10) years and to advance the cost to complete the
same. The letter-offer stated that in consideration of advancing the construction cost, the group wanted
to be given the "exclusive option to purchase" the building and the lot on which it was constructed.
Since no disposition of assets could be made due to the litigation concerning Manila Bank’s closure, an
arrangement was made whereby the property would first be leased to Manila Equities Corporation
(MEQCO) a subsidiary owned by Manila Bank, with MEQCO thereafter subleasing the property to the
Laureano group. Vicente G. Puyat accepted the Laureano group’s offer and granted it an "exclusive
option to purchase" the lot and building for ₱150,000,000.00. The building was leased to MEQCO for a
period of ten years pursuant to a contract of lease. MEQCO subleased the property to petitioner Abacus
Real Estate Development Center, Inc. (Abacus), a corporation formed by the Laureano group for the
purpose, under identical provisions as that of the lease contract between Manila Bank and MEQCO.

The Laureano group failed to finish the building due to the economic crisis brought about by the failed
December 1989 coup attempt. Because of this, the Laureano group offered its rights in Abacus and its
"exclusive option to purchase" to Benjamin Bitanga (Bitanga), for (₱20,500,000.00). (Bitanga later allege
that he sought the approval of Atty. Santos, the receiver appointed by CB, and that the latter gave a
verbal approval). The Laureano group transferred and assigned to Bitanga all of its rights in Abacus and
the "exclusive option to purchase" the subject land and building. Abacus sent a letter to Manila Bank
informing the latter of its desire to exercise its "exclusive option to purchase". However, Manila Bank
refused to honor the same.

ABACUS filed for specific performance and damages against Manila Bank and/or the Estate of Vicente G.
Puyat before the RTC of Makati. Manila Bank and the Estate of Vicente G. Puyat filed separate motions
to dismiss the complaint. The RTC granted the motion to dismiss filed by the Estate of Vicente Puyat. On
the other hand, Manila Bank was ordered to file an answer. The RTC ruled in favor of Abacus and
ordered Manila Bank to sell the parcel of land to for attorney’s fees. Manila bank filed a motion for
reconsideration but it was denied. Manila Bank filed an appeal before the CA. The CA reversed and set
aside the decision of the RTC. ABACUS filed a motion for reconsideration but it was denied. ABACUS,
then, filed a petition for review under rule 45 before the SC.
ISSUES 1. Whether or not the option to purchase the lot and building in question granted to it by the
late Vicente G. Puyat, then acting president of Manila Bank, was binding upon the latter despite having
placed under the receivership at the time of its granting?

2. Whether or not Renan Santos, as a receiver, can ratify the “exclusive option to purchase”?

RULING 1. NO. The appellate court was correct in declaring that Vicente G. Puyat was without authority
to grant the exclusive option to purchase the lot and building in question. 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.” With respondent bank having been already placed under receivership, its officers, inclusive of its
acting president, Vicente G. Puyat, were no longer authorized to transact business in connection with
the bank’s assets and property. Clearly then, the "exclusive option to purchase" granted by Vicente G.
Puyat was and still is unenforceable against Manila Bank.

2. NO. The receiver has no power to ratify the “exclusive option to purchase” agreements entered into
by the parties. Under Section 29, the receiver appointed by the Central Bank to take charge of the
properties of Manila Bank only had authority to administer the same for the benefit of its creditors.
Granting or approving an "exclusive option to purchase" is not an act of administration, but an act of
strict ownership, involving, as it does, the disposition of property of the bank. Not being an act of
administration, the so-called "approval" by Atty. Renan Santos amounts to no approval at all, a bank
receiver not being authorized to do so on his own. For sure, Congress itself has recognized that a bank
receiver only has powers of administration. Section 30 of the New Central Bank Act expressly provides
that "[t]he receiver shall immediately gather and take charge of all the assets and liabilities of the
institution, administer the same for the benefit of its creditors, and exercise the general powers of a
receiver under the Revised Rules of Court but shall not, with the exception of administrative
expenditures, pay or commit any act that will involve the transfer or disposition of any asset of the
institution…"
ALFEO D. VIVAS, ON HIS BEHALF AND ON BEHALF OF THE SHAREHOLDERS OF EUROCREDIT COMMUNITY
BANK, PETITIONER, vs. THE MONETARY BOARD OF THE BANGKO SENTRAL NG PILIPINAS AND THE
PHILIPPINE DEPOSIT INSURANCE CORPORATION, RESPONDENTS.

G.R. No. 191424, THIRD DIVISION, August 7, 2013 Mendoza, J

The Monetary Board under R.A. 7653 has been invested with more power of closure and placement of a
bank under receivership for insolvency or illiquidity or because of the bank’s continuance in business
world probably results in the loss to depositors or creditors. To address the growing concerns in the
banking industry, the legislature has sufficiently empowered the Monetary Board to effectively monitor
and supervise and financial institutions and if circumstances warrant, to forbid them to do business, to
take over their management or to place them under receivership. Thus any act of the Monetary Board
placing bank receivership, conservatorship or liquidation may not be restrained or set aside except on a
petition for certiorari.

FACTS Petitioner Vivas and his principals acquired the controlling interest in Rural Bank Faire, a bank
whose corporate life has already expired. BSP authorized extending the banks’ corporate life and was
later renamed to EuroCredit Community Bank (ECBI). Through a series of examinations conducted by the
BSP, the findings bore that ECBI was illiquid, insolvent, and was performing transactions which are
considered unsafe and unsound banking practices. Consequently ECBI was placed under receivership.
Petitioner contends that the implementation of the questioned resolution was tainted with arbitrariness
and bad faith, stressing that ECBI was placed under receivership without due and prior hearing in
violation of his and the bank’s right to due process. The petitioner files for prohibition with prayer for
the issuance of a status quo ante order or writ of preliminary injunction ordering the respondents to
desist from closing EuroCredit Community Bank, Incorporated (ECBI) and from pursuing the receivership
thereof. The petition likewise prays that the management and operation of ECBI be restored to its Board
of Directors (BOD) and its officers.

Vivas files a petition for prohibition with prayer for the issuance of a status quo ante order or writ of
preliminary injunction ordering the respondents to desist from closing EuroCredit Community Bank,
Incorporated (ECBI) and from pursuing the receivership thereof. The petition likewise prays that the
management and operation of ECBI be restored to its Board of Directors (BOD) and its officers.

The Supreme Court said to begin with, Vivas availed of the wrong remedy. The MB issued Resolution No.
276, dated March 4, 2010, in the exercise of its power under R.A. No. 7653. Under Section 30 thereof,
any act of the MB placing a bank under conservatorship, receivership or liquidation may not be
restrained or set aside except on a petition for certiorari.

The Petition Should Have Been Filed in the CA. Even if treated as a petition for certiorari, the petition
should have been filed with the CA. (Doctrine of Hierarchy of Courts)

ISSUE Whether or not ECBI was entitled to due and prior hearing before its being placed under
receivership and whether or not MB placing bank under conservatorship, receivership or liquidation may
not be restrained or set aside?

RULING The Court has taken this into account, but it appears from all over the records that ECBI was
given every opportunity to be heard and improve on its financial standing. The records disclose that BSP
officials and examiners met with the representatives of ECBI, including Vivas, and discussed their
findings.34 There were also reminders that ECBI submit its financial audit reports for the years 2007 and
2008 with a warning that failure to submit them and a written explanation of such omission shall result
in the imposition of a monetary penalty.35 More importantly, ECBI was heard on its motion for
reconsideration. For failure of ECBI to comply, the MB came out with Resolution No. 1548 denying its
request for reconsideration of Resolution No. 726. Having been heard on its motion for reconsideration,
ECBI cannot claim that it was deprived of its right under the Rural Bank Act.

At any rate, if circumstances warrant it, the MB may forbid a bank from doing business and place it
under receivership without prior notice and hearing.
In the case of Bangko Sentral Ng Pilipinas Monetary Board v. Hon. Antonio-Valenzuela, the Court
reiterated the doctrine of “close now, hear later,” stating that it was justified as a measure for the
protection of the public interest. Thus:

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

In Rural Bank of Buhi, Inc. v. Court of Appeals, the Court also wrote that

x x x due process does not necessarily require a prior hearing; a hearing or an opportunity to be heard
may be subsequent to the closure. One can just imagine the dire consequences of a prior hearing: bank
runs would be the order of the day, resulting in panic and hysteria. In the process, fortunes may be
wiped out and disillusionment will run the gamut of the entire banking community.

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. Swift, adequate and determined actions must be taken against financially
distressed and mismanaged banks by government agencies lest the public faith in the banking system
deteriorate to the prejudice of the national economy.

The Monetary Board under R.A. 7653 has been invested with more power of closure and placement of a
bank under receivership for insolvency or illiquidity or because of the bank’s continuance in business
world probably results in the loss to depositors or creditors. To address the growing concerns in the
banking industry, the legislature has sufficiently empowered the Monetary Board to effectively monitor
and supervise and financial institutions and if circumstances warrant, to forbid them to do business, to
take over their management or to place them under receivership. Thus any act of the Monetary Board
placing bank receivership, conservatorship or liquidation may not be restrained or set aside except on a
petition for certiorari.
SPOUSES CHUGANI V PHILIPPINE DEPOSIT INSURANCE CORP.

G.R. No. 230037, March 19, 2018 FIRST DIVISION (Tijam, J.)

The PDIC was created by Republic Act (R.A.) No. 3591 as an insurer of deposits in all banks entitled to
the benefits of insurance under the PDIC Charter to promote and safeguard the interests of the
depositing public by way of providing permanent and continuing insurance coverage of all insured
deposits. In order for the claim for deposit insurance with the PDIC may prosper, it is necessary that the
corresponding deposit must be placed in the insured bank. In the case at bar, upon investigation by the
PDIC, it was discovered that the money allegedly placed by the petitioners in RBMI was in fact credited
to the personal account of the president of RBMI, hence, they could not be construed as valid liabilities
of RBMI to petitioners.

FACTS Petitioners Spouses Chugani, signified their intention to open Time Deposits with Rural Bank of
Mawab (Davao), Inc., (RBMI) through inter-branch deposits to the accounts of RBMI maintained in
Metrobank and China Bank- Tagum, Davao Branches. Thereafter, Certificates of Time Deposits (CTDs)
and Official Receipts were issued to Spouses Chugani.

Sometime in September 2011, Spouses Chugani came to know that the Monetary Board of the Bangko
Sentral ng Pilipinas placed RBMI under receivership and thereafter closed the latter. Spouses Chugani,
then filed claims for insurance of their time deposits.

Respondent Philippine Deposit Insurance Corporation (PDIC) denied the claims on the following
grounds: 1.) based on bank records submitted by RBMI, Spouses Chugani’s deposit accounts are not part
of RBMI's outstanding deposit liabilities; 2.) the time deposits of Spouses Chugani are fraudulent and
their CTDs were not duly issued by RBMI, but were mere replicas of unissued CTD's in the inventory
submitted by RBMI to PDIC; and 3.) the amounts purportedly deposited by the petitioners were credited
to the personal account of the president of RBMI, hence, they could not be construed as valid liabilities
of RBMI.

Spouses Chugani filed a request for reconsideration of PDIC's denial of their claim. PDIC however
rejected the same. Hence, Spouses Chugani filed a Petition for Certiorari under Rule 65 of the Rules of
Court with the Regional Trial Court (RTC).

RTC issued an Order dismissing the Petition for Certiorari filed by Spouses Chugani for lack of
jurisdiction. Aggrieved, Spouses Chugani appealed the RTC's Decision to the Court of Appeals (CA).
Meanwhile, CA denied the appeal of Spouses Chugani ruling that, RTC has no jurisdiction over the
Petitions for Certiorari filed by the petitioners questioning the PDIC's denial of their claim for deposit
insurance.

ISSUES 1. Whether or not RTC has jurisdiction over the Petitions for Certiorari questioning PDIC’S denial
of Spouses Chugani’s claim for deposit.

2. Whether or not PDIC acted in grave abuse of discretion in denying the claim for deposit insurance.

RULING 1. NO. The RTC has no jurisdiction. Consistent with Section 4,Rule 65, the CA has the jurisdiction
to rule on the alleged grave abuse of discretion of the PDIC. Therefore, the CA is correct when it held
that the RTC has no jurisdiction over the Petitions for Certiorari filed by the petitioners questioning the
PDIC's denial of their claim for deposit insurance. Nevertheless, any question as to where the petition
for certiorari should be filed to question PDIC's decision on claims for deposit insurance has been put to
rest by R.A. No. 10846. Section 7 therein provides:

"The actions of the Corporation taken under Section 5(g) shall be final and executory, and may only be
restrained or set aside by the Court of Appeals, upon appropriate petition for certiorarion the ground
that the action was taken in excess of jurisdiction or with such grave abuse of discretion as to amount to
a lack or excess of jurisdiction. The petition for certiorari may only be filed within thirty (30) days from
notice of denial of claim for deposit insurance”.

2. NO. PDIC did not acted in grave abuse of discretion. Based on its charter, the PDIC has the duty to
grant or deny claims for deposit insurance. Upon investigation by the PDIC, it was discovered that 1) the
money allegedly placed by the petitioners in RBMI was in fact credited to the personal account of the
president of RBMI, hence, they could not be construed as valid liabilities of RBMI to petitioners; 2) based
on bank records and the certified list of the bank's outstanding deposit liabilities, the alleged deposits of
petitioners are not part of RBMI's outstanding liabilities; and 3) the CTDs are not validly issued by RBMI,
but were mere replicas of the unissued and unused CTDs still included in the inventory of RBMI.
Considering the above disquisitions, it is sufficiently established that the PDIC, did not commit any grave
abuse of discretion in denying petitioners' claim for deposit insurance as the same were validly
grounded on the facts, law and regulations issued by the PDIC
SO V. PHILIPPINE DEPOSIT INSURANCE CORP.

G.R. No. 230020 March 19, 2018 FIRST DIVISION (Tijam, J.)

PDIC exercises judicial discretion and judgment in determining whether a claimant is entitled to a
deposit insurance claim, which determination results from its investigation of facts and weighing of
evidence presented before it. Noteworthy also is the fact that the law considers PDIC's action as final
and executory and may be reviewed only on the ground of grave abuse of discretion.

FACTS Petitioner Peter So (So) opened an account with the Cooperative Rural Bank Bulacan (CRBB)
amounting to P300,000, for which he was assigned the Special Incentive Savings Account (SISA) No. 05-
15712-1.

On the same year, however, So learned that CRBB closed its operations and was placed under Philippine
Deposit Insurance Corporation's (PDIC's) receivership. This prompted So, together with other depositors,
to file an insurance claim with the PDIC. Acting upon such claim, PDIC sent a letter/notice requiring So to
submit additional documents, which So averred of having complied with. Upon investigation, the PDIC
found that So’s account originated from and was funded by the proceeds of a terminated SISA (mother
account), jointly owned by a certain Reyes family. Thus, based on the determination that So's account
was among the product of the splitting of the said mother account which is prohibited by law, PDIC
denied So's claim for payment of deposit insurance.So then filed a Request for Reconsideration, which
was likewise denied by the PDIC.

Aggrieved, So filed a Petition for Certiorari under Rule 65 before the RTC.RTC upheld the factual findings
and conclusions of the PDIC. According to the RTC, based on the records, the PDIC correctly denied So's
claim for insurance on the ground of splitting of deposits which is prohibited by law.

RTC also declared that, pursuant to its Charter (RA 3591), PDIC is empowered to determine and pass
upon the validity of the insurance deposits claims, it being the deposit insurer. As such, when it rules on
such claims, it is exercising a quasi-judicial function. Thus, it was held that petitioner's remedy to the
dismissal of his claim is to file a petition for certiorari with the Court of Appeals under Section 4, Rule 65,
stating that if the petition involves the acts or omissions of a quasi-judicial agency, unless otherwise
provided by law or the rules, it shall be filed in and cognizable only by the Court of Appeals (CA).

ISSUE Whether or not RTC have jurisdiction over a petition for certiorari filed under Rule 65, assailing the
PDIC's denial of a deposit insurance claim.

RULING NO. PDIC was created under RA 3591 as an insurer of deposits in all banks entitled to the
benefits of insurance under the said Act to promote and safeguard the interests of the depositing public.
As such, PDIC has the duty and authority to determine the validity of and grant or deny deposit
insurance claims. Section 16(a) of its Charter, as amended, provides that PDIC shall commence the
determination of insured deposits due the depositors of a closed bank upon its actual take over of the
closed bank. Also, Section 1 of PDIC's Regulatory Issuance No. 2011-03, provides that as it is tasked to
promote and safeguard the interests of the depositing public by way of providing permanent and
continuing insurance coverage on all insured deposits, and in helping develop a sound and stable
banking system at all times, PDIC shall pay all legitimate deposits held by bona fide depositors and
provide a mechanism by which depositors may seek reconsideration from its decision, denying a deposit
insurance claim.

Further, it bears stressing that as stated in Section 4(f) of its Charter, as amended, PDIC's action, such as
denying a deposit insurance claim, is considered as final and executory and may be reviewed by the
court only through a petition for certiorari on the ground of grave abuse of discretion.

Considering the foregoing, the legislative intent in creating the PDIC as a quasi-judicial agency is clearly
manifest. Accordingly, the actions of the Corporation taken under Section 5(g) shall be final and
executory, and may only be restrained or set aside by the Court of Appeals, upon appropriate petition
for certiorari on the ground that the action was taken in excess of jurisdiction or with such grave abuse
of discretion as to amount to a lack or excess of jurisdiction. The petition for certiorari may only be filed
within thirty (30) days from notice of denial of claim for deposit insurance.
As it stands, the controversy as to which court has jurisdiction over a petition for certiorari filed to
question the PDIC's action is already settled
BANCO FILIPINO SAVINGS AND MORTGAGE BANK V. BANGKO SENTRAL NG PILIPINAS

G.R. No. 200678, THIRD DIVISION, June 4, 2018, Leonen, J.

A closed bank under receivership can only sue or be sued through its receiver, the Philippine Deposit
Insurance Corporation (PDIC). Hence, the petition filed by the petitioner bank which has been placed
under receivership is dismissible as it did not join PDIC as a party to the case.

FACTS Petitioner bank has been placed under receivership when it filed a Petition for Certiorari with the
Supreme Court. Said Petition was assailed by the respondent that contended that the same should be
dismissed outright for being led without Philippine Deposit Insurance Corporation's authority. It asserts
that petitioner was placed under receivership on March 17, 2011, and thus, petitioner's Executive
Committee would have had no authority to sign for or on behalf of petitioner absent the authority of its
receiver, Philippine Deposit Insurance Corporation. They also point out that both the Philippine Deposit
Insurance Corporation Charter and Republic Act No. 7653 categorically state that the authority to file
suits or retain counsels for closed banks is vested in the receiver. Thus, the verification and certification
of non-forum shopping signed by petitioner's Executive Committee has no legal effect.

ISSUE Whether or not petitioner Banco Filipino, as a closed bank under receivership, could file this
Petition for Review without joining its statutory receiver, the Philippine Deposit Insurance Corporation,
as a party to the case.

RULING A closed bank under receivership can only sue or be sued through its receiver, the Philippine
Deposit Insurance Corporation. Under Republic Act No. 7653, when the Monetary Board finds a bank
insolvent, it may "summarily and without need for prior hearing forbid the institution from doing
business in the Philippines and designate the Philippine Deposit Insurance Corporation as receiver of the
banking institution."

The relationship between the Philippine Deposit Insurance Corporation and a closed bank is fiduciary in
nature. Section 30 of Republic Act No. 7653 directs the receiver of a closed bank to "immediately gather
and take charge of all the assets and liabilities of the institution" and "administer the same for the
benefit of its creditors." The law likewise grants the receiver "the general powers of a receiver under the
Revised Rules of Court." Under Rule 59, Section 6 of the Rules of Court, "a receiver shall have the power
to bring and defend, in such capacity, actions in his [or her] own name." Thus, Republic Act No. 7653
provides that the receiver shall also "in the name of the institution, and with the assistance of counsel as
[it] may retain, institute such actions as may be necessary to collect and recover accounts and assets of,
or defend any action against, the institution." Considering that the receiver has the power to take
charge of all the assets of the closed bank and to institute for or defend any action against it, only the
receiver, in its fiduciary capacity, may sue and be sued on behalf of the closed bank.

When petitioner was placed under receivership, the powers of its Board of Directors and its officers
were suspended. Thus, its Board of Directors could not have validly authorized its Executive Vice
Presidents to file the suit on its behalf. The Petition, not having been properly verified, is considered an
unsigned pleading. 124 124 A defect in the certification of non-forum shopping is likewise fatal to
petitioner's cause. 125 125 Considering that the Petition was led by signatories who were not validly
authorized to do so, the Petition does not produce any legal effect. Being an unauthorized pleading, this
Court never validly acquired jurisdiction over the case. The Petition, therefore, must be dismissed

APOLLO M. SALUD, as Attorney-in-Fact for its Stockholders, in his behalf and for and in behalf of the
Rural Bank of Muntinlupa, Inc., Hon. VICENTE R. CAMPOS, Presiding Judge, Regional Trial Court, National
Capital Region, Br. CLXIV, petitioners, vs. CENTRAL BANK OF THE PHILIPPINES, AND CONSOLACION V.
ODRA, in her capacity as Liquidator of the Rural Bank of Muntinlupa, Inc., respondents. G.R. No. L-
17620, FIRST DIVISION, August 19, 1986, Narvasa, J
There is no provision of law which expressly or even by implication imposes the requirement for a
separate proceeding exclusively occupied with adjudicating this issue. Moreover, to declare the issue as
beyond the scope of matters cognizable in a proceeding for assistance in liquidation would be to
engender that multiplicity of proceedings which the law abhors.

FACTS Central Bank issued two resolutions. The first one forbids the Rural Bank of Muntinlupa (RBM)
from doing business and designates Consolacion Odra as its receiver. The second one orders the
liquidation of RBM after confirmation that it was insolvent and cannot resume business. Central Bank
the filed a petition for assistance in the liquidation of RBM based on Sec. 29 of the Central Bank Act.
RBM assailed that the resolution ordered by the Monetary Board is tainted with arbitrariness because
RBM is still capable of rehabilitation. Central Bank contends that the court in which the petition for
assistance in liquidation is filed has no jurisdiction to resolve the issue of arbitrariness. Such issue can
only be raised in a separate action.

Central Bank the filed a petition for assistance in the liquidation before the RTC. RBM filed an opposition
which was treated as a motion to dismiss. RTC ruled in favor of RBM. Failing in two attempts to have this
Order reconsidered, 7 the Central Bank and its Liquidator instituted in this Court a special civil action of
certiorari and mandamus, under Rule 65 of the Rules of Court, praying that the Regional Trial Court's
orders be annulled because "issued without or in excess of jurisdiction or with grave abuse of
discretion," and that it be compelled to grant their application for assistance. The petition was referred
to the Intermediate Appellate Court. The IAC remanded the case to the RTC but upon motion for
reconsideration, IAC declared the ruling of the RTC null and void. Hence, this petition.

ISSUE Whether or not a separate action is necessary to determine the issue on arbitrariness of the
Monetary Board’s order placing a bank under receivership and liquidation

RULING No, a separate action is not necessary.

This Court perceives no reason whatever why a banking institution's claim that a resolution of the
Monetary Board under Section 29 of the Central Bank Act should be set aside as plainly arbitrary and
made in bad faith cannot be asserted as an affirmative defense or a counterclaim in the proceeding for
assistance in liquidation, but only as a cause of action in a separate and distinct action. Nor can this
Court see why "a full-blown hearing" on the issue is possible only if it is asserted as a cause of action, but
not when set up by way of an affirmative defense, or a counterclaim. There is no provision of law which
expressly or even by implication imposes the requirement for a separate proceeding exclusively
occupied with adjudicating this issue. Moreover, to declare the issue as beyond the scope of matters
cognizable in a proceeding for assistance in liquidation would be to engender that multiplicity of
proceedings which the law abhors.
BANCO FILIPINO SAVINGS AND MORTGAGE BANK VS. CENTRAL BANK

G.R. No. 70054, EN BANC, December 11, 1991, Medialdea, J

There is no question that under Section 29 of the Central Bank Act, the following are the mandatory
requirements to be complied with before a bank found to be insolvent is ordered closed and forbidden
to do business in the Philippines: Firstly, an examination shall be conducted by the head of the
appropriate supervising or examining department or his examiners or agents into the condition of the
bank; secondly, it shall be disclosed in the examination that the condition of the bank is one of
insolvency, or that its continuance in business would involve probable loss to its depositors or creditors;
thirdly, the department head concerned shall inform the Monetary Board in writing, of the facts; and
lastly, the Monetary Board shall find the statements of the department head to be true. In the case at
bar, We believe that the closure of the petitioner bank was arbitrary and committed with grave abuse of
discretion. Granting in gratia argumenti that the closure was based on justified grounds to protect the
public, the fact that petitioner bank was suffering from serious financial problems should not
automatically lead to its liquidation. Section 29 of the Central Bank provides that a closed bank may be
reorganized or otherwise placed in such a condition that it may be permitted to resume business with
safety to its depositors, creditors and the general public.

FACTS This case involves 9 consolidated cases. The first six cases involve the common issue of whether
or not the liquidator appointed by the respondent Central Bank has the authority to prosecute as well as
to defend suits, and to foreclose mortgages for and in behalf of the bank while the issue on the validity
of the receivership and liquidation of the latter is pending resolution in G.R. No. 7004. On the other
hand, the other three (3) cases, namely, G.R. Nos. 70054, which is the main case, 78767 and 78894 all
seek to annul and set aside M.B. Resolution No. 75 issued by respondents Monetary Board and Central
Bank on January 25, 1985.

G.R. Nos. 70054

Banco Filipino Savings and Mortgage Bank commenced operations on July 9, 1964. It has 89 operating
branches with more than 3 million depositors. It has an approved emergency advance of P119.7 million.
The Monetary Board placed Banco Filipino Savings and Mortgage Bank under conservatorship of Basilio
Estanislao. He was later replaced by Gilberto Teodoro as conservator on August 10, 1984. Gilberto
Teodoro submitted a report dated January 8, 1985 to respondent The Monetary Board on the
conservatorship of the bank. Subsequently, another report dated January 23, 1985 was submitted to the
Monetary Board by Ramon Tiaoqui regarding the major findings of examination on the financial
condition of Banco Filipino Savings and Mortgage Bank as of July 31, 1984, finding the bank one of
insolvency and illiquidity and provides sufficient justification for forbidding the bank from engaging in
banking. The Monetary Board ordered the closure of Banco Filipino and designated Mrs. Carlota P.
Valenzuela as Receiver.

Banco Filipino filed a complaint with the RTC to set aside the action of the Monetary Board placing the
bank under receivership and filed with the SC the petition for certiorari and mandamus. Carlota
Valenzuela, as Receiver and Arnulfo Aurellano and Ramon Tiaoqui as Deputy Receivers of Banco Filipino
submitted their report on the receivership of the bank to the Monetary Board, finding that the condition
of the banking institution continues to be one of insolvency, i.e., its realizable assets are insufficient to
meet all its liabilities and that the bank cannot resume business with safety to its depositors, other
creditors and the general public, and recommends the liquidation of the bank. Banco Filipino filed a
motion before the SC praying that a restraining order or a writ of preliminary injunction be issued to
enjoin respondents from causing the dismantling of Banco Filipino signs in its main office and 89
branches. The SC ordered the issuance of the temporary restraining order. The SC directed the
Monetary Board and Central Bank hold hearings at which the Banco Filipino should be heard.

This refers to nine (9) consolidated cases concerning the legality of the closure and receivership of
petitioner Banco Filipino Savings and Mortgage Bank (Banco Filipino for brevity) pursuant to the order of
respondent Monetary Board. Six (6) of these cases, namely, G.R. Nos. 68878, 77255-68, 78766, 81303,
81304 and 90473 involve the common issue of whether or not the liquidator appointed by the
respondent Central Bank (CB for brevity) has the authority to prosecute as well as to defend suits, and to
foreclose mortgages for and in behalf of the bank while the issue on the validity of the receivership and
liquidation of the latter is pending resolution in G.R. No. 7004. Corollary to this issue is whether the CB
can be sued to fulfill financial commitments of a closed bank pursuant to Section 29 of the Central Bank
Act. On the other hand, the other three (3) cases, namely, G.R. Nos. 70054, which is the main case,
78767 and 78894 all seek to annul and set aside M.B. Resolution No. 75 issued by respondents
Monetary Board and Central Bank on January 25, 1985

ISSUES 1. Whether or not the liquidator appointed by the respondent Central Bank has the authority to
prosecute as well as to defend suits, and to foreclose mortgages for and in behalf of the bank while the
issue on the validity of the receivership and liquidation of the latter is pending resolution in G.R. No.
7004

2. Whether or not the Central Bank and the Monetary Board acted arbitrarily and in bad faith in finding
and thereafter concluding that petitioner bank is insolvent, and in ordering its closure on January 25,
1985

RULING 1. Yes, the liquidator appointed by the respondent Central Bank has the authority to prosecute
as well as to defend suits, and to foreclose mortgages for and in behalf of the bank while the issue on
the validity of the receivership and liquidation of the latter is pending resolution in G.R. No. 7004. When
the issue on the validity of the closure and receivership of Banco Filipino bank was raised in G.R. No.
70054, pendency of the case did not diminish the powers and authority of the designated liquidator to
effect and carry on the administration of the bank. In fact when We adopted a resolute on August 25,
1985 and issued a restraining order to respondents Monetary Board and Central Bank, We enjoined
further acts of liquidation. Such acts of liquidation, as explained in Sec. 29 of the Central Bank Act are
those which constitute the conversion of the assets of the banking institution to money or the sale,
assignment or disposition of the s to creditors and other parties for the purpose of paying debts of such
institution. We did not prohibit however acts a as receiving collectibles and receivables or paying off
credits claims and other transactions pertaining to normal operate of a bank.

There is no doubt that the prosecution of suits collection and the foreclosure of mortgages against
debtors the bank by the liquidator are among the usual and ordinary transactions pertaining to the
administration of a bank. They did Our order in the same resolution dated August 25, 1985 for the
designation by the Central Bank of a comptroller Banco Filipino alter the powers and functions; of the
liquid insofar as the management of the assets of the bank is concerned. The mere duty of the
comptroller is to supervise counts and finances undertaken by the liquidator and to d mine the propriety
of the latter's expenditures incurred behalf of the bank. Notwithstanding this, the liquidator is
empowered under the law to continue the functions of receiver is preserving and keeping intact the
assets of the bank in substitution of its former management, and to prevent the dissipation of its assets
to the detriment of the creditors of the bank. These powers and functions of the liquidator in directing
the operations of the bank in place of the former management or former officials of the bank include
the retaining of counsel of his choice in actions and proceedings for purposes of administration. Clearly,
in G.R. Nos. 68878, 77255-58, 78766 and 90473, the liquidator by himself or through counsel has the
authority to bring actions for foreclosure of mortgages executed by debtors in favor of the bank. In G.R.
No. 81303, the liquidator is likewise authorized to resist or defend suits instituted against the bank by
debtors and creditors of the bank and by other private persons. Similarly, in G.R. No. 81304, due to the
aforestated reasons, the Central Bank cannot be compelled to fulfill financial transactions entered into
by Banco Filipino when the operations of the latter were suspended by reason of its closure. The Central
Bank possesses those powers and functions only as provided for in Sec. 29 of the Central Bank Act

2. Yes, the Monetary Board acted arbitrarily and in bad faith in finding and thereafter concluding that
petitioner bank is insolvent, and in ordering its closure on January 25, 1985. There is no question that
under Section 29 of the Central Bank Act, the following are the mandatory requirements to be complied
with before a bank found to be insolvent is ordered closed and forbidden to do business in the
Philippines: Firstly, an examination shall be conducted by the head of the appropriate supervising or
examining department or his examiners or agents into the condition of the bank; secondly, it shall be
disclosed in the examination that the condition of the bank is one of insolvency, or that its continuance
in business would involve probable loss to its depositors or creditors; thirdly, the department head
concerned shall inform the Monetary Board in writing, of the facts; and lastly, the Monetary Board shall
find the statements of the department head to be true. Anent the first requirement, the Tiaoqui report,
submitted on January 23, 1985, revealed that the finding of insolvency of petitioner was based on the
partial list of exceptions and findings on the regular examination of the bank as of July 31, 1984
conducted by the Supervision and Examination Sector II of the Central Bank of the Philippines Central
Bank. Clearly, Tiaoqui based his report on an incomplete examination of petitioner bank and outrightly
concluded therein that the latter's financial status was one of insolvency or illiquidity. It is evident from
the foregoing circumstances that the examination contemplated in Sec. 29 of the CB Act as a mandatory
requirement was not completely and fully complied with. Despite the existence of the partial list of
findings in the examination of the bank, there were still highly significant items to be weighed and
determined such as the matter of valuation reserves, before these can be considered in the financial
condition of the bank.

It would be a drastic move to conclude prematurely that a bank is insolvent if the basis for such
conclusion is lacking and insufficient, especially if doubt exists as to whether such bases or findings
faithfully represent the real financial status of the bank. The actuation of the Monetary Board in closing
petitioner bank on January 25, 1985 barely four days after a conference with the latter on the
examiners' partial findings on its financial position is also violative of what was provided in the CB
Manual of Examination Procedures. Said manual provides that only after the examination is concluded,
should a pre-closing conference led by the examiner-in-charge be held with the officers/representatives
of the institution on the findings/exception, and a copy of the summary of the findings/violations should
be furnished the institution examined so that corrective action may be taken by them as soon as
possible (Manual of Examination Procedures, General Instruction, p. 14). It is hard to understand how a
period of four days after the conference could be a reasonable opportunity for a bank to undertake a
responsive and corrective action on the partial list of findings of the examiner-in-charge. In the instant
case, the basic standards of substantial due process were not observed. Time and again, We have held in
several cases, that the procedure of administrative tribunals must satisfy the fundamentals of fair play
and that their judgment should express a wellsupported conclusion.

In view of the foregoing premises, We believe that the closure of the petitioner bank was arbitrary and
committed with grave abuse of discretion. Granting in gratia argumenti that the closure was based on
justified grounds to protect the public, the fact that petitioner bank was suffering from serious financial
problems should not automatically lead to its liquidation. Section 29 of the Central Bank provides that a
closed bank may be reorganized or otherwise placed in such a condition that it may be permitted to
resume business with safety to its depositors, creditors and the general public.
JERRY ONG, petitioner, vs. COURT OF APPEALS and RURAL BANK OF OLONGAPO, INC., represented by its
Liquidator, GUILLERMO G. REYES, JR. and Deputy Liquidator ABEL ALLANIGUE, respondents.

G.R. No. 112830. FIRST DIVISION, February 1, 1996 BELLOSILLO, J

All disputed claims against the bank should be filed before the liquidation proceeding. As explained in a
previous case, the judicial liquidation is intended to prevent multiplicity of actions against the insolvent
bank. It is a pragmatic arrangement designed to establish due process and orderliness in the liquidation
of the bank, to obviate the proliferation of litigations and to avoid injustice and arbitrariness

FACTS Omnibus Finance Inc. obtained a loan from Jerry Ong and the Rural Bank of Olongapo mortgaged
its two parcels of land situated in Tagaytay City to guarantee the payment of the said obligation.
Omnibus Finance Inc., failed settle it obligation to Ong which prompted the latter to move for the
extrajudicial foreclosure of the mortgages. A certificate of sale was issued to him by the City Sheriff of
Tagaytay City. The said certificate of sale was duly registered in the Registry of Deeds. Respondents
failed to seasonably redeem said parcels of land, for which reason, petitioner has executed an Affidavit
of Consolidation of Ownership which, to date, has not been submitted to the Registry of Deeds of
Tagaytay City, in view of the fact that possession of the aforesaid titles or owners duplicate certificates
of title remains with the RBO. To date, petitioner has not been able to register of said parcels of land in
his name in view of the persistent refusal of respondents to surrender RBOs copies of its owners
certificates of title for the parcels of land covered.

Jerry Ong filed with the Regional Trial Court of Quezon City a petition for the surrender of TCT Nos.
13769 and 13770 against Rural Bank of Olongapo, Inc. (RBO), represented by its liquidator Guillermo G.
Reyes, Jr. and deputy liquidator Abel Allanigue. Respondent RBO filed a motion to dismiss on the ground
of res judicata alleging that petitioner had earlier sought a similar relief from the Regional Trial Court of
Tagaytay City, which case was dismissed with finality on appeal before the Court of Appeals. In a
supplemental motion to dismiss, respondent RBO contended that it was undergoing liquidation and,
pursuant to prevailing jurisprudence, it is the liquidation court which has exclusive jurisdiction to take
cognizance of petitioners claim. The RTC denied the motion to dismiss. RBO filed a motion for
reconsideration which was also rejected. The RTC held that the parcels of land were already sold to the
petitioner in a public sale and no longer part of the assets of the RBO when it was put under liquidation
and when its petition for assistance in its liquidation was approved by the RTC of Olongapo. RBO filed for
an MR claiming that the certificate of sale was still not final since the same were still subject of a
pending litigation between the parties in a separate case. RTC denied the MR

The bank elevated the case to the CA by way of a petition for certiorari and prohibition. The CA annuled
the decision of the RTC and held that Sec. 29, par. 3, of R.A. 265 as amended by P.D. 1827[6] does not
limit the jurisdiction of the liquidation court to claims against the assets of the insolvent bank. The
provision is general in that it clearly and unqualifiedly states that the liquidation court shall have
jurisdiction to adjudicate disputed claims against the bank. Disputed claims refer to all claims, whether
they are against the assets of the insolvent bank, for specific performance, breach of contract, damages,
or whatever. To limit the jurisdiction of the liquidation court to those claims against the assets of the
bank is to remove significantly and without basis the cases that may be brought against a bank in case of
insolvency. Respondent court also noted that the certificates of title are still in the name of respondent
RBO. As far as third persons are concerned (and these include claimants in the liquidation court),
registration is the operative act which would convey title to the property. This prompted the petitioner
to elevate the case before the SC.

ISSUE Whether or not the civil case the petitioner filed before the RTC should be filed before the
liquidation proceeding?

RULING YES. All disputed claims against the bank should be filed before the liquidation proceeding. As
explained in a previous case, the judicial liquidation is intended to prevent multiplicity of actions against
the insolvent bank. It is a pragmatic arrangement designed to establish due process and orderliness in
the liquidation of the bank, to obviate the proliferation of litigations and to avoid injustice and
arbitrariness. The lawmaking body contemplated that for convenience only one court, if possible, should
pass upon the claims against the insolvent bank and that the liquidation court should assist the
Superintendent of Banks and regulates his operations. The term disputed claim in the provision includes
all contentious cases that might arise in the course of liquidation wherein a full-dress hearing would be
required and legal issues would have to be resolved. Hence, it would be necessary injustice to all
concerned that a Court of First Instance (now Regional Trial Court) assist and supervise the liquidation
and act as umpire or arbitrator in the allowance and disallowance of claims. Petitioner must have
overlooked the fact that since respondent RBO is insolvent other claimants not privy to their transaction
may be involved. As far as those claimants are concerned, in the absence of certificates of title in the
name of petitioner, subject lots still form part of the assets of the insolvent bank.

This, however, does not prejudice the right of the petitioner to file his claim before the RTC of Olongapo
wherein the liquidation proceeding is being held.
DOMINGO R. MANALO, petitioner, vs. COURT OF APPEALS (Special Twelfth Division) and PAIC SAVINGS
AND MORTGAGE BANK, respondents.

G.R. No. 141297, FIRST DIVISION, October 8, 2001, Puno, J

The pertinent provision of the law which states the liquidation court “shall have jurisdiction in the same
proceedings to assist in the adjudication of disputed claims against the bank…xxx” only finds operation
in cases where there are claims against an insolvent bank. In fine, the exclusive jurisdiction of the
liquidation court pertains only to the adjudication of claims against the bank. It does not cover the
reverse situation where it is the bank which files a claim against another person or legal entity

To be sure, the liquidator took the proper course of action when it applied for a writ in the Pasay City
RTC because under Act 3135, it is mandated that jurisdiction over a Petition for Writ of Possession lies
with the court of the province, city, or municipality where the property subject thereof is situated.

Furthermore, a bank which had been ordered closed by the monetary board retains its juridical
personality which can sue and be sued through its liquidator

FACTS S. Villanueva Enterprise thru its president, Therese Vargas, obtained a loan of 3M and 1M from
the respondent PAIC Savings and Mortgage Bank and the Philippine American Investments Corporation
(PAIC) respectively. As a security, Vargas executed a Joint First Mortgage over her two parcels of land in
favor of the respondent and PAIC. S. Villanueva Enterprise failed to settle its loan obligation which
prompted the respondent to institute an extrajudicial foreclosure proceeding over the mortgage lots. A
public sale was held and the property was sold to the respondent. A certificate of sale was issued and
it’s duly annotated in the title of the land. Vargas failed to redeem the property, thus, the title was
consolidated in respondent’s name. Meanwhile, the respondent bank was put under liquidation a
petition for assistance was granted by the RTC. Vargas tried to negotiate with the liquidator of the bank
to repurchase the property but she cannot afford the same. Vargas then filed a case for annulment of
the mortgage and the extrajudicial foreclosure which was later on dismissed by the RTC. Vargas
appealed before the CA but the decision of the RTC was affirmed and later on, this decision became final
and executory.

In the meantime, the respondent bank filed a petition before the RTC for the issuance of a writ of
possession for the subject property. Vargas and the Villanueva Enterprise filed an opposition. While the
case was still pending, Vargas sold the disputed property to a certain Armando Angsico. After this sale,
Vargas, representing herself as the lawful owner of the same property, leased it to Doming R. Manalo
for a period of 10 years. Later on, Angsico assigned his rights over the property to Manalo. Then, the RTC
granted the petition and issued the writ of possession and ordered Vargas and any and all persons
claiming rights under her title to vacate the property. Villanueva Enterprise and Vargas moved for the
quashal of the said writ. Manalo filed a motion to intervene. The RTC denied both the said motions.
Manalo filed a Motion for Reconsideration which was also denied. Manalo filed a Petition for Certiorari
before the CA. Petitioner contended that the lower court should have dismissed respondents Ex-Parte
Petition for Issuance of Writ of Possession for want of jurisdiction over the subject matter of the claim.
The power to hear the same, he insists, exclusively vests with the Liquidation Court pursuant to Section
29 of Republic Act No. 265, otherwise known as The Central Bank Act. He then cites the decision in
Valenzuela v. Court of Appeals, where it was held that if there is a judicial liquidation of an insolvent
bank, all claims against the bank should be filed in the liquidation proceeding. For going to another
court, the respondent, he accuses, is guilty of forum shopping. While this case was pending, Manalo
entered into a lease agreement with the respondent over the same property. The CA dismissed the
petition of Manalo. Hence, this appeal before the SC.

ISSUES 1. Whether or not the Liquidation Court has the exclusive jurisdiction over the petition for the
issuance of writ of possession filed by the respondent bank in another court?

2. Whether or not the respondent bank can still file and maintain a suit despite the fact that it is already
under liquidation?
RULING 1. NO. The pertinent provision of the law which states the liquidation court “shall have
jurisdiction in the same proceedings to assist in the adjudication of disputed claims against the bank…
xxx” only finds operation in cases where there are claims against an insolvent bank. In fine, the exclusive
jurisdiction of the liquidation court pertains only to the adjudication of claims against the bank. It does
not cover the reverse situation where it is the bank which files a claim against another person or legal
entity. This interpretation of Section 29 becomes more obvious in the light of its intent. The requirement
that all claims against the bank be pursued in the liquidation proceedings filed by the Central Bank is
intended to prevent multiplicity of actions against the insolvent bank and designed to establish due
process and orderliness in the liquidation of the bank, to obviate the proliferation of litigations and to
avoid injustice and arbitrariness. The lawmaking body contemplated that for convenience, only one
court, if possible, should pass upon the claims against the insolvent bank and that the liquidation court
should assist the Superintendents of Banks and regulates his operations. It then ought to follow that
petitioner’s reliance on Section 29 and the Valenzuela case is misplaced. The Petition for the Issuance of
a Writ of Possession in Civil Case No. 9011 is not in the nature of a disputed claim against the bank. On
the contrary, it is an action instituted by the respondent bank itself for the preservation of its asset and
protection of its property. It was filed upon the instance of the respondent’s liquidator in order to take
possession of a tract of land over which it has ownership claims. To be sure, the liquidator took the
proper course of action when it applied for a writ in the Pasay City RTC because under Act 3135, it is
mandated that jurisdiction over a Petition for Writ of Possession lies with the court of the province, city,
or municipality where the property subject thereof is situated.

2. YES. A bank which had been ordered closed by the monetary board retains its juridical personality
which can sue and be sued through its liquidator. The only limitation being that the prosecution or
defense of the action must be done through the liquidator. Otherwise, no suit for or against an insolvent
entity would prosper. In such situation, banks in liquidation would lose what justly belongs to them
through a mere technicality
RURAL BANK OF STA. CATALINA, INC., represented by The Philippine Deposit Insurance Corporation, in
its capacity as Liquidator, petitioner, vs. LAND BANK OF THE PHILIPPINES,

G.R. No. 148019, SECOND DIVISION, July 26, 2004, Callejo Sr., J.

Such party declared in default is proscribed from seeking a modification or reversal of the assailed
decision on the basis of the evidence submitted by him in the Court of Appeals, for if it were otherwise,
he would thereby be allowed to regain his right to adduce evidence, a right which he lost in the trial
court when he was declared in default, and which he failed to have vacated. In this case, the petitioner
sought the modification of the decision of the trial court based on the evidence submitted by it only in
the Court of Appeals.

The petitioner is, thus, barred from relying on the orders of the Monetary Board of the Central Bank of
the Philippines placing its assets and affairs under receivership and ordering its liquidation.

FACTS Land Bank of the Philippines filed a complaint against, Sta. Catalina Rural Bank, Inc., in the
Regional Trial Court for the collection of the sum of P2,809,280.25, capitalized and accrued interests,
penalties and surcharges, and for such other equitable reliefs. For its failure to file its answer to the
complaint, the trial court declared the petitioner bank in default. Despite its receipt of the copy of the
said order, the petitioner bank failed to file a motion to set aside the order of default.

In the meantime, the Monetary Board approved the placement of the petitioner bank’s assets under
receivership. The Philippine Deposit Insurance Corporation (PDIC) was designated as receiver
(conservator) of the petitioner, and the latter was prohibited from doing business in the Philippines.
Unaware of the action of the CB, the trial court rendered judgment by default against the petitioner
bank ordering the bank to pay its obligation to respondent LBP plus interests and damages.

The petitioner, through the PDIC, appealed the decision to the Court of Appeals. The petitioner bank
claim that since it was placed under receivership and prohibited from doing business in the Philippines it
should no longer be held liable for interests and penalties on its account to the respondent bank.
However, CA rendered judgment affirming the decision of the RTC

ISSUE Whether or not Rural bank of Sta. Catalina is liable for Interests or Penalties when it was placed
under receivership.

RULING NO, Such party declared in default is proscribed from seeking a modification or reversal of the
assailed decision on the basis of the evidence submitted by him in the Court of Appeals, for if it were
otherwise, he would thereby be allowed to regain his right to adduce evidence, a right which he lost in
the trial court when he was declared in default, and which he failed to have vacated. In this case, the
petitioner sought the modification of the decision of the trial court based on the evidence submitted by
it only in the Court of Appeals.

Petitioner was served with a copy of summons and the complaint, but failed to file its answer thereto. It
also failed to file a verified motion to set aside the order of default despite its receipt of a copy thereof.
We note that the trial court rendered judgment only on April 7, 1998 or more than a year after the
issuance of the default order; yet, the petitioner failed to file any verified motion to set aside the said
order before the rendition of the judgment of default. The PDIC was designated by the Central Bank of
the Philippines as receiver (conservator) as early as January 14, 1998, and in the course of its
management of the petitioner bank’s affairs, it should have known of the pendency of the case against
the latter in the trial court. Moreover, the petitioner, through the PDIC, received a copy of the decision
of the trial court but did not bother filing a motion for partial reconsideration appending thereto the
orders of the Monetary Board or a motion to set aside the order of default. Instead, the petitioner
appealed the decision, and even failed to assign as an error the default order of the trial court. The
petitioner is, thus, barred from relying on the orders of the Monetary Board of the Central Bank of the
Philippines placing its assets and affairs under receivership and ordering its liquidation.
LETICIA G. MIRANDA, petitioner, vs. PHILIPPINE DEPOSIT INSURANCE CORPORATION, BANGKO SENTRAL
NG PILIPINAS and PRIME SAVINGS BANK, Respondents.

G.R. No. 169334, FIRST DIVISION, September 8, 2006, Justice Ynares-Santiago

"Disputed claims" refer to all claims, whether they be against the assets of the insolvent bank, for
specific performance, breach of contract, damages, or whatever. Petitioner's claim which involved the
payment of the two cashier's checks that were not honored by Prime Savings Bank due to its closure
falls within the ambit of a claim against the assets of the insolvent bank. The issuance of the cashier's
checks by Prime Savings Bank to the petitioner created a debtor/creditor relationship between them.
This disputed claim should therefore be lodged in the liquidation proceedings by the petitioner as
creditor, since the closure of Prime Savings Bank has rendered all claims subsisting at that time moot
which can best be threshed out by the liquidation court and not the regular courts.

FACTS Leticia G. Miranda was a depositor of Prime Savings Bank. She then wanted to withdrew 5.5M
from her account, but instead of cash she opted to be issued a crossed cashier’s check in the sum of
P2,500,000 and cashier’s check in the amount of P3,002,000. Petitioner deposited the two checks into
her account in another bank on the same day, however, Bangko Sentral ng Pilipinas suspended the
clearing privileges of Prime Savings Bank effective 2:00 p.m. of June 3, 1999. The two checks of
petitioner were returned to her unpaid. Subsequently, Prime Savings Bank declared a bank holiday. The
BSP placed Prime Savings Bank under the receivership of the Philippine Deposit Insurance Corporation
(PDIC).

Miranda filed a civil action for sum of money in the Regional Trial Court to recover the funds from her
unpaid checks against Prime Savings Bank, PDIC and the BSP. The court rendered judgment against
defendants and ordered them to pay the plaintiff. On appeal, the Court of Appeals reversed the trial
court and ruled in favor of the PDIC and BSP, dismissing the case against them, without prejudice to the
right of petitioner to file her claim before the court designated to adjudicate on claims against Prime
Savings Bank. Petitioner’s motion for reconsideration was denied. Hence, this petition.

ISSUES (1)Whether the claim lodged by the petitioner is a disputed claim under Section 30 of Republic
Act (R.A.) No. 7653, otherwise known as the New Central Bank Act, and therefore, under the jurisdiction
of the liquidation court.

(2)Whether the respondents are solidarily liable to the petitioner

RULING (1) YES, the claim lodged by the petitioner qualifies as a disputed claim subject to the
jurisdiction of the liquidation court. Regular courts do not have jurisdiction over actions filed by
claimants against an insolvent bank, unless there is a clear showing that the action taken by the BSP,
through the Monetary Board in the closure of financial institutions was in excess of jurisdiction, or with
grave abuse of discretion.

The power and authority of the Monetary Board to close banks and liquidate them thereafter when
public interest so requires is an exercise of the police power of the State. Police power, however, is
subject to judicial inquiry. It may not be exercised arbitrarily or unreasonably and could be set aside if it
is either capricious, discriminatory, whimsical, arbitrary, unjust, or is tantamount to a denial of due
process and equal protection clauses of the Constitution.

"Disputed claims" refer to all claims, whether they be against the assets of the insolvent bank, for
specific performance, breach of contract, damages, or whatever. Petitioner's claim which involved the
payment of the two cashier's checks that were not honored by Prime Savings Bank due to its closure
falls within the ambit of a claim against the assets of the insolvent bank. The issuance of the cashier's
checks by Prime Savings Bank to the petitioner created a debtor/creditor relationship between them.
This disputed claim should therefore be lodged in the liquidation proceedings by the petitioner as
creditor, since the closure of Prime Savings Bank has rendered all claims subsisting at that time moot
which can best be threshed out by the liquidation court and not the regular courts.
(2) NO, it is only Prime Savings Bank that is liable to pay for the amount of the two cashier's checks.
Solidary liability cannot attach to the BSP, in its capacity as government regulator of banks, and the PDIC
as statutory receiver under R.A. No. 7653, because they are the principal government agencies
mandated by law to determine the financial viability of banks and quasi-banks, and facilitate
receivership and liquidation of closed financial institutions, upon a factual determination of the latter's
insolvency.

As correctly pointed out by the Court of Appeals, the BSP should not be held liable on the crossed
cashier's checks for it was not a party to the issuance of the same; nor can it be held liable for imposing
the sanctions on Prime Savings Bank which indirectly affected Miranda, since it is mandated under Sec.
37 of R.A. No. 7653 to act accordingly.26 The BSP, through the Monetary Board was well within its
discretion to exercise this power granted by law to issue a resolution suspending the interbank clearing
privileges of Prime Savings Bank, having made a factual determination that the bank had deficient cash
reserves deposited before the BSP. There is no showing that the BSP abused this discretionary power
conferred upon it by law.
IN RE: PETITION FOR ASSISTANCE IN THE LIQUIDATION OF THE RURAL BANK OF BOKOD (BENGUET), INC.,
PHILIPPINE DEPOSIT INSURANCE CORPORATION, petitioner, vs. BUREAU OF INTERNAL REVENUE

G.R. NO. 158261, FIRST DIVISION, December 18, 2006, Justice Chico-Nazario

Section 52(C) of the Tax Code of 1997 and the BIR-SEC Regulations No. 1 regulate the relations only as
between the SEC and the BIR, making a certificate of tax clearance a prior requirement before the SEC
could approve the dissolution of a corporation. In Spec. Proc. No. 91-SP-0060 pending before the RTC,
RBBI was placed under receivership and ordered liquidated by the BSP, not the SEC; and the SEC is not
even a party in the said case, although the BIR is. This Court cannot find any basis to extend the SEC
requirements for dissolution of a corporation to the liquidationproceedings of RBBI before the RTC when
the SEC is not even involved therein.

FACTS Rural Bank of Bokod (Benguet), Inc. (RBBI) conducted a special examination of RBBI was
conducted by the Supervision and Examination Sector (SES) Department III of what is now the Bangko
Sentral ng Pilipinas (BSP),4 wherein various loan irregularities were uncovered. In a letter, dated 20 May
1986, the SES Department III required the RBBI management to infuse fresh capital into the bank, within
30 days from date of the advice, and to correct all the exceptions noted. However, up to the termination
of the subsequent general examination conducted by the SES Department III, no concrete action was
taken by the RBBI management. A memorandum and report, dated 28 August 1990, were submitted by
the Director of the SES Department III concluding that the RBBI remained in insolvent financial condition
and it can no longer safely resume business with the depositors, creditors, and the general public.

BSP liquidator of RBBI caused the filing with the RTC of a Petition for Assistance in the Liquidation of
RBBI, the Monetary Board transferred to herein petitioner Philippine Deposit Insurance Corporation
(PDIC) the receivership/liquidation of RBBI.The respondent Bureau of Internal Revenue (BIR), through
Atty. Justo Reginaldo, manifested that PDIC should secure a tax clearance certificate from the
appropriate BIR Regional Office, pursuant to Section 52(C) of Republic Act No. 842. PDIC argues that the
closure of banks under Section 30 of the New Central Bank Act is summary in nature and procurement
of tax clearance as required under Section 52(C) of the Tax Code of 1997 is not a condition precedent.

ISSUE Whether or not submission of tax clearance is a requirement for a bank to be close and placed
under receivership.

RULING No. Section 52(C) of the Tax Code of 1997 and the BIR-SEC Regulations No. 1 regulate the
relations only as between the SEC and the BIR, making a certificate of tax clearance a prior requirement
before the SEC could approve the dissolution of a corporation. In Spec. Proc. No. 91-SP-0060 pending
before the RTC, RBBI was placed under receivership and ordered liquidated by the BSP, not the SEC; and
the SEC is not even a party in the said case, although the BIR is. This Court cannot find any basis to
extend the SEC requirements for dissolution of a corporation to the liquidation proceedings of RBBI
before the RTC when the SEC is not even involved therein.

The receiver shall immediately gather and take charge of all the assets and liabilities of the institution,
administer the same for the benefit of its creditors, and exercise the general powers of a receiver under
the Revised Rules of Court but shall not, with the exception of administrative expenditures, pay or
commit any act that will involve the transfer or disposition of any asset of the institution: Provided, That
the receiver may deposit or place the funds of the institution in nonspeculative investments. The
receiver shall determine as soon as possible, but not later than ninety (90) days from takeover, whether
the institution may be rehabilitated or otherwise placed in such a condition that it may be permitted to
resume business with safety to its depositors and creditors and the general public: Provided, That any
determination for the resumption of business of the institution shall be subject to prior approval of the
Monetary Board.
CU v. SMALL BUSINESS GUARANTEE AND FINANCE CORP

G.R. No. 211222, August 7, 2017, First Division, CAGUIOA, J.

A criminal case for violation of BP 22 against a bank placed under receivership by the Monetary Board
may be dismissed for the demandability of the obligation to be performed has been suspended.

FACTS Golden 7 Bank (G7 Bank) was granted a credit line worth Php 50 million by respondent Small
Business Guarantee and Finance Corp. The bank’s officers, herein petitioner Fidel Cu, Allan Cu and
others were made signatories to the loan documents including the postdated checks which were issued
in payment for the drawdowns on the credit line.

BSP placed G7 Bank under receivership by the Philippine Deposit Insurance Corporation (PDIC). PDIC
eventually took over the bank’s premises, per the closure order issued by the Monetary Board. In effect,
the Deputy Receiver of PDIC took over the bank and issued a cease and desist order which allowed PDIC
to close all of G7 Bank’s deposit accounts with other banks.

The postdated checks issued by Cu the matured and when SB Corp deposited the same to its account
with the LBP Makati Branch, they were all dishonored for the reason that the account was already
closed. SB Corp sent demand letters to Cu, demanding payment. Despite such, Cu failed to comply thus
SB Corp filed a criminal complaint against Cu and others for violation of BP 22. A petition for assistance
in the liquidation of G7 Bank’s assets was then filed by PDIC in the Naga City court.

The MeTC dismissed the BP 22 cases, and the dismissal was upheld by the RTC, by the reason that the
appointment of a receiver operates to suspend the authority of the bank and its officers to intermeddle
with its own property and transfer its assets to make do the payment with SB Corp. The CA reversed the
ruling, hence Cu’s petition.

ISSUE Whether the criminal case for BP 22 against the bank officers should be dismissed due to the
order for receivership and despite a subsequent pending petition for assistance for liquidation.

RULING YES, the SC found that both the MeTC and the RTC acted correctly when it ordered the dismissal
of the BP 22 cases against Cu. The Court found that:

(1) the closure of G7 Bank, placing it under receivership per Monetary Board Orders and the
filing of the petition for assistance in the liquidation proceedings effectively suspended the
demandabililty of the loan, thus the BP 22 case cannot proceed and was properly dismissed; and

(2) the filing of a petition for assistance in liquidation by PDIC as receiver as a result of the
Monetary Bank’s order for closure made it legally impossible for Cu to comply with his obligation with
SB Corp, thus the filing was clearly in bad faith

It applied the doctrine in the case of Gidwani v. People, in which the demandability of the payment for
the embroidery services rendered by the exporter was “suspended” by an SEC order, which ordered the
account from which the payments were to be drawn against, to be closed, after the exporter filed a
petition for declaration of a state of suspension of payments.

“In other words, the SEC Order also created a suspensive condition. When a contract is subject to a
suspensive condition, its birth takes place or its effectivity commences only if and when the event that
constitutes the condition happens or is fulfilled. Thus, at the time the payee presented the September
and October 1997 checks for encashment, it had no right to do so, as there was yet no obligation due
from the exporter, through its President.”

“Consequently, because there was a suspension of the exporter's obligations, its President may not be
held liable for civil obligations of the corporation covered by the bank checks at the time this case arose.
However, it must be emphasized that the President's non-liability should not prejudice the right of the
payee to pursue its claim through the remedies available to it, subject to the SEC proceedings regarding
the application for corporate rehabilitation.”
The Court pointed out that that G7 Bank was placed under receivership prior to the demand of the
payments. This means that when SB Corp. deposited the postdated checks, it was surely aware that G7
Bank was already under receivership and PDIC had already taken over the bank by virtue of the
Monetary Board’s closure thereof. SB Corp clearly acted in bad faith because it was aware that it was
legally impossible for Cu to fund those checks on the dates indicated therein, which were all past G7
Bank’s closure because all the bank accounts of G7 Bank were closed by PDIC.

Further, the effect of a petition for assistance in the liquidation of a cloased bank is that it gives the
liquidation court the exclusive jurisdiction to adjudicate disputed claims against the closed bank, assist in
the individual liabilities of the stockholders, directors, and officers, and decide on all other issues as may
be material to implement the distribution plan adopted by the PDIC for general application to all closed
banks.

Considering the amount to be received by SB Corp was not yet determine as the liquidation proceeding
was still pending, the debtor’s obligation to pay or perform is suspended. This however, does not
preclude the proper filing of claims in the liquidation proceedings.
APEX BANCRIGHTS HOLDINGS, INC., LEAD BANCFUND HOLDINGS, et al., v. BANGKO SENTRAL NG
PILIPINAS and PHILIPPINE DEPOSIT INSURANCE CORPORATION,

G.R. No. 214866, October 2, 2017, Second Division, PERLAS-BERNABE, J.

The Monetary Board may summarily and without need for prior hearing forbid the institution from
doing business in the Philippines and designate the Philippine Deposit Insurance Corporation as receiver
of the banking institution.

The receiver shall immediately gather and take charge of all the assets and liabilities of the institution,
administer the same for the benefit of its creditors, and exercise the general powers of a receiver under
the Revised Rules of Court. If the receiver determines that the institution cannot be rehabilitated or
permitted to resume business in accordance with the next preceding paragraph, the Monetary Board
shall notify in writing the board of directors of its findings and direct the receiver to proceed with the
liquidation of the institution.

FACTS EIB, entered into a three-way merger with Urban Bank, Inc. (UBI) and Urbancorp Investments, Inc.
(UII) in an attempt to rehabilitate UBI which was then under receivership. However, EIB then
encountered its own financial difficulties and failed to overcome those thus leading to PDIC placing it
under receivership pursuant to Section 30 of RA 7653 or the New Central Bank Act. Accordingly, PDIC
took over EIB. PDIC submitted its initial receivership report to the Monetary Board which contained its
finding that EIB can be rehabilitated or permitted to resume business; provided, that a bidding for its
rehabilitation would be conducted, and that the following conditions would be met: (a) there are
qualified interested banks that will comply with the parameters for rehabilitation of a closed bank,
capital strengthening, liquidity, sustainability and viability of operations, and strengthening of bank
governance; and (b) all parties (including creditors and stockholders) agree to the rehabilitation and the
revised payment terms and conditions of outstanding liabilities.

A public bidding was scheduled by PDIC, but the same failed as no bid was submitted. A rebidding was
then set which also did not materialize as no bids were submitted. Thereafter, PDIC informed BSP that
EIB can hardly be rehabilitated and so the Monetary Board directed PDIC to proceed with the
liquidation.

Petitioners, who are stockholders representing the majority stock of EIB, filed a petition for certiorari
before the CA challenging the Resolution of Liquidation. In essence, petitioners blame PDIC for the
failure to rehabilitate EIB, contending that PDIC: (a) imposed unreasonable and oppressive conditions
which delayed or frustrated the transaction between BDO and EIB; (b) frustrated EIB's efforts to increase
its liquidity when PDIC disapproved EIB's proposal to sell its MRT bonds to a private third party and,
instead, required EIB to sell the same to government entities; (c) imposed impossible and unnecessary
bidding requirements; and (d) delayed the public bidding which dampened investors' interest.

In defense, PDIC countered that petitioners were already estopped from assailing the placement of EIB
under receivership and its eventual liquidation since they had already surrendered full control of the
bank to the BSP. For its part, BSP maintained that it had ample factual and legal bases to order EIB's
liquidation.

The CA ruled in favor of the BSP noting that nothing in the Section 30 of RA 7653requires the Monetary
Board to make its own independent factual determination on the bank's viability before ordering its
liquidation. The law only provides that the Monetary Board "shall notify in writing the board of directors
of its findings and direct the receiver to proceed with the liquidation of the institution," which it did in
this case.

ISSUE Whether or not the monetary board did not gravely abuse its discretion when it directed the PDIC
to proceed with the liquidation of EIB.

RULING NO. As per Section 30 (c) of RA 7653 on the Proceedings in Receivership and Liquidation
provides that “the Monetary Board may summarily and without need for prior hearing forbid the
institution from doing business in the Philippines and designate the Philippine Deposit Insurance
Corporation as receiver of the banking institution”.

The receiver shall immediately gather and take charge of all the assets and liabilities of the institution,
administer the same for the benefit of its creditors, and exercise the general powers of a receiver under
the Revised Rules of Court. If the receiver determines that the institution cannot be rehabilitated or
permitted to resume business in accordance with the next preceding paragraph, the Monetary Board
shall notify in writing the board of directors of its findings and direct the receiver to proceed with the
liquidation of the institution.

The actions of the Monetary Board taken under this section or under Section 29 of this Act shall be final
and executory and may not be restrained or set aside by the court except on petition for certiorari on
the ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to
amount to lack or excess of jurisdiction.

It is settled that "the power and authority of the Monetary Board to close banks and liquidate them
thereafter when public interest so requires is an exercise of the police power of the State. Police power,
however, is subject to judicial inquiry. It may not be exercised arbitrarily or unreasonably and could be
set aside if it is either capricious, discriminatory, whimsical, arbitrary, unjust, or is tantamount to a
denial of due process and equal protection clauses of the Constitution."

Here, there was no grave abuse of discretion. In an attempt to forestall EIB's liquidation, petitioners
insist that the Monetary Board must first make its own independent finding that the bank could no
longer be rehabilitated — instead of merely relying on the findings of the PDIC — before ordering the
liquidation of a bank. Such position is untenable.

As correctly held by the CA, nothing in Section 30 of RA 7653 requires the BSP, through the Monetary
Board, to make an independent determination of whether a bank may still be rehabilitated or not. As
expressly stated in the afore-cited provision, once the receiver determines that rehabilitation is no
longer feasible, the Monetary Board is simply obligated to: (a) notify in writing the bank's board of
directors of the same; and (b) direct the PDIC to proceed with liquidation.
BSB GROUP, INC., represented by its President, Mr. RICARDO BANGAYAN,Petitioner,-versusSALLY GO
a.k.a. SALLY GO-BANGAYAN,Respondent.

G.R. No. 168644, THIRD DIVISION, February 16, 2010, PERALTA, J.

R.A. No. 1405 has two allied purposes. It hopes to discourage private hoarding and at the same time
encourage the people to deposit their money in banking institutions, so that it may be utilized by way of
authorized loans and thereby assist in economic development. Owing to this piece of legislation, the
confidentiality of bank deposits remains to be a basic state policy in the Philippines. We hold that the
testimony of Marasigan on the particulars of respondents supposed bank account with Security Bank
and the documentary evidence represented by the checks adduced in support thereof, are not only
incompetent for being excluded by operation of R.A. No. 1405. They are likewise irrelevant to the case,
inasmuch as they do not appear to have any logical and reasonable connection to the prosecution of
respondent for qualified theft.

FACTS Petitioner, the BSB Group, Inc., is a duly organized domestic corporation presided by its herein
representative, Ricardo Bangayan (Bangayan). Respondent Sally Go, alternatively referred to as Sally Sia
Go and Sally Go-Bangayan, is Bangayans wife, who was employed in the company as a cashier, and was
engaged, among others, to receive and account for the payments made by the various customers of the
company.

In 2002, Bangayan filed with the Manila Prosecutors Office a complaint for estafa and/or qualified theft
against respondent, alleging that several checks representing the aggregate amount of P1,534,135.50
issued by the companys customers in payment of their obligation were, instead of being turned over to
the companys coffers, indorsed by respondent who deposited the same to her personal banking account
maintained at Security Bank and Trust Company (Security Bank).

Accordingly, respondent was charged before the Regional Trial Court of Manila.

Respondent entered a negative plea when arraigned. The trial ensued. On the premise that respondent
had allegedly encashed the subject checks and deposited the corresponding amounts thereof to her
personal banking account, the prosecution moved for the issuance of subpoena ducestecum /ad
testificandum against the respective managers or records custodians of Security Banks Divisoria Branch,
as well as of the Asian Savings Bank (now Metropolitan Bank & Trust Co. [Metrobank]). The trial court
granted the motion and issued the corresponding subpoena. Respondent filed a motion to quash the
subpoena, addressed to Metrobank, noting to the court that in the complaint-affidavit filed with the
prosecutor, there was no mention made of the said bank account, to which respondent, in addition to
the Security Bank account, allegedly deposited the proceeds of the supposed checks.

Petitioner, opposing respondents move, argued for the relevancy of the Metrobank account on the
ground that the complaint-affidavit showed that there were two checks which respondent allegedly
deposited in an account with the said bank.To this, respondent filed a supplemental motion to quash,
invoking the absolutely confidential nature of the Metrobank account under the provisions of Republic
Act (R.A.) No. 1405. The trial court did not sustain respondent; hence, it denied the motion to quash for
lack of merit.

Meanwhile, the prosecution was able to present in court the testimony of Elenita Marasigan
(Marasigan), the representative of Security Bank. In a nutshell, Marasigans testimony sought to prove
that between 1988 and 1989, respondent, while engaged as cashier at the BSB Group, Inc., was able to
run away with the checks issued to the company by its customers, endorse the same, and credit the
corresponding amounts to her personal deposit account with Security Bank. In the course of the
testimony, the subject checks were presented to Marasigan for identification and marking as the same
checks received by respondent, endorsed, and then deposited in her personal account with Security
Bank.
But before the testimony could be completed, respondent filed a Motion to Suppress, seeking the
exclusion of Marasigans testimony and accompanying documents thus far received, bearing on the
subject Security Bank account. This time respondent invokes, in addition to irrelevancy, the privilege of
confidentiality under R.A. No. 1405.

The Trial court denied said motion as well as the motion for reconsideration filed by the respondent. CA
reversed the decision and ordered that the witness’ testimony be stricken out from the record.

In this Petition under Rule 45, petitioner averred in the main that the Court of Appeals had seriously
erred in reversing the assailed orders of the trial court, and in effect striking out Marasigans testimony
dealing with respondents deposit account with Security Bank. It asserted that apart from the fact that
the said evidence had a direct relation to the subject matter of the case for qualified theft and, hence,
brings the case under one of the exceptions to the coverage of confidentiality under R.A. 1405.

For her part, respondent claimed that the money represented by the Security Bank account was neither
relevant nor material to the case, because nothing in the criminal information suggested that the money
therein deposited was the subject matter of the case. Thus, the checks which the prosecution had
Marasigan identify, as well as the testimony itself of Marasigan, should be suppressed by the trial court
at least for violating respondents right to due process. More in point, respondent opined that admitting
the testimony of Marasigan, as well as the evidence pertaining to the Security Bank account, would
violate the secrecy rule under R.A. No. 1405.

ISSUES WON the testimony of Marasigan and the accompanying documents are irrelevant to the case,
and whether they are also violative of the absolutely confidential nature of bank deposits and, hence,
excluded by operation of R.A. No. 1405.

RULING YES. The Court, after deliberative estimation, finds the subject evidence to be indeed
inadmissible. It is conceded that while the fundamental law has not bothered with the triviality of
specifically addressing privacy rights relative to banking accounts, there, nevertheless, exists in our
jurisdiction a legitimate expectation of privacy governing such accounts. The source of this right of
expectation is statutory, and it is found in R.A. No. 1405, otherwise known as the Bank Secrecy Act of
1955.

R.A. No. 1405 has two allied purposes. It hopes to discourage private hoarding and at the same time
encourage the people to deposit their money in banking institutions, so that it may be utilized by way of
authorized loans and thereby assist in economic development. Owing to this piece of legislation, the
confidentiality of bank deposits remains to be a basic state policy in the Philippines.

In taking exclusion from the coverage of the confidentiality rule, petitioner in the instant case posits that
the account maintained by respondent with Security Bank contains the proceeds of the checks that she
has fraudulently appropriated to herself and, thus, falls under one of the exceptions in Section 2 of R.A.
No. 1405 that the money kept in said account is the subject matter in litigation. To highlight this thesis,
petitioner avers, citing Mathay v. Consolidated Bank and Trust Co] that the subject matter of the action
refers to the physical facts; the things real or personal; the money, lands, chattels and the like, in
relation to which the suit is prosecuted, which in the instant case should refer to the money deposited in
the Security Bank account. On the surface, however, it seems that petitioners theory is valid to a point,
yet a deeper treatment tends to show that it has argued quite off-tangentially. This, because, while
Mathay did explain what the subject matter of an action is, it nevertheless did so only to determine
whether the class suit in that case was properly brought to the court.

What indeed constitutes the subject matter in litigation in relation to Section 2 of R.A. No. 1405 has
been pointedly and amply addressed in Union Bank of the Philippines v. Court of Appeals, in which the
Court noted that the inquiry into bank deposits allowable under R.A. No. 1405 must be premised on the
fact that the money deposited in the account is itself the subject of the action.

In other words, it can hardly be inferred from the indictment itself that the Security Bank account is the
ostensible subject of the prosecutions inquiry. Without needlessly expanding the scope of what is plainly
alleged in the Information, the subject matter of the action in this case is the money amounting to
P1,534,135.50 alleged to have been stolen by respondent, and not the money equivalent of the checks
which are sought to be admitted in evidence. Thus, it is that, which the prosecution is bound to prove
with its evidence, and no other.

In sum, we hold that the testimony of Marasigan on the particulars of respondents supposed bank
account with Security Bank and the documentary evidence represented by the checks adduced in
support thereof, are not only incompetent for being excluded by operation of R.A. No. 1405. They are
likewise irrelevant to the case, inasmuch as they do not appear to have any logical and reasonable
connection to the prosecution of respondent for qualified theft. We find full merit in and affirm
respondents objection to the evidence of the prosecution. The Court of Appeals was, therefore, correct
in reversing the assailed orders of the trial court.
EMMANUEL C. OÑATE and ECON HOLDINGS CORPORATION, petitioners, vs. HON. ZUES C. ABROGAR, as
Presiding Judge of Branch 150 of the Regional Trial Court of Makati, and SUN LIFE ASSURANCE
COMPANY OF CANADA, respondents. G.R. No. 107303, SECOND DIVISION, February 23, 1995,
MENDOZA, J.:

Hence, whether the transaction is considered a sale or money placement does not make the money the
"subject matter of litigation" within the meaning of § 2 of Republic Act No. 1405 which prohibits the
disclosure or inquiry into bank deposits except "in cases where the money deposited or invested is the
subject matter of litigation." Nor will it matter whether the money was "swindled" as Sun Life contends.

FACTS Petitioners maintain that, in accordance with prior decisions of this Court, the attachment of their
properties was void because the trial court had not at that time acquired jurisdiction over them and that
the subsequent service of summons on them did not cure the invalidity of the levy. They further
contend that the examination of the books and ledgers of the Bank of the Philippine Islands (BPI), the
Philippine National Bank (PNB) and the Urban Bank was a "fishing expedition" which the trial court
should not have authorized because petitioner Emmanuel C. Oñate, whose accounts were examined,
was not a signatory to any of the documents evidencing the transaction between Sun Life Assurance of
Canada (Sun Life) and Brunner Development Corporation (Brunner).

On the other hand private respondent Sun Life stresses the fact that the trial court eventually acquired
jurisdiction over petitioners and contends that this cured the invalidity of the attachment of petitioners'
properties. With respect to the second contention of petitioners, private respondent argues that the
examination of petitioner Oñate's bank account was justified because it was he who signed checks
transferring huge amounts from Brunner's account in the Urban Bank to the PNB and the BPI.

ISSUES Whether respondent Judge had acted with grave abuse of discretion amounting to lack or in
excess of jurisdiction in allowing the examination of the bank records though no notice was given.

RULING YES. The records show that, on January 21, 1992, respondent judge ordered the examination of
the books of accounts and ledgers of Brunner at the Urban Bank, Legaspi Village branch, and on January
30, 199 the records of account of petitioner Oñate at the BPI, even as he ordered the PNB to produce
the records regarding certain checks deposited in it.

First. Sun Life defends these court orders on the ground that the money paid by it to Brunner was
subsequently withdrawn from the Urban Bank after it had been deposited by Brunner and then
transferred to BPI and to the unnamed account in the petitioner Oñate's account in the BPI and to the
unnamed account in the PNB.

The issue before the trial court, however, concerns the nature of the transaction between petitioner
Brunner and Sun Life. In its complaint, Sun Life alleges that Oñate, in his personal capacity and as
president of Econ, offered to sell to Sun Life P46,990,000.00 worth of treasury bills owned by Econ and
Brunner at the discounted price of P39,526,500.82; that on November 27, 1991, Sun Life paid the price
by means of a check payable to Brunner; that Brunner, through its president Noel L. Diño, issued to it a
receipt with undertaking to deliver the treasury bills to Sun Life; and that on December 4, 1991, Brunner
and Diño delivered instead a promissory note, dated November 27, 1991, in which it was made to
appear that the transaction was a money placement instead of sale of treasury bills.

Thus the issue is whether the money paid to Brunner was the consideration for the sale of treasury bills,
as Sun Life claims, or whether it was money intended for placement, as petitioners allege. Petitioners do
not deny receipt of P39,526,500.82 from Sun Life. Hence, whether the transaction is considered a sale or
money placement does not make the money the "subject matter of litigation" within the meaning of § 2
of Republic Act No. 1405 which prohibits the disclosure or inquiry into bank deposits except "in cases
where the money deposited or invested is the subject matter of litigation." Nor will it matter whether
the money was "swindled" as Sun Life contends.

Second. The examination of bank books and records cannot be justified under Rule 57, § 10. This
provision states:
Sec. 10. Examination of party whose property is attached and persons indebted to him or controlling his
property; delivery of property to officer. — Any person owing debts to the party whose property is
attached or having in his possession or under his control any credit or other personal property belonging
to such party, may be required to attend before the court in which the action is pending, or before a
commissioner appointed by the court, and be examined on oath respecting the same. The party whose
property is attached may also be required to attend for the purpose of giving information respecting his
property, and may be examined on oath. The court may, after such examination, order personal
property capable of manual delivery belonging to him, in the possession of the person so required to
attend before the court, to be delivered to the clerk of the court, sheriff, or other proper officer on such
terms as may be just, having reference to any lien thereon or claims against the same, to await the
judgment in the action.

Since, as already stated, the attachment of petitioners' properties was invalid, the examination ordered
in connection with such attachment must likewise be considered invalid. Under Rule 57, § 10, as quoted
above, such examination is only proper where the property of the person examined has been validly
attached.
PHILIPPINE COMMERCIAL INTERNATIONAL BANK, petitioner, vs. COURT OF APPEALS and RORY W. LIM,
respondents;

G.R. No. 97785, THIRD DIVISION, March 29, 1996, Francisco, J.

Undoubtedly, the services being offered by a banking institution like petitioner are imbued with public
interest. The use of telegraphic transfers have now become commonplace among businessmen because
it facilitates commercial transactions. Any attempt to completely exempt one of the contracting parties
from any liability in case of loss notwithstanding its bad faith, fault or negligence, as in the instant case,
cannot be sanctioned for being inimical to public interest and therefore contrary to public policy

FACTS Private respondent Rory Lim delivered to his cousin Lim Ong Tian PCIB Check in the amount of
P200,000.00 for the purpose of obtaining a telegraphic transfer from petitioner PCIB in the same
amount. The money was to be transferred to Equitable Banking Corporation, and credited to private
respondents account at the said bank. Upon purchase of the telegraphic transfer, petitioner issued the
corresponding receipt which contained the assailed provision that in case of fund transfer, the
undersigned hereby will be made without any responsibility on the part of the BANK, or its
correspondents, for any loss occasioned by errors, or delays in the transmission of message by telegraph
or cable companies or by the correspondents or agencies, necessarily employed by this BANK in the
transfer of this money, all risks for which are assumed by the undersigned.

Subsequent to the purchase of the telegraphic transfer, petitioner in turn issued and delivered eight (8)
Equitable Bank checksto his suppliers as payment for the merchandise. When the checks were
presented for payment, five of them bounced for insufficiency of funds, while the remaining three were
held overnight for lack of funds upon presentment. Such happening came to private respondents’
attention only when Equitable Bank notified him of the penalty charges and after receiving letters from
his suppliers that his credit was being cut-off due to the dishonor of the checks he issued.

Aggrieved, private respondent demanded from petitioner PCIB that he be compensated for the resulting
damage that he suffered due to petitioners failure to make the timely transfer of funds which led to the
dishonor of his checks. Petitioner refused to heed private respondents demand prompting the latter to
file a complaint for damages with the Regional Trial Court of Gingoog City. Petitioner denied any liability
to private respondent and interposed alleged the lack of privity between it and private respondent as it
was not private respondent himself who purchased the telegraphic transfer from petitioner.
Additionally, petitioner pointed out that private respondent is nevertheless bound by the stipulation in
the telegraphic transfer application/form receipt.

The Regional Trial Court held petitioner liable for breach of contract. The provision amounted to a
contract of adhesion wherein the objectionable portion was unilaterally inserted by petitioner in all its
application forms without giving any opportunity to the applicants to question the same and express
their conformity thereto. The Court of Appeals affirmed with modifications the judgment of the trial
court.

ISSUE Whether or not petitioner is exempt from liability in the loss resulting from errors or delays in the
transfer of funds

RULING No. A contract of adhesion is defined as one in which one of the parties imposes a ready-made
form of contract, which the other party may accept or reject, but which the latter cannot modify. One
party prepares the stipulation in the contract, while the other party merely affixes his signature or his
adhesion thereto, giving no room for negotiation and depriving the latter of the opportunity to bargain
on equal footing. Nevertheless, these types of contracts have been declared as binding as ordinary
contracts, the reason being that the party who adheres to the contract is free to reject it entirely. It has
been declared that a contract of adhesion may be struck down as void and unenforceable, for being
subversive to public policy, only when the weaker party is imposed upon in dealing with the dominant
bargaining party and is reduced to the alternative of taking it or leaving it, completely deprived of the
opportunity to bargain on equal footing.

Having established that petitioner acted fraudulently and in bad faith, we find it implausible to absolve
petitioner from its wrongful acts on account of the assailed provision exempting it from any liability. In
Geraldez vs. Court of Appeals, it was unequivocally declared that notwithstanding the enforceability of a
contractual limitation, responsibility arising from a fraudulent act cannot be exculpated because the
same is contrary to public policy. Freedom of contract is subject to the limitation that the agreement
must not be against public policy and any agreement or contract made in violation of this rule is not
binding and will not be enforced.

Undoubtedly, the services being offered by a banking institution like petitioner are imbued with public
interest. The use of telegraphic transfers have now become commonplace among businessmen because
it facilitates commercial transactions. Any attempt to completely exempt one of the contracting parties
from any liability in case of loss notwithstanding its bad faith, fault or negligence, as in the instant case,
cannot be sanctioned for being inimical to public interest and therefore contrary to public policy
UNION BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS and ALLIED BANK CORPORATION,
respondents.

G.R. No. 134699, FIRST DIVISION, December 23, 1999, Kapunan, J

Sec. 2 of the Law on Secrecy of Bank Deposits, as amended, declares bank deposits to be "absolutely
confidential" except:

(1) In an examination made in the course of a special or general examination of a bank that is specifically
authorized by the Monetary Board after being satisfied that there is reasonable ground to believe that a
bank fraud or serious irregularity has been or is being committed and that it is necessary to look into the
deposit to establish such fraud or irregularity,

(2) In an examination made by an independent auditor hired by the bank to conduct its regular audit
provided that the examination is for audit purposes only and the results thereof shall be for the
exclusive use of the bank,

(3) Upon written permission of the depositor,

(4) In cases of impeachment,

(5) Upon order of a competent court in cases of bribery or dereliction of duty of public officials, or

(6) In cases where the money deposited or invested is the subject matter of the litigation

FACTS: On March 21, 1990, a check in the amount of P1,000,000.00 was drawn against Account No.
0111- 01854-8 with private respondent Allied Bank payable to the order of one Jose Ch. Alvarez. The
payee deposited the check with petitioner Union Bank who credited the P1,000,000.00 to the account of
Mr. Alvarez. Petitioner then sent the check for clearing through the Philippine Clearing House
Corporation (PCHC). When the check was presented for payment, a clearing discrepancy was committed
by Union Bank's clearing staff when the amount 1M was erroneously "under-encoded" to 1,000php only

Petitioner only discovered the under-encoding almost a year later. Thus, on May 7, 1991, Union Bank
notified Allied Bank of the discrepancy by way of a charge slip for P999,000.00 for automatic debiting
against of Allied Bank. The latter, however, refused to accept the charge slip "since [the] transaction was
completed per your [Union Bank's] original instruction and client's account is now insufficiently funded.

The cause of action against defendant arose from defendant's deliberate violation of the provisions of
the PCHC Rule Book, Sec. 25.3, specifically on Under-Encoding of check amounting to P1,000,000.00
drawn upon defendant's Tondo Branch which was deposited with plaintiff, which was erroneously
encoded at P1,000.00 which defendant as the receiving bank thereof, never called nor notified the
plaintiff of the error committed thus causing actual losses to plaintiff in the principal amount of
P999,000.00 exclusive of opportunity losses and interest.

Union Bank filed a complaint against Allied Bank before the PCHC Arbitration Committee (Arbicom),
praying that judgment be rendered in favor of plaintiff against defendant sentencing it to pay plaintiff:
The sum of P999,000.00, and other damages. Petitioner's theory is that private respondent Allied Bank
should have informed petitioner of the under-encoding pursuant to the provisions of Section 25.3.1 of
the PCHC Handbook. Failing in that duty, petitioner holds private respondent directly liable for the
P999,000.00 and other damages.

Union Bank filed in the RTC of Makati a petition for the examination of Account No. 111-01854-8.
Judgment on the arbitration case was held in abeyance pending the resolution of said petition.

RTC dismissed the petition. It held that the case of the herein petitioner does not fall under any of the
foregoing exceptions to warrant a disclosure of or inquiry into the ledgers/books of account of Allied
Checking Account No. 111-01854-8. Needless to say, the complaint filed by herein petitioner against
Allied Banking Corporation before the PCHC Arbitration Committee and is not one for bribery or
dereliction of duty of public officials much less is there any showing that the subject matter thereof is
the money deposited in the account in question.

The Court of Appeals affirmed the dismissal of the petition, ruling that the case was not one where the
money deposited is the subject matter of the litigation.

Hence, Union Bank is now before this Court insisting that the money deposited in Account No. 0111-
01854-8 is the subject matter of the litigation which warrants the examination of the bank deposits.

ISSUES Whether or not the case at bar falls under the last exception on Secrecy of Bank Deposits

RULING No, it does not fall under the last exception

Sec. 2 of the Law on Secrecy of Bank Deposits, as amended, declares bank deposits to be "absolutely
confidential" except

(1) In an examination made in the course of a special or general examination of a bank that is specifically
authorized by the Monetary Board after being satisfied that there is reasonable ground to believe that a
bank fraud or serious irregularity has been or is being committed and that it is necessary to look into the
deposit to establish such fraud or irregularity,

(2) In an examination made by an independent auditor hired by the bank to conduct its regular audit
provided that the examination is for audit purposes only and the results thereof shall be for the
exclusive use of the bank,

(3) Upon written permission of the depositor,

(4) In cases of impeachment,

(5) Upon order of a competent court in cases of bribery or dereliction of duty of public officials, or

(6) In cases where the money deposited or invested is the subject matter of the litigation.

In the case at bar, petitioner is only fishing for information so it can determine the culpability of private
respondent and the amount of damages it can recover from the latter. It appears that the true purpose
for the examination is to aid petitioner in proving the extent of Allied Bank's liability.

It does not seek recovery of the very money contained in the deposit. The subject matter of the dispute
may be the amount of P999,000.00 that petitioner seeks from private respondent as a result of the
latter's alleged failure to inform the former of the discrepancy; but it is not the P999,000.00 deposited in
the drawer's account. By the terms of R.A. No. 1405, the "money deposited" itself should be the subject
matter of the litigation.

That petitioner feels a need for such information in order to establish its case against private respondent
does not, by itself, warrant the examination of the bank deposits. The necessity of the inquiry, or the
lack thereof, is immaterial since the case does not come under any of the exceptions allowed by the
Bank Deposits Secrecy Act.
CARMEN LL. INTENGAN, ROSARIO LL. NERI, and RITA P. BRAWNER, petitioners, vs. COURT OF APPEALS,
DEPARTMENT OF JUSTICE, AZIZ RAJKOTWALA, WILLIAM FERGUSON, JOVEN REYES, and VIC LIM,
respondents.

G.R. No. 128996, SECOND DIVISION, February 15, 2002, Justice De Leon, Jr

The accounts in question are U.S. dollar deposits; consequently, the applicable law is not Republic Act
No. 1405 but Republic Act (RA) No. 6426, known as the Foreign Currency Deposit Act of the Philippines.
Under R.A. No. 6426 there is only a single exception to the secrecy of foreign currency deposits, that is,
disclosure is allowed only upon the written permission of the depositor

FACTS Citibank filed a complaint for violation of section 31, in relation to section 144of the Corporation
Code against two (2) of its officers, Dante L. Santos and MarilouGenuino. Attached to the complaint was
an affidavitexecuted by private respondent Vic Lim, a vice-president of Citibank. According to Lim, the
two with the use of two (2) companies in which they have personal financial interest, namely Torrance
Development Corporation and Global Pacific Corporation, managed or caused existing bank
clients/depositors to divert their money from Citibank, N.A., such as those placed in peso and dollar
deposits and money placements, to products offered by other companies that were commanding higher
rate of yields. This was done by first transferring bank clients monies to Torrance and Global which in
turn placed the monies of the bank clients in securities, shares of stock and other certificates of third
parties. It also appeared that out of these transactions, Mr. Dante L. Santos and Ms.MarilouGenuino
derived substantial financial gains.

As evidence, Lim annexed bank records purporting to establish the deception practiced by Santos and
Genuino. Some of the documents pertained to the dollar deposits of petitioners.

The Assistant Provincial Prosecutor recommended the dismissal of petitioners complaints. The
recommendation was overruled by Provincial Prosecutor, directing the filing of informations against
private respondents for alleged violation of Republic Act No. 1405, otherwise known as the Bank Secrecy
Law. Private respondents counsel then filed an appeal before the Department of Justice (DOJ).

DOJ Secretary Franklin M. Drilon issued a Resolution ordering, the withdrawal of the aforesaid
informations against private respondents. Petitioners motion for reconsideration was denied by DOJ.
Initially, petitioners sought the reversal of the DOJ resolutions via a petition for certiorari and mandamus
filed with the Supreme Court. However, the former First Division of the Court referred the matter to the
Court of the Appeals, on the basis of the latter tribunals concurrent jurisdiction to issue the
extraordinary writs therein prayed for.

The Court of Appeals rendered judgment dismissing the petition. According to the CA the disclosure of
petitioners deposits was necessary to establish the allegation that Santos and Genuino had violated
Section 31 of the Corporation Code in acquiring any interest adverse to the corporation in respect of any
matter which has been reposed in him in confidence. Petitioners motion for reconsideration was
similarly denied. Hence, petitioners filed a petition for review on certiorari, seeking the reversal of the
decision of the Court of Appeals

ISSUE Whether or not private respondents violated R.A. NO. 1405?

RULING No, they did not. A case for violation of Republic Act No. 6426 should have been the proper case
brought against private respondents. Private respondents Lim and Reyes admitted that they had
disclosed details of petitioners dollar deposits without the latters written permission. It does not matter
if that such disclosure was necessary to establish Citibanks case against Dante L. Santos and
MarilouGenuino

The accounts in question are U.S. dollar deposits; consequently, the applicable law is not Republic Act
No. 1405 but Republic Act (RA) No. 6426, known as the Foreign Currency Deposit Act of the Philippines.

Under R.A. No. 6426 there is only a single exception to the secrecy of foreign currency deposits, that is,
disclosure is allowed only upon the written permission of the depositor. Incidentally, the acts of private
respondents complained of happened before the enactment on September 29, 2001 of R.A. No. 9160
otherwise known as the Anti-Money Laundering Act of 2001.
JOSEPH VICTOR G. EJERCITO, Petitioner, vs. SANDIGANBAYAN (Special Division) and PEOPLE OF THE
PHILIPPINES, Respondents.

G.R. Nos. 157294-95, EN BANC, November 30, 2006, Carpio Morales, J

An examination of the law shows that the term “deposits” used therein is to be understood broadly and
not limited only to accounts which give rise to a creditor-debtor relationship between the depositor and
the bank.

The policy behind the law is laid down in Section 1. If the money deposited under an account may be
used by banks for authorized loans to third persons, then such account, regardless of whether it creates
a creditor-debtor relationship between the depositor and the bank, falls under the category of accounts
which the law precisely seeks to protect for the purpose of boosting the economic development of the
country

Trust Account No. 858 is, without doubt, one such account. The Trust Agreement between petitioner
and Urban Bank provides that the trust account covers “deposit, placement or investment of funds” by
Urban Bank for and in behalf of petitioner. The money deposited under Trust Account No. 858, was,
therefore, intended not merely to remain with the bank but to be invested by it elsewhere. To hold that
this type of account is not protected by R.A. 1405 would encourage private hoarding of funds that could
otherwise be invested by banks in other ventures, contrary to the policy behind the law.

FACTS Three resolutions were issued in the Criminal Case, "People of the Philippines v. Joseph Ejercito
Estrada, et al.," for plunder.

In said case, the Special Prosecution Panelfiled before the Sandiganbayan a Request for Issuance of
Subpoena DucesTecum for the issuance of a subpoena directing the President of Export and Industry
Bank (EIB, formerly Urban Bank) or his/her authorized representative to produce various documents
during the hearings.

The Special Prosecution Panel also filed a Request for Issuance of Subpoena DucesTecum/Ad
Testificandum directed to the authorized representative of Equitable-PCI Bank to produce statements of
account pertaining to certain accounts in the name of "Jose Velarde" and to testify thereon.

The SB granted both requests and subpoenas were accordingly issued.

The Special Prosecution Panel filed still another Request for Issuance of Subpoena Duces Tecum/Ad
Testificandum for the President of EIB or his/her authorized representative to produce the same
documents subject of the first Subpoena DucesTecum and to testify thereon on the hearings scheduled
and subsequent dates until completion of the testimony. The request was likewise granted by the
Sandiganbayan.

Petitioner, unassisted by counsel, thus filed a Motion to Quash Subpoena DucesTecum/Ad

Testificandum the subpoenas previously issued to the President of the EIB. In his Motion to Quash,
petitioner claimed that his bank accounts are covered by R.A. No. 1405 (The Secrecy of Bank Deposits
Law) and do not fall under any of the exceptions stated therein. He further claimed that the specific
identification of documents in the questioned subpoenas, including details on dates and amounts, could
only have been made possible by an earlier illegal disclosure thereof by the EIB and the Philippine
Deposit Insurance Corporation (PDIC) in its capacity as receiver of the then Urban Bank.

Before the Motion to Quash was resolved by the Sandiganbayan, the prosecution filed another Request
for the Issuance of Subpoena DucesTecum/Ad Testificandum, again to direct the President of the EIB to
produce, on the hearings the same documents.

The prosecution also filed a Request for the Issuance of Subpoena DucesTecum/Ad Testificandum
directed to Aurora C. Baldoz, Vice President-CR-II of the PDIC for her to produce the various documents.
The subpoenas prayed for in both requests were issued by the Sandiganbayan.

The petitioner filed various motions to quash the various Subpoenas DucesTecum/Ad Testificandum
previously issued, but were denied.
In connection with the Criminal Case for plunder, the Special Prosecution Panel filed before the
Sandiganbayan a request for issuance of Subpoena DucesTecum/Ad Testificandum for the production of
various documents relating to the said case. Resolutions have been issued by the Sandiganbayan
granting the request. The petitioner filed for Motion to Quash; however, it was denied. Consequently,
petitioner filed Motion for Reconsideration seeking a reconsideration of the Resolutions, but it was
denied. Hence, the present petition for certiorari under Rule 65 assailing the Sandiganbayan Resolutions
denying petitioner Joseph Victor G. Ejercito’s Motions to Quash Subpoenas DucesTecum/Ad
Testificandum, and Resolution denying his Motion for Reconsideration of the first two resolutions.

ISSUES 1. Whether or not petitioner’s Trust Account No. 858 is covered by the term "deposit" as used in
R.A. 1405;

2. Whether or not petitioner’s Trust Account No. 858 and Savings Account No. 0116-17345-9 are
protected by R.A. 1405; and

3. Whether or not the "extremely-detailed" information contained in the Special Prosecution Panel’s
requests for subpoena was obtained through a prior illegal disclosure of petitioner’s bank accounts, in
violation of the "fruit of the poisonous tree" doctrine.

RULING 1. Yes, trust account is covered by the term “deposit” as used in RA 1405.

An examination of the law shows that the term “deposits” used therein is to be understood broadly and
not limited only to accounts which give rise to a creditor-debtor relationship between the depositor and
the bank.

The policy behind the law is laid down in Section 1. If the money deposited under an account may be
used by banks for authorized loans to third persons, then such account, regardless of whether it creates
a creditor-debtor relationship between the depositor and the bank, falls under the category of accounts
which the law precisely seeks to protect for the purpose of boosting the economic development of the
country

Trust Account No. 858 is, without doubt, one such account. The Trust Agreement between petitioner
and Urban Bank provides that the trust account covers “deposit, placement or investment of funds” by
Urban Bank for and in behalf of petitioner. The money deposited under Trust Account No. 858, was,
therefore, intended not merely to remain with the bank but to be invested by it elsewhere. To hold that
this type of account is not protected by R.A. 1405 would encourage private hoarding of funds that could
otherwise be invested by banks in other ventures, contrary to the policy behind the law

Section 2 of the same law in fact even more clearly shows that the term “deposits” was intended to be
understood broadly. The phrase “of whatever nature” proscribes any restrictive interpretation of
“deposits.” Moreover, it is clear from the immediately quoted provision that, generally, the law applies
not only to money which is deposited but also to those which are invested. This further shows that the
law was not intended to apply only to “deposits” in the strict sense of the word. Otherwise, there would
have been no need to add the phrase “or invested.”

Clearly, therefore, R.A. 1405 is broad enough to cover Trust Account No. 858

2. No, it is not protected by such law.

Petitioner contends that since plunder is neither bribery nor dereliction of duty, his accounts are not
excepted from the protection of R.A. 1405. The Court disagrees. Cases for plunder involve unexplained
wealth.

Furthermore, cases of unexplained wealth are similar to cases of bribery or dereliction of duty and no
reason is seen why these two classes of cases cannot be excepted from the rule making bank deposits
confidential. The policy as to one cannot be different from the policy as to the other. This policy
expresses the notion that a public office is a public trust and any person who enters upon its discharge
does so with the full knowledge that his life, so far as relevant to his duty, is open to public scrutiny.
The crime of bribery and the overt acts constitutive of plunder are crimes committed by public officers,
and in either case the noble idea that “a public office is a public trust and any person who enters upon
its discharge does so with the full knowledge that his life, so far as relevant to his duty, is open to public
scrutiny” applies with equal force.

Plunder being thus analogous to bribery, the exception to R.A. 1405 applicable in cases of bribery must
also apply to cases of plunder.

3. No, the application of fruit of poisonous tree doctrine is misplaced.

Petitioner relies on Marquez v. Desierto where the Court held:

We rule that before an in camera inspection may be allowed there must be a pending case before a
court of competent jurisdiction. Further, the account must be clearly identified, the inspection limited to
the subject matter of the pending case before the court of competent jurisdiction. The bank personnel
and the account holder must be notified to be present during the inspection, and such inspection may
cover only the account identified in the pending case. (Underscoring supplied) As no plunder case
against then President Estrada had yet been filed before a court of competent jurisdiction at the time
the Ombudsman conducted an investigation, petitioner concludes that the information about his bank
accounts were acquired illegally, hence, it may not be lawfully used to facilitate a subsequent inquiry
into the same bank accounts.

Petitioner’s attempt to make the exclusionary rule applicable to the instant case fails. R.A. 1405, it bears
noting, nowhere provides that an unlawful examination of bank accounts shall render the evidence
obtained therefrom inadmissible in evidence. Section 5 of R.A. 1405 only states that "[a]ny violation of
this law will subject the offender upon conviction, to an imprisonment of not more than five years or a
fine of not more than twenty thousand pesos or both, in the discretion of the court." Even assuming
arguendo, however, that the exclusionary rule applies in principle to cases involving R.A. 1405, the Court
finds no reason to apply the same in this particular case.

Clearly, the "fruit of the poisonous tree" doctrine presupposes a violation of law. If there was no
violation of R.A. 1405 in the instant case, then there would be no "poisonous tree" to begin with, and,
thus, no reason to apply the doctrine.

IN SUM, the Court finds that the Sandiganbayan did not commit grave abuse of discretion in issuing the
challenged subpoenas for documents pertaining to petitioner’s Trust Account No. 858 and Savings
Account No. 0116-17345-9 for the following reasons:

1. These accounts are no longer protected by the Secrecy of Bank Deposits Law, there being two
exceptions to the said law applicable in this case, namely: (1) the examination of bank accounts is upon
order of a competent court in cases of bribery or dereliction of duty of public officials, and (2) the money
deposited or invested is the subject matter of the litigation. Exception (1) applies since the plunder case
pending against former President Estrada is analogous to bribery or dereliction of duty, while exception
(2) applies because the money deposited in petitioner’s bank accounts is said to form part of the subject
matter of the same plunder case

2. The "fruit of the poisonous tree" principle, which states that once the primary source (the "tree") is
shown to have been unlawfully obtained, any secondary or derivative evidence (the "fruit") derived
from it is also inadmissible, does not apply in this case. In the first place, R.A. 1405 does not provide for
the application of this rule. Moreover, there is no basis for applying the same in this case since the
primary source for the detailed information regarding petitioner’s bank accounts – the investigation
previously conducted by the Ombudsman – was lawful.

3. At all events, even if the subpoenas issued by the Sandiganbayan were quashed, the Ombudsman
may conduct on its own the same inquiry into the subject bank accounts that it earlier conducted last
February-March 2001, there being a plunder case already pending against former President Estrada. To
quash the challenged subpoenas would, therefore, be pointless since the Ombudsman may obtain the
same documents by another route. Upholding the subpoenas avoids an unnecessary delay in the
administration of justice.
SIBAYAN V. ALDA

G.R. No. 233395, January 17, 2018 THIRD DIVISION, Velasco, Jr.,

The denial of the motion for production of bank documents is justified as the bank accounts sought to
be examined are privileged. Section 2 of Republic Act No. 1405, otherwise known as The Law on Secrecy
of Bank Deposit, provides that all deposits of whatever nature with banks or banking institutions in the
Philippines may not be examined, inquired or looked into by any person, government official, bureau or
office, except upon written permission of the depositor, among others.

In fine, the OGCLS-BSP's issuance of the assailed orders did not violate Norlina' s right to due process
and was in accord with the summary nature of administrative proceedings before the BSP. The
opportunity accorded to Norlina was enough to comply with the requirements of due process in an
administrative case. The formalities usually attendant in court hearings need not be present in an
administrative investigation, as long as the parties are heard and given the opportunity to adduce their
respective sets of evidence.

FACTS Respondent Elizabeth, through her daughter Ruby O. Aida (Ruby) charged Norlina of
unauthorized deduction of her BDO Savings Account as well as for failure to post certain check deposits
to the said accountwith the Office of Special Investigation of the Bangko Sentral ng Pilipinas (OSI-BSP).
Norlina argued that the charges were only meant to harass her and BDO as Norlina previously filed a
criminal case against Elizabeth, Ruby, and their cohorts, for theft, estafa, and violation of the Access
Devise Regulation Act of 1998.

Meanwhile, during the investigation, parties submitted their respective pleadings. The OSI-BSP issued a
Resolution finding a prima facie case against Norlina for Conducting Business in an Unsafe or Unsound
Manner under The General Banking Law of 2000. OGCLS-BSP then directed Norlina to submit her sworn
answer to the formal charge filed by the OSI-BSP.

Norlina then filed a Request to Answer Written Interrogatories addressed to Elizabeth. She likewise filed
a Motion for Production of Documents praying that the bank to allow her inspect and copy the
Statement of Account of Ruby. She alleged that Ruby is the legal and beneficial owner of said account in
connection to the earlier case of theft Norlina filed against the her.

Unfortunately, the Motion for Production of Bank Documents filed by the Norlina is denied. Norlina
counter-argued that the examination is exempted from the rule on secrecy of bank deposit because the
money deposited in the subject bank accounts is the subject matter of litigation.

OGCLS-BSP rules otherwise. It said that the present action is an administrative proceeding aimed at
determining respondent's liability, if any, for violation of banking laws and that a deposit account may
only be examined or looked into if it is the subject matter of a pending litigation.

ISSUE Whether or not the bank account sought to be examined is privileged under Section 2 of Republic
Act No. 1405, otherwise known as The Law on Secrecy of Bank Deposit

RULING YES. The denial of the motion for production of bank documents pertaining to the statement of
account of Ruby is justified as the bank accounts sought to be examined are privileged. Section 2 of
Republic Act No. 1405, otherwise known as The Law on Secrecy of Bank Deposit, provides:

Section 2. All deposits of whatever nature with banks or banking institutions in the Philippines including
investments in bonds issued by the Government of the Philippines, its political subdivisions and its
instrumentalities, are hereby considered as of an absolutely confidential nature and may not be
examined, inquired or looked into by any person, government official, bureau or office, except upon
written permission of the depositor, or in cases of impeachment, or upon order of a competent court in
cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or
invested is the subject matter of the litigation.
Norlina bemoans that by suppressing her right to avail of discovery measures, the OGCLS-BSP violated
her right to due process. She maintains that the administrative character of the proceedings involved is
not sufficient to defeat such right.

Administrative due process cannot be fully equated with due process in its strict judicial sense. It is
enough that the party is given the chance to be heard before the case against him is decided. As
established by the facts, Norlina was afforded the opportunity to be heard and to explain her side
before the OGCLS-BSP. She was allowed to submit her answer and all documents in support of her
defense. In fact, her defense of fraud committed by Ruby is sufficiently contained in the pleadings and
attachments submitted by the parties to aid the OGCLSBSP in resolving the case before it. Clearly then,
the Requests to Answer Written Interrogatories and Motion for Production of Documents were both
unnecessary and improper
PHILIPPINE NATIONAL BANK and EDUARDO Z. ROMUALDEZ, in his capacity as President of the Philippine
National Bank, plaintiffs-appellants, plaintiffs-appellants, vs. EMILIO A. GANCAYCO and FLORENTINO
FLOR, Special Prosecutors of the Dept. of Justice, defendantsappellees

G.R. No. L-18343, EN BANC, September 30, 1965, Regala, J.

Section 8 of the Anti-Graft Law is intended to amend section 2 of Republic Act No. 1405 by providing
additional exception to the rule against the disclosure of bank deposits.

FACTS Defendants Emilio A. Gancayco and Florentino Flor, as special prosecutors of the Department of
Justice, required the plaintiff Philippine National Bank to produce at a hearing the records of the bank
deposits of Ernesto T. Jimenez, former administrator of the Agricultural Credit and Cooperative
Administration, who was then under investigation for unexplained wealth. Plaintiff declined and invoked
Republic Act No. 1405. On the other hand, the defendants cited the Anti-Graft and Corrupt Practices Act
(Republic Act No. 3019) in support of their claim of authority. Because of the threat of prosecution,
plaintiffs filed an action for declaratory judgment in the Manila Court of First Instance.

After trial, the court rendered judgment, sustaining the power of the defendants to compel the
disclosure of bank accounts of Jimenez. The court said that, by enacting section 8 of, the Anti-Graft and
Corrupt Practices Act, Congress clearly intended to provide an additional ground for the examination of
bank deposits.

From that judgment, plaintiffs appealed to the Supreme Court. Plaintiff argued that section 8 of the Anti-
Graft Law "simply means that such bank deposits may be included or added to the assets of the
Government official or employee for the purpose of computing his unexplained wealth if and when the
same are discovered or revealed in the manner authorized by Section 2 of Republic Act 1405, which are
(1) Upon written permission of the depositor; (2) In cases of impeachment; (3) Upon order of a
competent court in cases of bribery or dereliction of duty of public officials; and (4) In cases where the
money deposited or invested is the subject matter of the litigation."

In support of their position, plaintiffs contended, first, that the Anti-Graft Law (which took effect on
August 17, 1960) is a general law which cannot be deemed to have impliedly repealed section 2 of
Republic Act No. 1405 (which took effect on Sept. 9, 1955), because of the rule that repeals by
implication are not favored. Second, they argue that to construe section 8 of the Anti-Graft Law as
allowing inquiry into bank deposits would be to negate the policy expressed in section 1 of Republic Act
No. 1405 which is "to give encouragement to the people to deposit their money in banking institutions
and to discourage private hoarding so that the same may be utilized by banks in authorized loans to
assist in the economic development of the country."

ISSUES 1. Whether or not Anti-Graft Law amended Section 2 of Republic Act No. 1405?

2. Whether or not the disclosure of the bank deposit would be contrary to the policy, making

3. bank deposits confidential?

RULING 1. Yes, section 8 of the Anti-Graft Law is intended to amend section 2 of Republic Act No. 1405
by providing additional exception to the rule against the disclosure of bank deposits.

2. The truth is that these laws are so repugnant to each other than no reconciliation is possible. Thus,
while Republic Act No. 1405 provides that bank deposits are "absolutely confidential ... and [therefore]
may not be examined, inquired or looked into," except in those cases enumerated therein, the Anti-
Graft Law directs in mandatory terms that bank deposits "shall be taken into consideration in the
enforcement of this section, notwithstanding any provision of law to the contrary."

Indeed, it is said that if the new law is inconsistent with or repugnant to the old law, the presumption
against the intent to repeal by implication is overthrown because the inconsistency or repugnancy
reveals an intent to repeal the existing law.

3. No, cases of unexplained wealth are similar to cases of bribery or dereliction of duty and no reason is
seen why these two classes of cases cannot be excepted from the rule making bank deposits
confidential. The policy as to one cannot be different from the policy as to the other. This policy express
the motion that a public office is a public trust and any person who enters upon its discharge does so
with the full knowledge that his life, so far as relevant to his duty, is open to public scrutiny.
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner, vs. HON. FIDEL PURISIMA, etc., and HON.
VICENTE ERICTA and JOSE DEL FIERO, etc., respondents.

G.R. No. L-56429, FIRST DIVISION, May 28, 1988, Narvasa, J.

While Republic Act No. 1405 provides that bank deposits are "absolutely confidential and may not be
examined, inquired or looked into," except in those cases enumerated therein, the Anti-Graft Law
directs in mandatory terms that bank deposits "shall be taken into consideration in the enforcement of
this section, notwithstanding any provision of law to the contrary." The only conclusion possible is that
section 8 of the Anti-Graft Law is intended to amend section 2 of Republic Act No. 1405 by providing an
additional exception to the rule against the disclosure of bank deposits

FACTS The Customs special agent involved is Manuel Caturla, and the accusation against him was filed
by the Bureau of Internal Revenue. The Tanodbayan issued a subpoena ducestecum to the Banco
Filipino Savings & Mortgage Bank, commanding its representative to appear at a specified time at the
Office of the Tanodbayan and furnish the latter with duly certified copies of the records in all its
branches and extension offices, of the loans, savings and time deposits and other banking transactions,
dating back to 1969, appearing in the names of Caturla, his wife, PuritaCaturla, and their children
Manuel, Jr., Marilyn and Michael and/or Pedro Escuyos.

Caturla moved to quash the subpoena ducestecum arguing that compliance therewith would result in a
violation of Sections 2 and 3 of the Law on Secrecy of Bank Deposits.

Tanodbayan Vicente Ericta not only denied the motion for lack of merit, and directed compliance with
the subpoena, but also expanded its scope through a second subpoena ducestecum, this time requiring
production by Banco Filipino of the bank records in all its branches and extension offices, of Siargao
Agro-Industrial Corporation, Pedro Escuyos or his wife, EmeterioEscuyos, PuritaCaturla, Lucia Escuyos or
her husband, Romeo Escuyos, Emerson Escuyos, FraternoCaturla, AmparoMontilla, Cesar Caturla,
Manuel Caturla or his children, Manuel Jr., Marilyn and Michael, LTD Pub/Restaurant, and Jose Buo or
his wife, Evelyn. Two other subpoena of substantially the same tenor as the second were released by the
Tanodbayan's Office. The last required obedience under sanction of contempt.

The Banco Filipino Savings & Mortgage Bank filed a complaint for declaratory relief with the Court of
First Instance of Manila, which was assigned by raffle to the sala of respondent Judge Fidel Purisima. BF
Bank prayed for a judicial declaration as to whether its compliance with the subpoenae ducestecum
would constitute an infringement of the provisions of Sections 2 and 3 of R.A. No. 1405 in relation to
Section 8 of R.A. No. 3019. It also asked that pending final resolution of the question, the Tanodbayan be
provisionally restrained from exacting compliance with the subpoenae

Respondent Judge Purisima issued an Order denying for lack of merit the application by BF Bank for a
preliminary injunction and/or restraining order. This Order is impugned in the instant certiorari action
instituted by BF Bank before this Court, as having been issued with grave abuse of discretion, amounting
to lack of jurisdiction

ISSUES (1) Whether or not the "Law on Secrecy of Bank Deposits" precludes production by subpoena
ducestecum of bank records of transactions by or in the names of the wife, children and friends of a
special agent of the Bureau of Customs, accused before the Tanodbayan of having allegedly acquired
property manifestly out of proportion to his salary and other lawful income, in violation of the "Anti-
Graft and Corrupt Practices Act."

RULING NO. While Republic Act No. 1405 provides that bank deposits are "absolutely confidential and
may not be examined, inquired or looked into," except in those cases enumerated therein, the Anti-
Graft Law directs in mandatory terms that bank deposits "shall be taken into consideration in the
enforcement of this section, notwithstanding any provision of law to the contrary." The only conclusion
possible is that section 8 of the Anti-Graft Law is intended to amend section 2 of Republic Act No. 1405
by providing an additional exception to the rule against the disclosure of bank deposits:
... Cases of unexplained wealth are similar to cases of bribery or dereliction of duty and no reason is
seen why these two classes of cases cannot be excepted from the rule making bank deposits
confidential. The policy as to one cannot be different from the policy as to the other. This policy
expresses the notion that a public office is a public trust and any person who enters upon its discharge
does so with the full knowledge that his life, so far as relevant to his duty, is open to public scrutiny.

The inquiry into illegally acquired property — or property NOT "legitimately acquired" — extends to
cases where such property is concealed by being held by or recorded in the name of other persons. This
proposition is made clear by R.A. No. 3019 which quite categorically states that the term, "legitimately
acquired property of a public officer or employee shall not include property unlawfully acquired by the
respondent, but its ownership is concealed by its being recorded in the name of, or held by,
respondent's spouse, ascendants, descendants, relatives or any other persons." To sustain the
petitioner's theory, and restrict the inquiry only to property held by or in the name of the government
official or employee, or his spouse and unmarried children is unwarranted in the light of the provisions
of the statutes in question, and would make available to persons in government who illegally acquire
property an easy and fool-proof means of evading investigation and prosecution; all they would have to
do would be to simply place the property in the possession or name of persons other than their spouse
and unmarried children. This is an absurdity that we will not ascribe to the lawmakers.The power of the
Tanodbayan to issue subpoenae ad testificandcum and subpoenae ducestecum at the time in question is
not disputed, and at any rate does not admit of doubt. The subpoenae issued by him, will be sustained
against the petitioner's impugnation.
RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs. THE HONORABLE PACIFICO P. DE CASTRO
and PHILIPPINE VIRGINIA TOBACCO ADMINISTRATION, respondents.

G.R. No. L-34548, THIRD DIVISION, November 29, 1988, Cortes, J

RCBC cannot therefore be compelled to make restitution solidarily with the plaintiff BADOC. Plaintiff
BADOC alone was responsible for the issuance of the Writ of Execution and Order of Payment and so,
the plaintiff alone should bear the consequences of a subsequent annulment of such court orders;
hence, only the plaintiff can be ordered to restore the account of the PVT

FACTS In the Civil Case "Badoc Planters, Inc. versus Philippine Virginia Tobacco Administration, et al.,"
which was an action for recovery of unpaid tobacco deliveries, an Order (Partial Judgment) was issued
by the Hon. Lourdes P. San Diego, then Presiding Judge, ordering the defendants therein to pay jointly
and severally, the plaintiff Badoc Planters, Inc. within 48 hours the aggregate amount of P206,916.76,
with legal interests thereon.

BADOC filed an Urgent Ex-Parte Motion for a Writ of Execution of the said Partial Judgment which was
granted on the same day by the herein respondent judge who acted in place of the Hon. Judge San
Diego who had just been elevated as a Justice of the Court of Appeals. Accordingly, the Branch Clerk of
Court on the very same day, issued a Writ of Execution addressed to Special Sheriff Faustino Rigor, who
then issued a Notice of Garnishment addressed to the General Manager and/or Cashier of RCBC.

Upon an Urgent Ex-Parte Motion filed by BADOC, the respondent Judge issued an Order granting the Ex-
Parte Motion and directing the herein petitioner "to deliver in check the amount garnished to Sheriff
Faustino Rigor and Sheriff Rigor in turn is ordered to cash the check and deliver the amount to the
plaintiff's representative and/or counsel on record."

Respondent PVTA filed a Motion for Reconsideration which was granted in an Order, setting aside the
Orders of Execution and of Payment and the Writ of Execution and ordering petitioner and BADOC "to
restore, jointly and severally, the account of PVTA with the said bank in the same condition and state it
was before the issuance of the aforesaid Orders by reimbursing the PVTA of the amount of P 206,
916.76 with interests at the legal rate.

Initially, respondent judge granted the garnishment of the funds of PVTA by virtue of the Urgent Exparte
motion filed by BADOC. However, upon motion for reconsideration by PVTA, the respondent judge set
aside the orders of execution. This caused the petitioner to file a motion for reconsideration but it was
denied. Petitioner then filed a Notice of Appeal to the CA. this case was then certified by the CA to this
Honorable Court, involving as it does purely questions of law.

ISSUES

1. Whether or not PVTA funds are public funds not subject to garnishment;

2. Whether or not the respondent Judge correctly ordered the herein petitioner to reimburse the
amount paid to the Special Sheriff by virtue of the execution issued pursuant to the Order/Partial
Judgment dated January 15, 1970

RULING 1. The Court holds that they are not.

Republic Act No. 2265 created the PVTA as an ordinary corporation with all the attributes of a corporate
entity subject to the provisions of the Corporation Law. Hence, it possesses the power "to sue and be
sued" and "to acquire and hold such assets and incur such liabilities resulting directly from operations
authorized by the provisions of this Act or as essential to the proper conduct of such operations."
[Section 3, Republic Act No. 2265.]

Among the specific powers vested in the PVTA are: 1) to buy Virginia tobacco grown in the Philippines
for resale to local bona fide tobacco manufacturers and leaf tobacco dealers [Section 4(b), R.A. No.
2265]; 2) to contracts of any kind as may be necessary or incidental to the attainment of its purpose with
any person, firm or corporation, with the Government of the Philippines or with any foreign
government, subject to existing laws [Section 4(h), R.A. No. 22651; and 3) generally, to exercise all the
powers of a corporation under the Corporation Law, insofar as they are not inconsistent with the
provisions of this Act [Section 4(k), R.A. No. 2265.]

From the foregoing, it is clear that PVTA has been endowed with a personality distinct and separate
from the government which owns and controls it. Accordingly, this Court has heretofore declared that
the funds of the PVTA can be garnished since "funds of public corporation which can sue and be sued
were not exempt from garnishment

2. No. Petitioner cannot be held solidarily liable with BADOC for the reimbursement of the garnished
funds.

It is contended that RCBC was bound to inquire into the legality and propriety of the Writ of Execution
and Notice of Garnishment issued against the funds of the PVTA deposited with said bank. But the bank
was in no position to question the legality of the garnishment since it was not even a party to the case.
As correctly pointed out by the petitioner, it had neither the personality nor the interest to assail or
controvert the orders of respondent Judge. It had no choice but to obey the same inasmuch as it had no
standing at all to impugn the validity of the partial judgment rendered in favor of the plaintiff or of the
processes issued in execution of such judgment.

RCBC cannot therefore be compelled to make restitution solidarily with the plaintiff BADOC. Plaintiff
BADOC alone was responsible for the issuance of the Writ of Execution and Order of Payment and so,
the plaintiff alone should bear the consequences of a subsequent annulment of such court orders;
hence, only the plaintiff can be ordered to restore the account of the PVTA.
MELLON BANK, N.A., petitioner, vs.HON. CELSO L. MAGSINO, in his capacity as Presiding Judge of Branch
CLIX of the Regional Trial Court at Pasig; MELCHOR JAVIER, JR., VICTORIA JAVIER; HEIRS OF HONORIO
POBLADOR, JR., namely: Elsa AlunanPoblador, HonorioPoblador III, Rafael Poblador, Manuel Poblador,
Ma. Regina Poblador, Ma. Concepcion Poblador& Ma. Dolores Poblador; F.C. HAGEDORN & CO., INC.;
DOMINGO JHOCSON, JR.; JOSE MARQUEZ; ROBERTO GARINO; ELNOR INVESTMENT CO., INC.;
PARAMOUNT FINANCE CORPORATION; RAFAEL CABALLERO; and TRI-ARC INVESTMENT and
MANAGEMENT CO., INC. respondents.

G.R. No. 71479, THIRD DIVISION, October 18, 1990, FERNAN, C.J.

Section 2 of said law allows the disclosure of bank deposits in cases where the money deposited is the
subject matter of the litigation. Inasmuch as Civil Case No. 26899 is aimed at recovering the amount
converted by the Javiers for their own benefit, necessarily, an inquiry into the whereabouts of the
illegally acquired amount extends to whatever is concealed by being held or recorded in the name of
persons other than the one responsible for the illegal acquisition.

FACTS Dolores Ventosa requested the transfer of $1,000 from the First National Bank of Moundsville,
West Virginia, U.S.A. to Victoria Javier in Manila through the Prudential Bank.

Accordingly, the First National Bank requested the petitioner, Mellon Bank, to effect the transfer.
Unfortunately, the wire sent by Mellon Bank to Manufacturers Hanover Bank, a correspondent of
Prudential Bank, indicated the amount transferred as "US$1,000,000.00" instead of US$1,000.00. Hence
Manufacturers Hanover Bank transferred one million dollars less bank charges of $ 6.30 to the
Prudential Bank for the account of Victoria Javier.

Javier opened a new dollar account in the Prudential Bank and deposited $999,943.70. Victoria Javier
and her husband, Melchor Javier, Jr., made withdrawals from the account, deposited them in several
banks only to withdraw them later in an apparent plan to conceal, "launder" and dissipate the
erroneously sent amount.

Javier withdrew $475,000 from account No. 343 and converted it into eight cashier's checks made out to
the following: (a) F.C. Hagedorn& Co., Inc., two cheeks for the total amount of P1,000,000; (b) Elnor
Investment Co., Inc., two checks for P1,000,000; (c) Paramount Finance Corporation, two checks for
P1,000,000; and (d) M. Javier, Jr., two checks for P496,000. The first six checks were delivered to Jose
Marquez and HonorioPoblador, Jr

Mellon Bank also filed in the Court of First Instance of Rizal, a complaint against the Javier spouses,
HonorioPoblador, Jr., Domingo L. Jhocson, Jr., Jose Marquez, Roberto Gariño, Elnor Investment Co., Inc.,
F.C. Hagedorn& Co., Inc. and Paramount Finance Corporation. After its amendment, Rafael Caballero
and Tri-Arc Investment & Management Company, Inc. were also named defendants.

It prayed that: (a) the Javiers, Poblador, Elnor, Jhocson and Gariño be ordered to account for and pay
jointly and severally unto the plaintiff US$999,000.00 plus increments, additions, fruits and interests
earned by the funds from receipt thereof until fully paid; (b) the other defendants be ordered to account
for and pay unto the plaintiff jointly and severally with the Javiers to the extent of the amounts which
each of them may have received directly or indirectly from the US$999,000.00 plus increments,
additions, fruits and interests; (c) Marquez be held jointly and severally liable with Poblador for the
amount received by the latter for the sale of the 160-acre lot in California City; and (d) defendants be
likewise held liable jointly and severally for attomey's fees and litigation expenses plus exemplary
damages.

Mellon Bank traced these checks to Account 2825-1 of the Philippine Veterans Bank in the name of
CiprianoAzada, Poblador's law partner and counsel to the Javiers.

Mellon Bank then subpoenaed ErlindaBaylosis of the Philippine Veterans Bank to show that Azada
deposited HSBC checks No. 339736 and 339737 amounting to P874,490.75 in his personal current
account with said bank. It also subpoenaed Pilologo Red, Jr. of Hongkong& Shanghai Banking
Corporation to prove that said amount was returned by Azada to Hagedorn.
The testimonies of these witnesses were objected to by the defense on the grounds of res inter
aliosacta, immateriality, irrelevancy and confidentiality. The defendants then moved to strike off the
testimonies of Baylosis and Red from the record.

ISSUE Whether or not disclosure of bank deposits in cases where the money is the subject matter of
litigation violates RA 1405.

RULING NO. Private respondents' protestations that to allow the questioned testimonies to remain on
record would be in violation of the provisions of Republic Act No. 1405 on the secrecy of bank deposits,
is unfounded.

Section 2 of said law allows the disclosure of bank deposits in cases where the money deposited is the
subject matter of the litigation. Inasmuch as Civil Case No. 26899 is aimed at recovering the amount
converted by the Javiers for their own benefit, necessarily, an inquiry into the whereabouts of the
illegally acquired amount extends to whatever is concealed by being held or recorded in the name of
persons other than the one responsible for the illegal acquisition
PHILIPPINE COMMERCIAL & INDUSTRIAL BANK and JOSE HENARES, petitioners, vs. THE HON. COURT OF
APPEALS and MARINDUQUE MINING AND INDUSTRIAL CORPORATION, respondents.

G.R. No. 84526, SECOND DIVISION, January 28, 1991,SARMIENTO, J.

Since there is no evidence that the petitioners themselves divulged the information that the private
respondent had an account with the petitioner bank and it is undisputed that the said account was
properly the object of the notice of garnishment and writ of execution carried out by the deputy sheriff,
a duly authorized officer of the court, we can not therefore hold the petitioners liable under R.A. 1405.

FACTS The instant case originated from an action filed with the National Labor Relations Commission
(NLRC) by a group of laborers who obtained therefrom a favorable judgment for the payment of
backwages amounting to P205,853.00 against the private respondent.

The Commission issued a writ of execution directing the Deputy Sheriff of Negros Occidental, one
Damian Rojas, to enforce the aforementioned judgment.

Accordingly, the aforenamed deputy sheriff went to the mining site of the private respondent and
served the writ of execution on the persons concerned, but nothing seemed to have happened thereat.

Thereafter, the Sheriff prepared on his own a Notice of Garnishment addressed to six (6) banks, all
located in Bacolod City, one of which being the petitioner herein, directing the bank concerned to
immediately issue a check in the name of the Deputy Provincial Sheriff of Negros Occidental in an
amount equivalent to the amount of the garnishment and that proper receipt would be issued therefor.

The deputy sheriff presented the Notice of Garnishment and the Writ of Execution attached therewith to
the petitioner Henares and demanded from the latter, under pain of contempt, the release of the
deposit of the private respondent.

Petitioner Henares, upon knowing from the Acting Provincial Sheriff that there was no restraining order
from the National Labor Relations Commission and on the favorable advice of the bank's legal counsel,
issued a debit memo for the full balance of the private respondent's account with the petitioner bank.
Thereafter, he issued a manager's check in the name of the Deputy Provincial Sheriff of Negros
Occidental.

On the following day, the deputy sheriff returned to the bank in order to encash the check but before
the actual encashment, the petitioner Henares once again inquired about any existing restraining order
from the NLRC and upon being told that there was none, the latter allowed the said encashment.

The private respondent filed a complaint before the Regional Trial Court of Manila against the
petitioners and Damian Rojas, the Deputy Provincial Sheriff of Negros Occidental, then defendants,
alleging that the former's current deposit with the petitioner bank was levied upon, garnished, and with
undue haste unlawfully allowed to be withdrawn, and notwithstanding the alleged unauthorized
disclosure of the said current deposit and unlawful release thereof, the latter have failed and refused to
restore the amount of P37,466.18 to the former's account despite repeated demands.

The trial court rendered its judgment in favor of the private respondent. On appeal, the respondent
court in a decision dated February 26, 1988, first reversed the said judgment of the lower court, but
however, on the motion for reconsideration filed by the private respondent, subsequently annulled and
set aside its said decision in the resolution dated June 27, 1988. On August 3, 1988, the respondent
court denied the petitioner's own motion for reconsideration.

ISSUE Whether or not petitioners violated Republic Act No. 1405, otherwise known as the Secrecy of
Bank Deposits Act, when they allowed the sheriff to garnish the deposit of private respondent.

RULING NO. Since there is no evidence that the petitioners themselves divulged the information that the
private respondent had an account with the petitioner bank and it is undisputed that the said account
was properly the object of the notice of garnishment and writ of execution carried out by the deputy
sheriff, a duly authorized officer of the court, we can not therefore hold the petitioners liable under R.A.
1405.
While the general rule is that the findings of fact of the appellate court are binding on this Court, the
said rule however admits of exceptions, such as when the Court of Appeals clearly misconstrued and
misapplied the law, drawn from the incorrect conclusions of fact established by evidence and otherwise
at certain conclusions which are based on misapprehension of facts, as in the case at bar. The
petitioners are therefore absolved from any liability for the disclosure and release of the private
respondent's deposit to the custody of the deputy sheriff in satisfaction of the final judgment for the
laborers'backwages.
ALEXANDER VAN TWEST and THE HON. SALVADOR P. DE GUZMAN, in his capacity as Presiding Judge of
the Regional Trial Court of Makati, Branch 142, petitioners, vs.THE HON. COURT OF APPEALS and GLORIA
ANACLETO, respondents.

G.R. No. 106253, THIRD DIVISION, February 10, 1994, FELICIANO, J

Circular No. 960, Series of 1983 was in force at the time the private respondent undertook her
questioned transactions; thus, such local transfer from the original joint foreign currency account to
another personal foreign currency account, was not an eligible foreign currency deposit within the
coverage of RA No. 6426 and not entitled to the benefit of the confidentiality provisions of RA No. 6426.

FACTS Petitioner alleged in his complaint that in 1989, he and private respondent opened a joint foreign
currency savings account with Interbank to hold funds which "belonged entirely and exclusively" to
petitioner, to "facilitate the funding of certain business undertakings" of both of them and which funds
were to be "temporarily (held) in trust" by private respondent, who "shall turnover the same to plaintiff
upon demand."

Petitioner further alleged that withdrawals from the account were always made through their joint
signatures; that when his business relationship with private respondent turned sour, the latter
unilaterally closed their joint account, withdrew the remaining balance of Deutschmark (DM) 269,777.37
and placed the money in her own personal account with the same bank.

On March 1990, petitioner Alexander Van Twest filed a complaint against private respondent Gloria
Anacleto and International Corporate Bank ("Interbank") for recovery of a sum of money with prayer for
a writ of preliminary injunction, before Branch 142 of the Regional Trial Court of Makati. After issuing a
temporary restraining order upon the filing of the complaint. The hearings culminated in the issuance of
an order, enjoining private respondent and Interbank from effecting and allowing withdrawals from the
foreign currency deposit account until further orders from the trial court.

The preliminary injunction order of the Regional Trial Court was, however, annulled on petition for
certiorari filed by private respondent before the Court of Appeals in a Decision. In ruling that petitioner
was not entitled to the provisional remedy of preliminary injunction during the pendency of Civil Case
No. 90-659, the Court of Appeals said private respondent had failed to show that he has a right to stop
petitioner from withdrawing the foreign currency deposit under their joint "and/or" account. And it was
error for respondent Judge to have issued the Order of injunction.

Petitioner's principal contention is that the public respondent misappreciated the facts of the case; he
did not seek injunction to restrain private respondent from withdrawing the funds from their joint
account, since private respondent indeed enjoyed a semblance of right to do so and the withdrawal had
already become a fait accompli. Rather, petitioner seeks to restrain private respondent from effecting
withdrawals from her personal account, into which she had transferred the foreign currency, in order
not to defeat his main action seeking recovery of said fund.

Private respondent contends for the first before the CA that the personal foreign currency deposit
account she is maintaining is exempt from processes issued by the courts, pursuant to Section 8 of R.A.
6426 as amended by P. D. 1246, the statute in force on 26 February 1990, the date she withdrew the
foreign exchange fund from her joint account with petitioner and transferred the same to her personal
account.

ISSUE Whether or not the account is covered by confidentiality

RULING NO. Circular No. 960, Series of 1983 was in force at the time the private respondent undertook
her questioned transactions; thus, such local transfer from the original joint foreign currency account to
another personal foreign currency account, was not an eligible foreign currency deposit within the
coverage of RA No. 6426 and not entitled to the benefit of the confidentiality provisions of RA No. 6426.

Although transfers from one foreign currency deposit account to another foreign currency deposit
account in the Philippines are now eligible deposits under the Central Bank's Foreign Currency Deposit
System, private respondent is still not entitled to the confidentiality provisions of the relevant circulars.
For, as noted earlier, private respondent is not the owner of such foreign currency funds and her
personal deposit account is not protected.
LOURDES T. MARQUEZ, in her capacity as Branch Manager, Union Bank of the Philippines, petitioners,
vs. HON. ANIANO A. DESIERTO, (in his capacity as OMBUDSMAN, Evaluation and Preliminary
Investigation Bureau, Office of the Ombudsman, ANGEL C. MAYOR-ALGO, JR., MARY ANN CORPUZ-
MANALAC and JOSE T. DE JESUS, JR., in their capacities as Chairman and Members of the Panel,
respectively, respondents.

G.R. No. 135882, EN BANC, June 27, 2001, Justice Pardo

Before an in camera inspection may be allowed, there must be a pending case before a court of
competent jurisdiction. Further, the account must be clearly identified, the inspection limited to the
subject matter of the pending case before the court of competent jurisdiction. The bank personnel and
the account holder must be notified to be present during the inspection, and such inspection may cover
only the account identified in the pending case

In the case at bar, there is yet no pending litigation before any court of competent authority. What is
existing is an investigation by the office of the Ombudsman.

FACTS Petitioner Marquez received an Order from the Ombudsman Aniano A. Desierto to produce
several bank documents for purposes of inspection in camera relative to various accounts maintained at
Union Bank of the Philippines, Julia Vargas Branch, where petitioner is the branch manager. The
accounts to be inspected are Account Nos. 011-37270, 240-020718, 245-30317-3 and 245-30318- 1. The
order further states that the power of the Ombudsman to investigate and to require the production and
inspection of records and documents is sanctioned by the 1987 Philippine Constitution, Republic Act No.
6770, otherwise known as the Ombudsman Act of 1989 and under existing jurisprudence on the matter.

The basis of the Ombudsman in ordering an in camera inspection of the accounts is a trail of managers
checks purchased by one George Trivinio, a respondent in OMB-0-97-0411, pending with the office of
the Ombudsman.

It would appear that Mr. George Trivinio, purchased fifty one (51) Managers Checks (MCs) for a total
amount of P272.1 Million at Traders Royal Bank on May 2 and 3, 1995. Out of the 51 MCs, eleven (11)
MCs in the amount of P70.6 million, were deposited and credited to an account maintained at the Union
Bank, Julia Vargas Branch.

The Fact Finding and Intelligence Bureau (FFIB) panel met in conference with petitioner Lourdes T.
Marquez and Atty. Fe B. Macalino at the banks main office for the purpose of allowing petitioner and
Atty. Macalino to view the checks furnished by Traders Royal Bank. Atty. Macalino advised Ms. Marquez
to comply with the order of the Ombudsman. Petitioner agreed to an in camera inspection set on June
3, 1998.

However, on June 4, 1998, petitioner wrote the Ombudsman explaining to him that the accounts in
question cannot readily be identified and asked for time to respond to the order. The reason forwarded
by petitioner was that despite diligent efforts and from the account numbers presented, they cannot
identify these accounts since the checks are issued in cash or bearer and surmised that these accounts
have long been dormant, hence are not covered by the new account number generated by the Union
Bank system. Therefore, they have to verify from the Interbank records archives for the whereabouts of
these accounts.

The Ombudsman, responding to the request of the petitioner for time to comply with the order, stated:
firstly, it must be emphasized that Union Bank, Julia Vargas Branch was the depositary bank of the
subject Traders Royal Bank Managers Checks (MCs), as shown at its dorsal portion and as cleared by the
Philippine Clearing House, not the International Corporate Bank.

Notwithstanding the fact that the checks were payable to cash or bearer, nonetheless, the name of the
depositor(s) could easily be identified since the account numbers where said checks were deposited are
identified in the order.
Even assuming that the accounts were already classified as dormant accounts, the bank is still required
to preserve the records pertaining to the accounts within a certain period of time as required by existing
banking rules and regulations.

And finally, the in camera inspection was already extended twice from May 13, 1998 to June 3, 1998,
thereby giving the bank enough time within which to sufficiently comply with the order.

On June 16, 1998, the Ombudsman issued an order directing petitioner to produce the bank documents
relative to the accounts in issue. The order states:

Viewed from the foregoing, your persistent refusal to comply with Ombudsman’s order is unjustified,
and is merely intended to delay the investigation of the case. Your act constitutes disobedience of or
resistance to a lawful order issued by this office and is punishable as Indirect Contempt under Section
3(b) of R.A. 6770. The same may also constitute obstruction in the lawful exercise of the functions of the
Ombudsman which is punishable under Section 36 of R.A. 6770.

Petitioner together with Union Bank of the Philippines, filed a petition for declaratory relief, prohibition
and injunction with the Regional Trial Court, Makati City, against the Ombudsman.

Petitioner prayed for a temporary restraining order (TRO) because the Ombudsman and other persons
acting under his authority were continuously harassing her to produce the bank documents relative to
the accounts in question. Moreover, on June 16, 1998, the Ombudsman issued another order stating
that unless petitioner appeared before the FFIB with the documents requested, petitioner manager
would be charged with indirect contempt and obstruction of justice.

The lower court denied petitioners prayer for a temporary restraining order. The Ombudsman filed a
motion to dismiss the petition for declaratory relief on the ground that the Regional Trial Court has no
jurisdiction to hear a petition for relief from the findings and orders of the Ombudsman, citing R. A. No.
6770, Sections 14 and 27. On August 7, 1998, the Ombudsman filed an opposition to petitioner’s motion
for reconsideration dated July 20, 1998.

The lower court denied petitioners motion for reconsideration, and also the Ombudsman’s motion to
dismiss. Petitioner received a copy of the motion to cite her for contempt, filed with the Office of the
Ombudsman by the Fact Finding and Intelligence Bureau (FFIB).

Petitioner filed with the Ombudsman an opposition to the motion to cite her in contempt on the ground
that the filing thereof was premature due to the petition pending in the lower court. Petitioner likewise
reiterated that she had no intention to disobey the orders of the Ombudsman. However, she wanted to
be clarified as to how she would comply with the orders without her breaking any law, particularly R. A.
No. 1405.

Respondent Ombudsman panel set the incident for hearing on September 7, 1998. After hearing, the
panel issued an order dated September 7, 1998, ordering petitioner and counsel to appear for a
continuation of the hearing of the contempt charges against her.

On September 10, 1998, petitioner filed with the Ombudsman a motion for reconsideration of the above
order. Her motion was premised on the fact that there was a pending case with the Regional Trial Court,
Makati City, which would determine whether obeying the orders of the Ombudsman to produce bank
documents would not violate any law

The FFIB opposed the motion, and the Ombudsman denied the motion.

ISSUE Whether the order of the Ombudsman to have an in camera inspection of the questioned account
is allowed as an exception to the law on secrecy of bank deposits (R. A. No. 1405)

RULING NO. Before an in camera inspection may be allowed, there must be a pending case before a
court of competent jurisdiction. Further, the account must be clearly identified, the inspection limited to
the subject matter of the pending case before the court of competent jurisdiction. The bank personnel
and the account holder must be notified to be present during the inspection, and such inspection may
cover only the account identified in the pending case
In the case at bar, there is yet no pending litigation before any court of competent authority. What is
existing is an investigation by the office of the Ombudsman. In short, what the Office of the Ombudsman
would wish to do is to fish for additional evidence to formally charge Amado Lagdameo, et. al., with the
Sandiganbayan. Clearly, there was no pending case in court which would warrant the opening of the
bank account for inspection.

Zones of privacy are recognized and protected in our laws. The Civil Code provides that "Every person
shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons" and
punishes as actionable torts several acts for meddling and prying into the privacy of another. It also
holds a public officer or employee or any private individual liable for damages for any violation of the
rights and liberties of another person, and recognizes the privacy of letters and other private
communications. The Revised Penal Code makes a crime of the violation of secrets by an officer, the
revelation of trade and industrial secrets, and trespass to dwelling. Invasion of privacy is an offense in
special laws like the Anti-Wiretapping Law, the Secrecy of Bank Deposits Act, and the Intellectual
Property Code.
OFFICE OF THE OMBUDSMAN vs. HON. FRANCISCO B. IBAY, in his capacity as Presiding Judge of the
Regional Trial Court, Makati City, Branch 135, UNION BANK OF THE PHILIPPINES, and LOURDES T.
MARQUEZ, in her capacity as Branch Manager of UBP Julia Vargas Branch.

G. R. No. 137538, SECOND DIVISION, September 3, 2001, QUISUMBING, J

In Marquez vs. Desierto, before an in camera inspection of bank accounts may be allowed, the following
requisites must be present: (1) there must be a pending case before a court of competent jurisdiction,
(2) the account must be clearly identified, (3) the inspection limited to the subject matter of the pending
case before the court of competent jurisdiction, and (4)the bank personnel and the account holder must
be notified to be present during the inspection. In the present case, since there is no pending litigation
yet before a court of competent authority, but only an investigation by the Ombudsman on the so-called
"scam", any order for the opening of the bank account for inspection is clearly premature and legally
unjustified.

FACTS In 1998, the Ombudsmaninvestigated the alleged "scam" on the Public Estates Authority-Amari
(PEA-AMARI) Coastal Bay Development Corporation, revealing that the alleged anomaly was committed
through the issuance of checks which were subsequently deposited in several financial institutions.
Thus, the Ombudsman issued an Order directing Lourdes Marquez (branch manager) of Union Bank of
the Philippines (UBP) to produce several bank documents (i.e. bank account application forms, signature
cards, transactions history, bank statements, bank ledgers, debit and credit memos, deposit and
withdrawal slips, application for purchase of manager's checks, used manager's checks and check
microfilms) for inspection relative to certain accounts maintained there. The purpose of the inspection
was to identify the specific bank records prior to the issuance of the required information not in any
manner needed in or relevant to the investigation.

The Ombudsman issued an order to the branch manager to produce the requested bank documents for
"in camera" inspection. "In camera" inspection is when the bank records would be examined without
bringing the documents outside the bank premises. Because of her failure to comply with the order, the
branch manager was ordered to show cause: (1) why she should not be cited for indirect contempt (for
acts constituting disobedience or resistance to a lawful order), and (2) why she should not be charged
for obstruction (for willful obstruction of the lawful exercise of the functions of the Ombudsman).

On the other hand, the branch manager filed: First, a petition for declaratory relief with an application
for temporary restraining order and/or preliminary injunction before the Regional Trial Court (RTC),
seeking a definite ruling and/or guidelines as regards (a) her rights under Sections 2 and 3 of R.A. 1405,
which states that the legal obligation not to divulge any information relative to all deposits of whatever
nature with banks in the Philippines,and (b)the Ombudsman's power to inspect bank deposits under
Section 15 (8) of R.A. 6770, which states that the Ombudsman had the power to examine and have
access to bank accounts and records. Second, the branch manager filed a petition for certiorari and
prohibition with the Supreme Court (SC), assailing the Ombudsman's order to institute indirect
contempt proceedings against her.

The Ombudsman filed a motion to dismiss the petition for declaratory relief on the ground that the RTC
has no jurisdiction over the subject matter thereof. The RTC denied the motion to dismiss. The
Ombudsman then filed an ex-parte motion for extended ruling. The RTC issued an order declaring that it
has jurisdiction over the case since it is an action for declaratory relief under Rule 63 of the Rules of
Court.

The Ombudsman filed before the SC the petition for certiorari assailing the Orders of the RTC on the
ground of grave abuse of discretion and lack of jurisdiction. The Ombudsman sought the nullification of
the impugned orders, the immediate dismissal of thepetition for declaratory relief case, and the
prohibition of the RTC from exercising jurisdiction on the investigation being conducted by the
Ombudsman in the alleged PEA-AMARI land "scam".

ISSUE Whether or not the RTC acted without jurisdiction and/or with grave abuse of discretion in
entertaining the petition for declaratory relief.
RULING NO.The special civil action of declaratory relief falls under the exclusive jurisdiction of the RTC. It
is not among the actions within the original jurisdiction of the Supreme Court even if only questions of
law are involved.

The requisites of an action for declaratory relief are: (1) there must be a justiciable controversy must be
between persons whose interests are adverse; (3) that the party seeking the relief has a legal interest in
the controversy; and (4) that the issue is ripe for judicial determination. In this case, the controversy
concerns the extent of the power of the Ombudsman to examine bank accounts under Section 15 (8) of
R.A. 6770 vis-à-vis the duty of banks under Republic Act 1405 not to divulge any information relative to
deposits of whatever nature. The interests of the parties are adverse considering the antagonistic
assertion of a legal right on one hand, that is the power of Ombudsman to examine bank deposits, and
on the other, the denial thereof apparently by the branch manager who refused to allow the
Ombudsman to inspect in camera certain bank accounts. The party seeking relief, the branch manager
herein, asserts a legal interest in the controversy. The issue invoked is ripe for judicial determination as
litigation is inevitable. Note that theOmbudsman has threatened the branch manager with "indirect
contempt" and "obstruction" charges should the latter not comply with its order.

In Marquez vs. Desierto, before an in camera inspection of bank accounts may be allowed, the following
requisites must be present: (1) there must be a pending case before a court of competent jurisdiction,
(2) the account must be clearly identified, (3) the inspection limited to the subject matter of the pending
case before the court of competent jurisdiction, and (4)the bank personnel and the account holder must
be notified to be present during the inspection. In the present case, since there is no pending litigation
yet before a court of competent authority, but only an investigation by the Ombudsman on the so-called
"scam", any order for the opening of the bank account for inspection is clearly premature and legally
unjustified.
CHINA BANKING CORPORATION vs. THE HONORABLE COURT OF APPEALS and JOSE "JOSEPH" GOTIANUY
as substituted by ELIZABETH GOTIANUY LO.

G.R. NO. 140687, FIRST DIVISION, December 18, 2006, CHICO-NAZARIO

The law provides that all foreign currency deposits authorized under RA 6426, as amended by Sec. 8, PD
1246, PD No. 1035, as well as foreign currency deposits authorized under PD 1034 are considered
absolutely confidential in nature and may not be inquired into. There is only one exception to the
secrecy of foreign currency deposits, that is, disclosure is allowed upon the written permission of the
depositor.

Since Jose Gotianuy is the named co-payee of Mary Margaret Dee in the Citibank checks, which checks
were deposited by Mary Margaret Dee in China Bank, then, Jose Gotianuy is likewise a depositor
thereof. As the owner of the funds unlawfully taken and which are undisputably now deposited with
China Bank, Jose Gotianuy has the right to inquire into the said deposits. Jose Gotianuy’s request for the
assailed subpoena is tantamount to an express permission of a depositor for the disclosure of the name
of the account holder.On that basis, no written consent from Mary Margaret Dee is necessitated.

FACTS Jose "Joseph" Gotianuyfiled a complaint for recovery of sums of money and annulment of sales of
real properties and shares of stock against his son-in-law, George Dee, and his daughter, Mary Margaret
Dee, before the Regional Trial Court (RTC).

Jose Gotianuy accused Mary Margaret Dee of stealingUS dollar deposits with Citibank N.A. amounting to
not less than P35,000,000.00 and US$864,000.00. Mary Margaret Dee received these amounts from
Citibank N.A. through checks which she deposited at China Banking Corporation (China Bank). He
accused George Deeof transferring his real properties and shares of stock in George Dee's name without
any consideration. Jose Gotianuy died during the pendency of the case before the RTC. He was
substituted by his daughter,ElizabethGotianuy Lo, who presented the US Dollar checks withdrawn by
Mary Margaret Dee from his US dollar placement with Citibank.

Upon motion of Elizabeth Gotianuy Lo, the RTC issued a subpoena to CristotaLabios and Isabel Yap,
employees of China Bank, to testify with regards to the Citibank Checks and other matters material and
relevant to the issues of the case. China Bank moved for a reconsideration. TheRTC issued an
Orderpartly denying and partly granting the motion for reconsideration, in the sense that Isabel Yap
and/or CristutaLabios are directed to testify only for the purpose of disclosing in whose name or names
is the foreign currency fund deposited with China Bank and not to other matters material and relevant
to the issues of the case. China Bank filed a Petition for Certiorari with the Court of Appeals (CA). The CA
denied the petition and affirmed the Order of the RTC. The China Bank filed a petition with the Supreme
Court (SC).

ISSUE Whether or not China Bank is correct that the Citibank dollar checks with both Jose Gotianuy
and/or Mary Margaret Dee as payees, deposited with China Bank, may not be looked into under the law
on secrecy of foreign currency deposits.

RULING NO. The law protects only the deposits itself but not the name of the depositor. Thus, the
coverage of the law extends only to the foreign currency deposit in the China Bank account where Mary
Margaret Dee deposited the Citibank checks and nothing more.

The law provides that all foreign currency deposits authorized under RA 6426, as amended by Sec. 8, PD
1246, PD No. 1035, as well as foreign currency deposits authorized under PD 1034 are considered
absolutely confidential in nature and may not be inquired into. There is only one exception to the
secrecy of foreign currency deposits, that is, disclosure is allowed upon the written permission of the
depositor.

The following facts are established: (1) Jose Gotianuy and Mary Margaret Dee are co-payees of various
Citibank checks; (2) Mary Margaret Dee withdrew these checks from Citibank; (3) Mary Margaret Dee
admitted in her Answer to the Request for Admissions by the Adverse Party sent to her by Jose
Gotianuythat she withdrew the funds from Citibank upon the instruction of her father Jose Gotianuy and
that the funds belonged exclusively to the latter; (4) these checks were endorsed by Mary Margaret Dee
at the dorsal portion; and (5) Jose Gotianuy discovered that these checks were deposited with China
Bank as shown by the stamp of China Bank at the dorsal side of the checks.

Since Jose Gotianuy is the named co-payee of Mary Margaret Dee in the Citibank checks, which checks
were deposited by Mary Margaret Dee in China Bank, then, Jose Gotianuy is likewise a depositor
thereof. As the owner of the funds unlawfully taken and which are undisputably now deposited with
China Bank, Jose Gotianuy has the right to inquire into the said deposits. Jose Gotianuy’s request for the
assailed subpoena is tantamount to an express permission of a depositor for the disclosure of the name
of the account holder.On that basis, no written consent from Mary Margaret Dee is necessitated.

All things considered and in view of the distinctive circumstances attendant to the present case, we are
constrained to render a limited PRO HAC VICE RULING. Clearly it was not the intent of the legislature
when it enacted the law on secrecy on foreign currency deposits to perpetuate injustice. This Court is of
the view that the allowance of the inquiry would be in accord with the rudiments of fair play, the
upholding of fairness in our judicial system and would be an avoidance of delay and time-wasteful and
circuitous way of administering justice.
BSB GROUP, INC., represented by its President, Mr. RICARDO BANGAYAN,Petitioner,-versusSALLY GO
a.k.a. SALLY GO-BANGAYAN,Respondent.

G.R. No. 168644, THIRD DIVISION, February 16, 2010, PERALTA, J.

We hold that the testimony of Marasigan on the particulars of respondents supposed bank account with
Security Bank and the documentary evidence represented by the checks adduced in support thereof, are
not only incompetent for being excluded by operation of R.A. No. 1405. They are likewise irrelevant to
the case, inasmuch as they do not appear to have any logical and reasonable connection to the
prosecution of respondent for qualified theft.

FACTS Petitioner, the BSB Group, Inc., is a duly organized domestic corporation presided by its herein
representative, Ricardo Bangayan (Bangayan). Respondent Sally Go, alternatively referred to as Sally Sia
Go and Sally Go-Bangayan, is Bangayans wife, who was employed in the company as a cashier, and was
engaged, among others, to receive and account for the payments made by the various customers of the
company.

In 2002, Bangayan filed with the Manila Prosecutors Office a complaint for estafa and/or qualified theft
against respondent, alleging that several checks representing the aggregate amount of P1,534,135.50
issued by the companys customers in payment of their obligation were, instead of being turned over to
the companys coffers, indorsed by respondent who deposited the same to her personal banking account
maintained at Security Bank and Trust Company (Security Bank).

Accordingly, respondent was charged before the Regional Trial Court of Manila.

Respondent entered a negative plea when arraigned. The trial ensued. On the premise that respondent
had allegedly encashed the subject checks and deposited the corresponding amounts thereof to her
personal banking account, the prosecution moved for the issuance of subpoena ducestecum /ad
testificandum against the respective managers or records custodians of Security Banks Divisoria Branch,
as well as of the Asian Savings Bank (now Metropolitan Bank & Trust Co. [Metrobank]). The trial court
granted the motion and issued the corresponding subpoena. Respondent filed a motion to quash the
subpoena, addressed to Metrobank, noting to the court that in the complaint-affidavit filed with the
prosecutor, there was no mention made of the said bank account, to which respondent, in addition to
the Security Bank account, allegedly deposited the proceeds of the supposed checks.

Petitioner, opposing respondents move, argued for the relevancy of the Metrobank account on the
ground that the complaint-affidavit showed that there were two checks which respondent allegedly
deposited in an account with the said bank.To this, respondent filed a supplemental motion to quash,
invoking the absolutely confidential nature of the Metrobank account under the provisions of Republic
Act (R.A.) No. 1405. The trial court did not sustain respondent; hence, it denied the motion to quash for
lack of merit.

Meanwhile, the prosecution was able to present in court the testimony of Elenita Marasigan
(Marasigan), the representative of Security Bank. In a nutshell, Marasigans testimony sought to prove
that between 1988 and 1989, respondent, while engaged as cashier at the BSB Group, Inc., was able to
run away with the checks issued to the company by its customers, endorse the same, and credit the
corresponding amounts to her personal deposit account with Security Bank. In the course of the
testimony, the subject checks were presented to Marasigan for identification and marking as the same
checks received by respondent, endorsed, and then deposited in her personal account with Security
Bank.

But before the testimony could be completed, respondent filed a Motion to Suppress, seeking the
exclusion of Marasigans testimony and accompanying documents thus far received, bearing on the
subject Security Bank account. This time respondent invokes, in addition to irrelevancy, the privilege of
confidentiality under R.A. No. 1405.

The Trial court denied said motion as well as the motion for reconsideration filed by the respondent. CA
reversed the decision and ordered that the witness’ testimony be stricken out from the record.
In this Petition under Rule 45, petitioner averred in the main that the Court of Appeals had seriously
erred in reversing the assailed orders of the trial court, and in effect striking out Marasigans testimony
dealing with respondents deposit account with Security Bank. It asserted that apart from the fact that
the said evidence had a direct relation to the subject matter of the case for qualified theft and, hence,
brings the case under one of the exceptions to the coverage of confidentiality under R.A. 1405.

For her part, respondent claimed that the money represented by the Security Bank account was neither
relevant nor material to the case, because nothing in the criminal information suggested that the money
therein deposited was the subject matter of the case. Thus, the checks which the prosecution had
Marasigan identify, as well as the testimony itself of Marasigan, should be suppressed by the trial court
at least for violating respondents right to due process. More in point, respondent opined that admitting
the testimony of Marasigan, as well as the evidence pertaining to the Security Bank account, would
violate the secrecy rule under R.A. No. 1405.

ISSUES WON the testimony of Marasigan and the accompanying documents are irrelevant to the case,
and whether they are also violative of the absolutely confidential nature of bank deposits and, hence,
excluded by operation of R.A. No. 1405.

RULING YES. The Court, after deliberative estimation, finds the subject evidence to be indeed
inadmissible. It is conceded that while the fundamental law has not bothered with the triviality of
specifically addressing privacy rights relative to banking accounts, there, nevertheless, exists in our
jurisdiction a legitimate expectation of privacy governing such accounts. The source of this right of
expectation is statutory, and it is found in R.A. No. 1405, otherwise known as the Bank Secrecy Act of
1955.

R.A. No. 1405 has two allied purposes. It hopes to discourage private hoarding and at the same time
encourage the people to deposit their money in banking institutions, so that it may be utilized by way of
authorized loans and thereby assist in economic development. Owing to this piece of legislation, the
confidentiality of bank deposits remains to be a basic state policy in the Philippines. In taking exclusion
from the coverage of the confidentiality rule, petitioner in the instant case posits that the account
maintained by respondent with Security Bank contains the proceeds of the checks that she has
fraudulently appropriated to herself and, thus, falls under one of the exceptions in Section 2 of R.A. No.
1405 that the money kept in said account is the subject matter in litigation. To highlight this thesis,
petitioner avers, citing Mathay v. Consolidated Bank and Trust Co] that the subject matter of the action
refers to the physical facts; the things real or personal; the money, lands, chattels and the like, in
relation to which the suit is prosecuted, which in the instant case should refer to the money deposited in
the Security Bank account. On the surface, however, it seems that petitioners theory is valid to a point,
yet a deeper treatment tends to show that it has argued quite off-tangentially. This, because, while
Mathay did explain what the subject matter of an action is, it nevertheless did so only to determine
whether the class suit in that case was properly brought to the court.

What indeed constitutes the subject matter in litigation in relation to Section 2 of R.A. No. 1405 has
been pointedly and amply addressed in Union Bank of the Philippines v. Court of Appeals, in which the
Court noted that the inquiry into bank deposits allowable under R.A. No. 1405 must be premised on the
fact that the money deposited in the account is itself the subject of the action.

In other words, it can hardly be inferred from the indictment itself that the Security Bank account is the
ostensible subject of the prosecutions inquiry. Without needlessly expanding the scope of what is plainly
alleged in the Information, the subject matter of the action in this case is the money amounting to
P1,534,135.50 alleged to have been stolen by respondent, and not the money equivalent of the checks
which are sought to be admitted in evidence. Thus, it is that, which the prosecution is bound to prove
with its evidence, and no other.

In sum, we hold that the testimony of Marasigan on the particulars of respondents supposed bank
account with Security Bank and the documentary evidence represented by the checks adduced in
support thereof, are not only incompetent for being excluded by operation of R.A. No. 1405. They are
likewise irrelevant to the case, inasmuch as they do not appear to have any logical and reasonable
connection to the prosecution of respondent for qualified theft. We find full merit in and affirm
respondents objection to the evidence of the prosecution. The Court of Appeals was, therefore, correct
in reversing the assailed orders of the trial court.
RIZAL COMMERCIAL BANKING CORPORATION vs. HI-TRI DEVELOPMENT CORPORATION and LUZ R.
BAKUNAWA.

G.R. No. 192413, SECOND DIVISION, June 13, 2012, JUSTICE SERENO

Escheat proceedings refer to the judicial process in which the state, by virtue of its sovereignty, steps in
and claims abandoned, left vacant, or unclaimed property, without there being an interested person
having a legal claim thereto. It is a proceeding whereby the state compels the surrender to it of
unclaimed deposit balances when there is substantial ground for a belief that they have been
abandoned, forgotten, or without an owner.In the case of dormant accounts, the stateinquires into the
status, custody, and ownership of the unclaimed balance to determine whether the inactivity was
brought about by the fact of death or absence of or abandonment by the depositor.

The law sets a detailed system for notifying depositors of unclaimed balances. This notification is meant
to inform them that their deposit could be escheated if left unclaimed. Accordingly, before filing a sworn
statement, banks and other similar institutions are under obligation to communicate with owners of
dormant accounts. The purpose of this initial notice is for a bank to determine whether an inactive
account has indeed been unclaimed, abandoned, forgotten, or left without an owner.

FACTS Luz Bakunawa and her husband Manuel(Spouses Bakunawa) are registered owners of six (6)
parcels of land that were sequestered by the Presidential Commission on Good Government (PCGG). In
1990,Teresita Millan (Millan) offered to buy said lots and made a downpayment of ₱1,019,514.29.
However, Millan was not able to clear the preliminary obstacles. As a result, the Spouses Bakunawa
rescinded the sale and offered to return to Millan her downpayment,but Millan refused to accept it
back. Consequently, the Spouses Bakunawa, through their company, the Hi-Tri Development
Corporation (Hi-Tri) took out a Manager’s Check from RCBC-Ermita in the amount of ₱ 1,019,514.29,
payable to Millan’s company Rosmil Realty and Development Corporation (Rosmil) and used this as one
of their basis for a complaint against Millan filed with the Regional Trial Court (RTC). The Spouses
Bakunawa, upon advice of their counsel, retained custody of RCBC Manager’s Check and refrained from
canceling or negotiating it. All throughout the proceedings, especially during negotiations for a possible
settlement of the case, Millan was informed that the Manager’s Check was available for her withdrawal,
she, being the payee.

However, during the pendency of the case and without the knowledge of Hi-Tri and Spouses Bakunawa,
RCBC reported the ₱ 1,019,514.29-credit existing in favor of Rosmil to the Bureau of Treasury as among
its "unclaimed balances". Allegedly, a copy of the Sworn Statement executed by Florentino N. Mendoza,
Manager and Head of RCBC’s Asset Management, Disbursement and Sundry Department (AMDSD) was
posted within the premises of RCBC-Ermita.

Spouses Bakunawa settled amicably their dispute with Rosmil and Millan. Instead of only the amount of
"₱ 1,019,514.29", Spouses Bakunawa agreed to pay Rosmil and Millan the amount of ₱ 3,000,000.00,
which is inclusive of the amount of ₱ 1,019,514.29. But during negotiations and evidently prior to said
settlement, Manuel Bakunawa, through Hi-Tri inquired from RCBC-Ermita the availability of the ₱
1,019,514.29 under RCBC Manager’s Check No. ER 034469. Hi-Tri and Spouses Bakunawa were however
dismayed when they were informed that the amount was already subject of the escheat proceedings
before the RTC.

Manuel Bakunawa, through Hi-Tri,sent a letter to RCBC, stating that the deposit that was supposed to be
allocated for the payment of the Manager’s Check was supposed to remain part of the Hi-Tri’s RCBC
bank account, whichcontinued to be actively maintained and operated. Additionally,Hi-Tri averred that
it never received any statements of account from RCBC, and never received any single letter from RCBC
noting the absence of fund movement and advising the Corporation that the deposit would be treated
as dormant.

RCBC replied, stating that the inclusion of the Manager’s Check in the escheat proceedings and that the
funds covered by the Manager’s Check does not form part of the Bank’s own account. By simple
operation of law, the funds covered by the manager’s check in issue became a deposit/credit susceptible
for inclusion in the escheat case initiated by the OSG and/or Bureau of Treasury.
The Republic filed a Complaint for Escheat pursuant to Act No. 3936, as amended by P.D. 679, against
certain deposits, credits, and unclaimed balances held by the branches of various banks in the
Philippines. The RTC declared the amounts, subject of the special proceedings, escheated to the
Republic and ordered them deposited with the Treasurer of the Philippines (Treasurer) and credited in
favor of the Republic. The RTC judgments included an unclaimed balance in the amount of ₱
1,019,514.29, maintained by RCBC. Hi-Tri and Spouses Bakunawa filed an Omnibus Motion,seeking the
partial reconsideration of the RTC Decision insofar as it escheated the fund allocated for the payment of
the Manager’s Check and asked that they be included as partydefendants or, in the alternative, allowed
to intervene in the case and their motion considered as an answer-in-intervention as they were deprived
thereof because of the lack of notice from RCBC. The RTC denied the motion, explaining that the
Republic had proven compliance with the requirements of publication and notice, which served as
notice to all those who may be affected and prejudiced by the Complaint for Escheat.

The CA, in its Decision and Resolution, reversed and set aside the RTC Decision and Order, stating that
RCBC’s failure to notify Hi-Tri and Spouses Bakunawadeprived them of an opportunity to intervene in
the escheat proceedings and to present evidence to substantiate their claim which isa violation of their
right to due process. The CA ordered the exclusion of the funds allocated for the payment of the
Manager’s Check in the escheat proceedings. RCBC filed a Rule 45 Petition for Review on Certiorari,
contending that Hi-Tri and Spouses Bakunawawere not the owners of the unclaimed balances and were
thus not entitled to notice, whichhinges on the theory that the funds represented by the Manager’s
Check were deemed transferred to the credit of the payee or holder upon its issuance, which, in this
case, is Rosmil.

ISSUE Whether or not the escheat of the account is proper.

RULING NO. Escheat proceedings refer to the judicial process in which the state, by virtue of its
sovereignty, steps in and claims abandoned, left vacant, or unclaimed property, without there being an
interested person having a legal claim thereto. It is a proceeding whereby the state compels the
surrender to it of unclaimed deposit balances when there is substantial ground for a belief that they
have been abandoned, forgotten, or without an owner.In the case of dormant accounts, the
stateinquires into the status, custody, and ownership of the unclaimed balance to determine whether
the inactivity was brought about by the fact of death or absence of or abandonment by the depositor.

The law sets a detailed system for notifying depositors of unclaimed balances. This notification is meant
to inform them that their deposit could be escheated if left unclaimed. Accordingly, before filing a sworn
statement, banks and other similar institutions are under obligation to communicate with owners of
dormant accounts. The purpose of this initial notice is for a bank to determine whether an inactive
account has indeed been unclaimed, abandoned, forgotten, or left without an owner.

As to banks, service of processes is made by delivery of a copy of the complaint and summons upon the
president, cashier, or managing officer of the defendant bank. On the other hand, as to depositors or
other claimants of the unclaimed balances, service is made by publication of a copy of the summons in a
newspaper of general circulation in the locality where the institution is situated. A notice about the
forthcoming escheat proceedings must also be issued and published, directing and requiring all persons
who may claim any interest in the unclaimed balances to appear before the court and show cause why
the dormant accounts should not be deposited with the Treasurer.

In case the bank complies with the provisions of the law and the unclaimed balances are eventually
escheated to the Republic, the bank "shall not thereafter be liable to any person for the same and any
action which may be brought by any person against in any bank for unclaimed balances so deposited
shall be defended by the Solicitor General without cost to such bank." Otherwise, should it fail to comply
with the legally outlined procedure to the prejudice of the depositor, the bank may not raise the
defense provided under Sec.5 of Act No. 3936, as amended.

An ordinary check refers to a bill of exchange drawn by a depositor (drawer) on a bank (drawee),
requesting the latter to pay a person named therein (payee) or to the order of the payee or to the
bearer, a named sum of money. The issuance of the check does not of itself operate as an assignment of
any part of the funds in the bank to the credit of the drawer. Here, the bank becomes liable only after it
accepts or certifies the check. After the check is accepted for payment, the bank would then debit the
amount to be paid to the holder of the check from the account of the depositor-drawer.There are
checks of a special type called manager’s or cashier’s checks. These are bills of exchange drawn by the
banks manager or cashier, in the name of the bank, against the bank itself. A manager’s or a cashier’s
check is procured from the bank by allocating an amount of funds to be debited from the depositor’s
account or by directly paying or depositing to the bank the value of the check to be drawn. Since the
bank issues the check in its name, with itself as the drawee, the check is deemed accepted in advance.
Ordinarily, the check becomes the primary obligation of the issuing bank and constitutes its written
promise to pay upon demand. Nevertheless, the mere issuance of a manager’s check does not ipso facto
work as an automatic transfer of funds to the account of the payee. In case the procurer of the
manager’s or cashier’s check retains custody of the instrument, does not tender it to the intended
payee, or fails to make an effective delivery, the contract on a negotiable instrument is incomplete and
revocable.

In this case, RCBC acknowledges that the Manager’s Check was procured by Hi-Tri and Spouses
Bakunawa, and that the amount to be paid for the check would be sourced from the deposit account of
Hi-Tri. When Rosmil did not accept the Manager’s Check offered by Hi-Tri and Spouses Bakunawa, Hi-Tri
and Spouses Bakunawa remained in custody of the instrument instead of cancelling it. As the Manager’s
Check neither went to the hands of Rosmil nor was it further negotiated to other persons, the
instrument remained undelivered. RCBC does not dispute the fact that Hi-Tri and Spouses Bakunawa
retained custody of the instrument. Since there was no delivery, presentment of the check to the bank
for payment did not occur. An order to debit the account of Hi-Tri and Spouses Bakunawa was never
made. In fact, RCBC confirms that the Manager’s Check was never negotiated or presented for payment
to its Ermita Branch, and that the allocated fund is still held by the bank. As a result, the assigned fund is
deemed to remain part of the account of HiTri, which procured the Manager’s Check. The doctrine that
the deposit represented by a manager’s check automatically passes to the payee is inapplicable, because
the instrument – although accepted in advance – remains undelivered. Hence, Hi-Tri and Spouses
Bakunawa should have been informed that the deposit had been left inactive for more than 10 years,
and that it may be subjected to escheat proceedings if left unclaimed.

After a careful review of the RTC records, it is no longer necessary to remand the case for hearing to
determine whether the claim of Hi-Tri and Spouses Bakunawawas valid. There was no contention that
they were the procurers of the Manager’s Check. It is undisputed that there was no effective delivery of
the check, rendering the instrument incomplete. In addition, Hi-Tri and Spouses Bakunawa retained
ownership of the funds. As it is obvious from their foregoing actions that they have not abandoned their
claim over the fund, the allocated deposit, subject of the Manager’s Check, should be excluded from the
escheat proceedings. The objective of escheat proceedings is state forfeiture of unclaimed balances.
There is nothing in the records that would show that the OSG appealed the assailed CA judgments. Thus,
the failure to appeal is an indication of disinterest in pursuing the escheat proceedings in favor of the
Republic.
DOÑA ADELA EXPORT INTERNATIONAL, INC. vs. TRADE AND INVESTMENT DEVELOPMENT
CORPORATION (TIDCORP), and THE BANK OF THE PHILIPPINE ISLANDS (BPI).

G.R. No. 201931, THIRD DIVISION, February 11, 2015, Villarama, Jr., J.

In this case, the Joint Motion to Approve Agreement was executed by BPI and TIDCORP only. There was
no written consent given by petitioner or its representative, Epifanio Ramos, Jr., that petitioner is
waiving the confidentiality of its bank deposits. The provision on the waiver of the confidentiality of
petitioner’s bank deposits was merely inserted in the agreement. It is clear therefore that petitioner is
not bound by the said provision since it was without the express consent of petitioner who was not a
party and signatory to the said agreement.

FACTS Petitioner Doña Adela Export International, Inc., filed a Petition for Voluntary Insolvency, and the
case was raffled to RTC Mandaluyong. The RTC, after finding the petition sufficient in form and
substance, issued an order declaring petitioner as insolvent and staying all civil proceedings against
petitioner. Thereafter, Atty. Arlene Gonzales was appointed as receiver. After taking her oath, Atty.
Gonzales proceeded to make the necessary report, engaged appraisers and required the creditors to
submit proof of their respective claims.

Atty. Gonzales then filed a Motion for Parties to Enter Into Compromise Agreement incorporating
therein her proposed terms of compromise. Then, creditors TIDCORP and BPI also filed a Joint Motion to
Approve Agreement which contained that Petitioner and the members of its Board of Directors shall
waive all rights to confidentiality provided under the provisions of Law on Secrecy of Bank Deposits (R.A.
No. 1405), and The General Banking Law of 2000 (R.A. No. 8791). Accordingly, the petitioner and the
members of its Board of Directors by these presents grant TIDCORP and BPI access to any deposit or
other accounts maintained by them with any bank. The RTC rendered the assailed Decision approving
the Joint Motion to Approve Agreement.

Petitioner filed a motion for partial reconsideration and claimed that TIDCORP and BPI’s agreement
imposes on it several obligations such as payment of expenses and taxes and waiver of confidentiality of
its bank deposits but it is not a party and signatory to the said agreement. RTC denied the motion

Petitioner asserts that express and written waiver from the depositor concerned is required by law
before any third person or entity is allowed to examine bank deposits or bank records. According to
petitioner, it is not a party to the compromise agreement between BPI and TIDCORP and its silence or
acquiescence is not tantamount to an admission that binds it to the compromise agreement of the
creditors especially the waiver of confidentiality of bank deposits.

Respondent TIDCORP contends that the waiver of confidentiality under Republic Act (R.A.) Nos. 1405
and 8791 does not require the express or written consent of the depositor. It is TIDCORP’s position that
upon declaration of insolvency, the insolvency court obtains complete jurisdiction over the insolvent’s
property which includes the authority to issue orders to look into the insolvent’s bank deposits. Since
bank deposits are considered debts owed by the banks to the petitioner, the receiver is empowered to
recover them even without petitioner’s express or written consent.

ISSUE Whether or not the petitioner is bound by the provision in the BPI-TIDCORP Joint Motion to
Approve Agreement that petitioner shall waive its rights to confidentiality of its bank deposits under R.A.
No. 1405 and R.A. No. 8791.

RULING No. R.A. No. 1405 provides for exceptions when records of deposits may be disclosed. These are
under any of the following instances:

(a) upon written permission of the depositor

(b) in cases of impeachment

(c) upon order of a competent court in the case of bribery or dereliction of duty of public officials or
(d) when the money deposited or invested is the subject matter of the litigation, and

(e) in cases of violation of the Anti-Money Laundering Act, the Anti-Money Laundering Council may
inquire into a bank account upon order of any competent court.

In this case, the Joint Motion to Approve Agreement was executed by BPI and TIDCORP only. There was
no written consent given by petitioner or its representative, Epifanio Ramos, Jr., that petitioner is
waiving the confidentiality of its bank deposits. The provision on the waiver of the confidentiality of
petitioner’s bank deposits was merely inserted in the agreement. It is clear therefore that petitioner is
not bound by the said provision since it was without the express consent of petitioner who was not a
party and signatory to the said agreement.

In addition, considering that petitioner was already declared insolvent by the RTC, all its property, assets
and belongings were ordered delivered to the appointed receiver or assignee. Thus, in the order of the
RTC appointing Atty. Gonzales as receiver, petitioner was directed to assign and convey to Atty. Gonzales
all its real and personal property, monies, estate and effects with all the deeds, books and papers
relating thereto, pursuant to Section 32 of the Insolvency Law. Such assignment shall operate to vest in
the assignee all of the estate of the insolvent debtor not exempt by law from execution. Corollarily, the
stipulation in the Joint Motion to Approve Compromise Agreement that petitioner waives its right to
confidentiality of its bank deposits requires the approval and conformity of Atty. Gonzales as receiver
since all the property, money, estate and effects of petitioner have been assigned and conveyed to her
and she has the right to recover all the estate, assets, debts and claims belonging to or due to the
insolvent debtor. the waiver of confidentiality of petitioner’s bank deposits in the BPI-TIDCORP Joint
Motion to Approve Agreement lacks the required written consent of petitioner and conformity of the
receiver. The Court holds that petitioner is not bound by the said provision.
LOURDES DE LA RAMA vs. AUGUSTO R. VILLAROSA, ET AL., and LUZON SURETY COMPANY, INC.

G.R. No. L-17927, EN BANC, June 29, 1963, Labrador, J.

The mere garnishment of funds belonging to the party upon order of the court does not have the effect
of delivering the money garnished to the sheriff or to the party in whose favor the attachment is issued.
The fund is retained by the garnishee or the person holding the money for the defendant.

The garnishee, or one in whose hands property is attached or garnished, is universally regarded as
charged with its legal custody pending the outcome of the attachment of garnishment, unless, by local
statute and practice, he is permitted to surrender or pay the garnished property or funds into court, to
the attaching officer, or to a receiver or trustee appointed to receive them

FACTS Plaintiff lessor Lourdes de la Rama brought an action against defendant lessee Augusto R.
Villarosa and the latter's surety, the Luzon Surety Co., Inc. for judicial confirmation of the cancellation,
rescission and annulment of a contract of lease of sugarland. The court rendered a partial summary
judgment in favor of the de la Rama and ordering Villarosa to surrender and deliver to plaintiff or her
representatives the possession of the leased premises.

The lower court issued an order for the immediate execution of the above judgment; and, upon motion
of de la Rama, issued in order for the issuance of a third alias writ of execution directing the sheriff of
Manila to satisfy the judgment. Accordingly, the sheriff of Manila garnished the deposit of Villarosa with
the Philippine Trust Co. (PTC) to the amount of P71,533.99. and required the latter not to deliver,
transfer or otherwise dispose of the said amount belonging to the defendant, to any person except to
the sheriff, or suffer the penalties prescribed by law. PTC, complying with such notice, set aside the
amount of P71,533.99 out of the deposit of Luzon Surety in its possession for the benefit of the sheriff of
Manila and the plaintiff.

The garnishee, the PTC, refused to deliver to the sheriff of Manila, the amount garnished by the latter to
satisfy the writ of execution, so the lower court ordered said company to pay the sheriff out of the
deposit of the Luzon Surety Co., Inc. the amount stated in the amended garnishment. Before the order
could be complied with by the garnishee, the Luzon Surety Co. filed a petition for certiorari with
preliminary injunction with the CA. So the garnishee did not deliver to the sheriff of Manila any portion
of the amount garnished and de la Rama never received any amount either in full or partial satisfaction
of the original judgment of the trial court then under execution. The CA ruled in favor of de la Rama
ordering Luzon Surety to pay a sum of money solidarily with Villarosa, to de la Rama.

ISSUE Whether or not the amount garnished should be awarded to defendant-appellant

RULING No. In the first place, the amount garnished was not actually taken possession of by the sheriff,
even from the time of the garnishment, because upon the perfection of Luzon Surety's appeal to the CA,
this Court issued an injunction prohibiting execution of the judgment. De la Rama was, therefore, able to
secure a full satisfaction of the judgment only upon final judgment of the Court. The total sum garnished
was not delivered to the sheriff in execution, because the order for the execution of the judgment of the
lower court was suspended in time by the appeal and the preliminary injunction issue on appeal.

In the second place, the mere garnishment of funds belonging to the party upon order of the court does
not have the effect of delivering the money garnished to the sheriff or to the party in whose favor the
attachment is issued. The fund is retained by the garnishee or the person holding the money for the
defendant.

The garnishee, or one in whose hands property is attached or garnished, is universally regarded as
charged with its legal custody pending the outcome of the attachment of garnishment, unless, by local
statute and practice, he is permitted to surrender or pay the garnished property or funds into court, to
the attaching officer, or to a receiver or trustee appointed to receive them. (5 Am. Jur. 14)

The effect of the garnishment, therefore, was to require the PTC, to set aside said amount from the
funds of the Luzon Surety and keep the same subject to the final orders of the Court. In the case at bar
there was never in order to deliver the full amount garnished to de la Rama; all that was ordered to be
delivered after the judgment had become final was the amount found by the Court of Appeals to be due.
The balance of the amount garnished, therefore, remained all the time in the possession of the bank as
part of the funds of the Luzon Surety, although the same could not be disposed of by the owner.

In the third place, the motion by Luzon Surety for the payment of damages or interest was presented
when the judgment had already become final. Damages incident to the issuance of an attachment may
only be claimed before final judgment. Luzon Surety's own record on appeal shows that the decision of
the CA had already become final and executory time of the perfection of the appeal to this Court. A last
reason is the absence of any allegation to the effect that the garnishment of appellant's funds in PTC
caused actual damages to Luzon Surety
PHILIPPINE COMMERCIAL & INDUSTRIAL BANK and JOSE HENARES, petitioners, vs. THE HON. COURT OF
APPEALS and MARINDUQUE MINING AND INDUSTRIAL CORPORATION, respondents.

G.R. No. 84526, SECOND DIVISION, January 28, 1991, SARMIENTO, J

Since there is no evidence that the petitioners themselves divulged the information that the private
respondent had an account with the petitioner bank and it is undisputed that the said account was
properly the object of the notice of garnishment and writ of execution carried out by the deputy sheriff,
a duly authorized officer of the court, we can not therefore hold the petitioners liable under R.A. 1405.

The petitioners are therefore absolved from any liability for the disclosure and release of the private
respondent's deposit to the custody of the deputy sheriff in satisfaction of the final judgment for the
laborers'backwages.

FACTS The instant case originated from an action filed with the National Labor Relations Commission
(NLRC) by a group of laborers who obtained therefrom a favorable judgment for the payment of
backwages amounting to P205,853.00 against the private respondent

The Commission issued a writ of execution directing the Deputy Sheriff of Negros Occidental, one
Damian Rojas, to enforce the aforementioned judgment.

Accordingly, the aforenamed deputy sheriff went to the mining site of the private respondent and
served the writ of execution on the persons concerned, but nothing seemed to have happened thereat.

Thereafter, the Sheriff prepared on his own a Notice of Garnishment addressed to six (6) banks, all
located in Bacolod City, one of which being the petitioner herein, directing the bank concerned to
immediately issue a check in the name of the Deputy Provincial Sheriff of Negros Occidental in an
amount equivalent to the amount of the garnishment and that proper receipt would be issued therefor.

The deputy sheriff presented the Notice of Garnishment and the Writ of Execution attached therewith to
the petitioner Henares and demanded from the latter, under pain of contempt, the release of the
deposit of the private respondent.

Petitioner Henares, upon knowing from the Acting Provincial Sheriff that there was no restraining order
from the National Labor Relations Commission and on the favorable advice of the bank's legal counsel,
issued a debit memo for the full balance of the private respondent's account with the petitioner bank.
Thereafter, he issued a manager's check in the name of the Deputy Provincial Sheriff of Negros
Occidental.

On the following day, the deputy sheriff returned to the bank in order to encash the check but before
the actual encashment, the petitioner Henares once again inquired about any existing restraining order
from the NLRC and upon being told that there was none, the latter allowed the said encashment.

The private respondent filed a complaint before the Regional Trial Court of Manila against the
petitioners and Damian Rojas, the Deputy Provincial Sheriff of Negros Occidental, then defendants,
alleging that the former's current deposit with the petitioner bank was levied upon, garnished, and with
undue haste unlawfully allowed to be withdrawn, and notwithstanding the alleged unauthorized
disclosure of the said current deposit and unlawful release thereof, the latter have failed and refused to
restore the amount of P37,466.18 to the former's account despite repeated demands.

The trial court rendered its judgment in favor of the private respondent. On appeal, the respondent
court in a decision dated February 26, 1988, first reversed the said judgment of the lower court, but
however, on the motion for reconsideration filed by the private respondent, subsequently annulled and
set aside its said decision in the resolution dated June 27, 1988. On August 3, 1988, the respondent
court denied the petitioner's own motion for reconsideration. Hence, this petition.

ISSUE Whether or not petitioners violated Republic Act No. 1405, otherwise known as the Secrecy of
Bank Deposits Act, when they allowed the sheriff to garnish the deposit of private respondent.
RULING NO. Since there is no evidence that the petitioners themselves divulged the information that the
private respondent had an account with the petitioner bank and it is undisputed that the said account
was properly the object of the notice of garnishment and writ of execution carried out by the deputy
sheriff, a duly authorized officer of the court, we can not therefore hold the petitioners liable under R.A.
1405.

While the general rule is that the findings of fact of the appellate court are binding on this Court, the
said rule however admits of exceptions, such as when the Court of Appeals clearly misconstrued and
misapplied the law, drawn from the incorrect conclusions of fact established by evidence and otherwise
at certain conclusions which are based on misapprehension of facts, as in the case at bar. The
petitioners are therefore absolved from any liability for the disclosure and release of the private
respondent's deposit to the custody of the deputy sheriff in satisfaction of the final judgment for the
laborers'backwages.
KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr., father and Natural Guardian, and Spouses
FEDERICO N. SALVACION, JR., and EVELINA E. SALVACION, petitioners, vs. CENTRAL BANK OF THE
PHILIPPINES, CHINA BANKING CORPORATION and GREG BARTELLI y NORTHCOTT, respondents.

G.R. No. 94723, EN BANC, August 21, 1997, Justice Torres, Jr

Obviously, the foreign currency deposit made by a transient or a tourist is not the kind of deposit
encourage by PD Nos. 1034 and 1035 and given incentives and protection by said laws because such
depositor stays only for a few days in the country and, therefore, will maintain his deposit in the bank
only for a short time

Respondent Greg Bartelli, as stated, is just a tourist or a transient. He deposited his dollars with
respondent China Banking Corporation only for safekeeping during his temporary stay in the Philippines

For the reasons stated above, the Solicitor General thus submits that the dollar deposit of respondent
Greg Bartelli is not entitled to the protection of Section 113 of Central Bank Circular No. 960 and PD No.
1246 against attachment, garnishment or other court processes.

FACTS Greg Bartelli y Northcott, an American tourist, coaxed and lured petitioner Karen Salvacion, then
12 years old to go with him to his apartment. Therein, Greg Bartelli detained Karen Salvacion for four
days, and was able to rape the child once on February 4, and three times each day on February 5, 6, and
7, 1989. On February 7, 1989, after policemen and people living nearby, rescued Karen, Greg Bartelli was
arrested and detained at the Makati Municipal Jail. The policemen recovered from Bartelli the following
items: 1.) Dollar Check No. 368, Control No. 021000678-1166111303, US 3,903.20; 2.) COCOBANK Bank
Book No. 104-108758-8 (Peso Acct.); 3.) Dollar Account China Banking Corp., US $/A#54105028-2; 4.) ID-
122-30-8877; 5.) Philippine Money (P234.00) cash; 6.) Door Keys 6 pieces; 7.) Stuffed Doll (Teddy Bear)
used in seducing the complainant.

Makati Investigating Fiscal filed against Greg Bartelli, criminal cases for Serious Illegal Detention and for
four (4) counts of Rape. On the same day, petitioners filed with the Regional Trial Court of Makati civil
case for damages with preliminary attachment against Greg Bartelli. On February 24, 1989, the day
there was a scheduled hearing for Bartellis petition for bail the latter escaped from jail.

The court granted the fiscals Urgent Ex-Parte Motion for the Issuance of Warrant of Arrest and Hold
Departure Order. Pending the arrest of the accused Greg Bartelli y Northcott, the criminal cases were
archived in an Order.

Petitioners aver that Section 113 of Central Bank Circular No. 960 providing that Foreign currency
deposits shall be exempt from attachment, garnishment, or any other order or process of any court,
legislative body, government agency or any administrative body whatsoever should be unconstitutional
on the grounds that:

1. It has taken away the right of petitioners to have the bank deposit of defendant Greg Bartelli y
Northcott garnished to satisfy the judgment rendered in petitioners favor in violation of substantive due
process guaranteed by the Constitution;

2. It has given foreign currency depositors an undue favor or a class privilege in violation of the equal
protection clause of the Constitution;

3. It has provided a safe haven for criminals like the herein respondent Greg Bartelli y Northcott since
criminal could escape civil liability for their wrongful acts by merely converting their money to a foreign
currency and depositing it in a foreign currency deposit account with an authorized bank; and

4. The Monetary Board, in issuing Section 113 of Central Bank Circular No. 960 has exceeded its
delegated quasi- legislative power when it took away:
 a.) The plaintiffs substantive right to have the claim sought to be enforced by the civil action
secured by way of the writ of preliminary attachment as granted by Rule 57 of the Revised Rules of
Court;

b.) The plaintiffs substantive right to have the judgment credit satisfied by way of the writ of
execution out of the bank deposit of the judgment debtor as granted to the judgment creditor by Rule
39 of the Revised Rules of Court, which is beyond its power to do so.

On the other hand, respondent Central Bank alleges that the Monetary Board in issuing Section 113 of
CB Circular No. 960 did not exceed its power or authority because the subject Section is copied verbatim
from a portion of R.A. No. 6426 as amended by P.D. 1246. Hence, it was not the Monetary Board that
grants exemption from attachment or garnishment to foreign currency deposits, but the law (R.A. 6426
as amended) itself; that it does not violate the substantive due process guaranteed by the Constitution
because a.) it was based on a law; b.) the law seems to be reasonable; c.) it is enforced according to
regular methods of procedure; and d.) it applies to all members of a class.

Expanding, the Central Bank said; that one reason for exempting the foreign currency deposits from
attachment, garnishment or any other order process of any court, is to assure the development and
speedy growth of the Foreign Currency Deposit System and the Offshore Banking System in the
Philippines; that another reason is to encourage the inflow of foreign currency deposits into the banking
institutions thereby placing such institutions more in a position to properly channel the same to loans
and investments in the Philippines, thus directly contributing to the economic development of the
country; that the subject section is being enforced according to the regular methods of procedure; and
that it applies to all currency deposits made by any person and therefore does not violate the equal
protection clause of the Constitution.

Respondent Central Bank further avers that the questioned provision is needed to promote the public
interest and the general welfare; that the State cannot just stand idly by while a considerable segment
of the society suffers from economic distress; that the State had to take some measures to encourage
economic development; and that in so doing persons and property may be subjected to some kinds of
restraints or burdens to secure the general welfare or public interest. Respondent Central Bank also
alleges that Rule 39 and Rule 57 of the Revised Rules of Court provide that some properties are
exempted from execution/attachment especially provided by law and R.A. No. 6426 as amended is such
a law, in that it specifically provides, among others, that foreign currency deposits shall be exempted
from attachment, garnishment, or any other order or process of any court, legislative body, government
agency or any administrative body whatsoever.

Respondent China Bank is not unmindful of the inhuman sufferings experienced by the minor Karen E.
Salvacion from the beastly hands of Greg Bartelli; that it is not only too willing to release the dollar
deposit of Bartelli which may perhaps partly mitigate the sufferings petitioner has undergone; but it is
restrained from doing so in view of R.A. No. 6426 and Section 113 of Central Bank Circular No. 960; and
that despite the harsh effect to these laws on petitioners, CBC has no other alternative but to follow the
same.

In the Civil Case, the Judge issued an Order granting the application of herein petitioners, for the
issuance of the writ of preliminary attachment. After petitioners gave a bond by FGU Insurance
Corporation in the amount P100,000.00, a Writ of Preliminary Attachment was issued by the trial court
on February 28, 1989.

The Deputy Sheriff of Makati served a Notice of Garnishment on China Banking Corporation. In a letter
to the Deputy Sheriff of Makati, China Banking Corporation invoked Republic Act No. 1405 as its answer
to the notice of garnishment served on it. Deputy Sheriff of Makati Armando de Guzman sent his reply
to China Banking Corporation saying that the garnishment did not violate the secrecy of bank deposits
since the disclosure is merely incidental to a garnishment properly and legally made by virtue of a court
order which has placed the subject deposits in custodia legis. In answer to this letter of the Deputy
Sheriff of Makati, China Banking Corporation invoked Section 113 of Central Bank Circular No. 960 to the
effect that the dollar deposits of defendant Greg Bartelli are exempt from attachment, garnishment, or
any other order or process of any court, legislative body, government agency or any administrative
body, whatsoever.

This prompted the counsel for petitioners to make an inquiry with the Central Bank on whether Section
113 of CB Circular No. 960 has any exception or whether said section has been repealed or amended
since said section has rendered nugatory the substantive right of the plaintiff to have the claim sought to
be enforced by the civil action secured by way of the writ of preliminary attachment as granted to the
plaintiff under Rule 57 of the Revised Rules of Court. The Central Bank responded:

“The cited provision is absolute in application. It does not admit of any exception, nor has the
same been repealed nor amended. The purpose of the law is to encourage dollar accounts
within the countrys banking system which would help in the development of the economy.
There is no intention to render futile the basic rights of a person as was suggested in your
subject letter. The law may be harsh as some perceive it, but it is still the law. Compliance is,
therefore, enjoined.”

The trial court granted petitioners motion for leave to serve summons by publication in the Civil Case
entitled Karen Salvacion. et al. vs. Greg Bartelli y Northcott. Summons with the complaint was published
in the Manila Times once a week for three consecutive weeks. Greg Bartelli failed to file his answer to
the complaint and was declared in default. After hearing the case ex-parte, the court rendered judgment
in favor of petitioners.

Pursuant to an Order granting leave to publish notice of decision, said notice was published in the
Manila Bulletin once a week for three consecutive weeks. After the lapse of fifteen (15) days from the
date of the last publication of the notice of judgment and the decision of the trial court had become
final, petitioners tried to execute on Bartellis dollar deposit with China Banking Corporation. Likewise,
the bank invoked Section 113 of Central Bank Circular No. 960.

Thus, petitioners decided to seek relief from this Court.

ISSUES (1) Whether or not the Court may entertain the instant petition despite the fact that original
jurisdiction in petitions for declaratory relief rests with the lower court

(2) Whether or not Section 113 of Central Bank Circular No. 960 and Section 8 of R.A. 6426, as amended
by P.D. 1246, otherwise known as the Foreign Currency Deposit Act be made applicable to a foreign
transient

RULING 1. YES. The Court has no original and exclusive jurisdiction over a petition for declaratory relief.
However, exceptions to this rule have been recognized. Thus, where the petition has farreaching
implications and raises questions that should be resolved, it may be treated as one for mandamus.

It is worth mentioning that R.A. No. 6426 was enacted in 1983 or at a time when the country’s economy
was in a shambles; when foreign investments were minimal and presumably, this was the reason why
said statute was enacted. But the realities of the present times show that the country has recovered
economically; and even if not, the questioned law still denies those entitled to due process of law for
being unreasonable and oppressive. The intention of the questioned law may be good when enacted.
The law failed to anticipate the inquitous effects producing outright injustice and inequality such as as
the case before us.
The Solicitor General correctly opined, thus: "The present petition has far-reaching implications on the
right of a national to obtain redress for a wrong committed by an alien who takes refuge under a law
and regulation promulgated for a purpose which does not contemplate the application thereof
envisaged by the allien. More specifically, the petition raises the question whether the protection
against attachment, garnishment or other court process accorded to foreign currency deposits PD No.
1246 and CB Circular No. 960 applies when the deposit does not come from a lender or investor but
from a mere transient who is not expected to maintain the deposit in the bank for long

2. NO. It is evident that the Offshore Banking System and the Foreign Currency Deposit System were
designed to draw deposits from foreign lenders and investors It is these depositors that are induced by
the two laws and given protection and incentives by them.

Obviously, the foreign currency deposit made by a transient or a tourist is not the kind of deposit
encourage by PD Nos. 1034 and 1035 and given incentives and protection by said laws because such
depositor stays only for a few days in the country and, therefore, will maintain his deposit in the bank
only for a short time.

Respondent Greg Bartelli, as stated, is just a tourist or a transient. He deposited his dollars with
respondent China Banking Corporation only for safekeeping during his temporary stay in the Philippines.

For the reasons stated above, the Solicitor General thus submits that the dollar deposit of respondent
Greg Bartelli is not entitled to the protection of Section 113 of Central Bank Circular No. 960 and PD No.
1246 against attachment, garnishment or other court processes.

In fine, the application of the law depends on the extent of its justice. Eventually, if we rule that the
questioned Section 113 of Central Bank Circular No. 960 which exempts from attachment, garnishment,
or any other order or process of any court. Legislative body, government agency or any administrative
body whatsoever, is applicable to a foreign transient, injustice would result especially to a citizen
aggrieved by a foreign guest like accused Greg Bartelli. This would negate Article 10 of the New Civil
Code which provides that in case of doubt in the interpretation or application of laws, it is presumed
that the lawmaking body intended right and justice to prevail. When the statute is silent or ambiguous,
this is one of those fundamental solutions that would respond to the vehement urge of conscience.
(Padilla vs. Padilla, 74 Phil. 377)

It would be unthinkable, that the questioned Section 113 of Central Bank No. 960 would be used as a
device by accused Greg Bartelli for wrongdoing, and in so doing, acquitting the guilty at the expense of
the innocent.
GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner, vs. THE HONORABLE 15TH DIVISION OF THE
COURT OF APPEALS and INDUSTRIAL BANK OF KOREA, TONG YANG MERCHANT BANK, HANAREUM
BANKING CORP., LAND BANK OF THE PHILIPPINES, WESTMONT BANK and DOMSAT HOLDINGS, INC.,
respondents.

G.R. No. 189206, FIRST DIVISION, June 8, 2011, PEREZ, J

The lone exception to the non-disclosure of foreign currency deposits, under Republic Act No. 6426, is
disclosure upon the written permission of the depositor.

Applying Section 8 of Republic Act No. 6426, absent the written permission from Domsat, Westmont
Bank cannot be legally compelled to disclose the bank deposits of Domsat, otherwise, it might expose
itself to criminal liability under the same act.

FACTS Domsat Holdings, Inc. (Domsat) obtained a loan from $11 Million to Domsat for the purpose of
financing the lease and/or purchase of a Gorizon Satellite from the International Organization of Space
Communications (Intersputnik) from Industrial Bank of Korea, Tong Yang Merchant Bank, First Merchant
Banking Corporation, Land Bank of the Philippines, and Westmont Bank (now United Overseas Bank),
collectively known as the Banks. In line with this, Domsat obtained a surety bond from GSIS to secure
the payment of the loan from the Banks.

When Domsat failed to pay the loan, GSIS refused to comply with its obligation reasoning that Domsat
did not use the loan proceeds for the payment of rental for the satellite. GSIS alleged that Domsat, with
Westmont Bank as the conduit, transferred the U.S. $11 Million loan proceeds from the Industrial Bank
of Korea to Citibank New York account of Westmont Bank and from there to the Binondo Branch of
Westmont Bank. The Banks filed a complaint before the RTC of Makati against Domsat and GSIS.

In the course of the hearing, GSIS requested for the issuance of a subpoena ducestecum to the
custodian of records of Westmont Bank to produce among others the ledger covering the account of
DOMSAT Holdings, Inc. with Westmont Bank and all documents, records, files, books, deeds, papers,
notes and other data and materials relating to the account.

The RTC issued a subpoena decustecum . The Banks and Domsat filed a motion to quash on three
grounds: 1) the subpoena is unreasonable, oppressive and does not establish the relevance of the
documents sought; 2) request for the documents will violate the Law on Secrecy of Bank Deposits; and
3) GSIS failed to advance the reasonable cost of production of the documents.

RTC issued an Order denying the motion to quash for lack of merit. however, the trial court granted the
second motion for reconsideration filed by the banks. The previous subpoenas issued were
consequently quashed. The trial court invoked the ruling in Intengan v. Court of Appeals, where it was
ruled that foreign currency deposits are absolutely confidential and may be examined only when there is
a written permission from the depositor. The motion for reconsideration filed by GSIS was denied . On
appeal, the Court of Appeals declared that Domsats deposit in Westmont Bank is covered by Republic
Act No. 6426 or the Bank Secrecy Law.

Before the Supreme Court, GSIS insisted that Domsat’s deposit with Westmont Bank can be examined
and inquired into. It anchored its argument on Republic Act No. 1405 or the Law on Secrecy of Bank
Deposits, which allows the disclosure of bank deposits in cases where the money deposited is the
subject matter of the litigation. GSIS asserted that the subject matter of the litigation is the U.S. $11
Million obtained by Domsat from the Banks to supposedly finance the lease of a Russian satellite from
Intersputnik.
Also, GSIS assailed the acceptance by the trial court of the second motion for reconsideration filed by
the banks on the grounds that it is pro forma and did not conform to the notice requirements of Section
4, Rule 15 of the Rules of Civil Procedure.

Upon the other hand, the Banks maintained that Republic Act No. 1405 is not the applicable law in the
instant case because the Domsat deposit is a foreign currency deposit, thus covered by Republic Act No.
6426. Under said law, only the consent of the depositor shall serve as the exception for the disclosure of
his/her deposit.

ISSUES 1. WON the acted with grave abuse of discretion when it favorably considered respondent banks
(second) Motion for Reconsideration dated July 9, 2003 despite the fact that it did not contain a notice
of hearing and was therefore a mere scrap of paper?

2. WON the respondent judge capriciously and arbitrarily ignored Section 2 of the Foreign Currency
Deposit Act (RA 6426) in ruling in his Orders dated September 1 and December 30, 2003 that the
US$11,000,000.00 deposit in the account of respondent Domsat in Westmont Bank is covered by the
secrecy of bank deposit?

3. WON the disclosure of respondent banks and respondent Domsat of the US$11,000,000.00 deposit
during the trial made the said deposits non-confidential?

RULING 1. No. The judge may, in the exercise of his sound discretion, grant the second motion for
reconsideration despite its being pro forma. The appellate court correctly relied on precedents where
this Court set aside technicality in favor of substantive justice. Furthermore, the appellate court
accurately pointed out that petitioner did not assail the defect of lack of notice in its opposition to the
second motion of reconsideration. Thus, it can be considered a waiver of the defect.

2. No. Republic Act No. 1405 provides for four (4) exceptions when records of deposits may be disclosed.
These are under any of the following instances: a) upon written permission of the depositor, (b) in cases
of impeachment, (c) upon order of a competent court in the case of bribery or dereliction of duty of
public officials or, (d) when the money deposited or invested is the subject matter of the litigation, and
e) in cases of violation of the Anti-Money Laundering Act (AMLA), the Anti-Money Laundering Council
(AMLC) may inquire into a bank account upon order of any competent court. On the other hand, the
lone exception to the non-disclosure of foreign currency deposits, under Republic Act No. 6426, is
disclosure upon the written permission of the depositor.

These two laws both support the confidentiality of bank deposits. There is no conflict between them.
Republic Act No. 1405 was enacted for the purpose of giving encouragement to the people to deposit
their money in banking institutions and to discourage private hoarding so that the same may be properly
utilized by banks in authorized loans to assist in the economic development of the country. It covers all
bank deposits in the Philippines and no distinction was made between domestic and foreign deposits.
Thus, Republic Act No. 1405 is considered a law of general application.

On the other hand, Republic Act No. 6426 was intended to encourage deposits from foreign lenders and
investors. It is a special law designed especially for foreign currency deposits in the Philippines. A general
law does not nullify a specific or special law. Generaliaspecialibus non derogant. Therefore, it is beyond
cavil that Republic Act No. 6426 applies in this case.

Applying Section 8 of Republic Act No. 6426, absent the written permission from Domsat, Westmont
Bank cannot be legally compelled to disclose the bank deposits of Domsat, otherwise, it might expose
itself to criminal liability under the same act.

3. No. The testimony of the incumbent president of Westmont Bank is not the written consent
contemplated by Republic Act No. 6426.