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The New Central Bank Act

Responsibility and Primary Objective

DAMASO PEREZ and REPUBLIC BANK, etc. et al. v. MONETARY BOARD, THE SUPERINTENDENT OF
BANKS, CENTRAL BANK OF THE PHILIPPINES and SECRETARY OF JUSTICE et al.
G.R. No. L-23307, 30 June 1967, J. J.P. Bengzon

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. There is nothing
in said laws that impose a clear, specific duty on the former to do the actual prosecution of the latter.

Facts:

Damaso Perez, for himself and in a derivative capacity on behalf of the Republic Bank, instituted
mandamus proceedings compelling respondents to prosecute certain 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. Respondents assailed the propriety of the 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 the said cases.

Issue:

Whether or not the mandamus proceeding was proper.

Ruling:

NO, petitioners cannot seek by mandamus to compel respondents to prosecute criminally those
alleged violators of the banking laws. Although the Central Bank and its respondent officials may have the duty
under the Central Bank Act and the General Banking Act to cause the prosecution of those alleged violators, yet
the Court finds nothing in said laws that impose 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.

The Central Bank and its respondent officials have already done all they could, within the confines of
their powers, to cause the prosecution of those persons denounced by Perez. The cases of the alleged
anomalous loans had already been referred by the Central Bank to the special prosecutors of the Department
of Justice for criminal investigation and prosecution. For respondents to do the actual prosecuting themselves,
as petitioners would have it, would be tantamount to an ultra vires act already.
______________________________________________________________________________________________________________________________

ROMEO P. BUSUEGO, CATALINO F. BANEZ, and RENATO LIM v. THE HONORABLE COURT OF APPEALS
and THE MONETARY BOARD OF THE CENTRAL BANK OF THE PHILIPPINES
G.R. No. 95326, 11 March 1999, J. Purisima

The Central Bank, through the Monetary Board, is empowered to conduct investigations and examine the
records of savings and loan associations. If any irregularity is discovered in the process, the Monetary Board may
impose appropriate sanctions.

Facts:
The Central Bank examiners, in conducting their 16 th regular examination of the books and records of
PAL Employees Savings and Loan Association, Inc. (PESALA), discovered several anomalies and irregularities
committed by petitioners who are PESALA’s directors and officers. The Monetary Board then adopted and
issued MB Resolution No. 805 which among others provide the following: (1) inclusion of petitioners’ names
in the Sector’s watchlist to prevent them from holding responsible positions in any institutions under Central
Bank supervision; (2) to require the board of directors of PESALA to file civil and criminal cases against
petitioners for all the misfeasance and malfeasance committed by them, as warranted by the evidence.
Thereafter, the petitioners filed and was issued a TRO enjoining the Monetary Board from including petitioners’
names in the watchlist.

Issue:

Whether or not Monetary Board Resolution No. 805 is null and void for being violative of petitioners'
rights to due process.

Ruling:

NO. the Central Bank of the. Philippines (now BangkoSentral ng Pilipinas), through the Monetary
Board, 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. The Central Bank, through the Monetary Board, is empowered to conduct investigations
and examine the records of savings and loan associations. If any irregularity is discovered in the process, the
Monetary Board may impose appropriate sanctions, such as suspending the offender from holding office or
from being employed with the Central Bank, or placing the names of the offenders in a watchlist.

The requirement of prior notice is also relaxed under Section 28 (c) of RA 3779 as investigations or
examinations may be conducted with or without prior notice "but always with fairness and reasonable
opportunity for the association or any of its officials to give their side." As may be gathered from the records,
the said requirement was properly complied with by the respondent Monetary Board.
______________________________________________________________________________________________________________________________

ANA MARIA A. KORUGA v. TEODORO O. ARCENAS, JR., ALBERT C. AGUIRRE, CESAR S. PAGUIO,
FRANCISCO A. RIVERA and THE HONORABLE COURT OF APPEALS, THIRD DIVISION
G.R. Nos. 168332, 19 June 2009, J. Nachura

It is the BSP which is authorized to administer the monetary, banking, and credit system of the Philippines.
It is further authorized to take the necessary steps against any banking institution if its continued operation would
cause prejudice to its depositors, creditors and the general public as well.

Facts:

Ana Maria Koruga, a minority stockholder of Banco Filipino Savings and Mortgage Bank, filed a
complaint charging private respondents with violation of Sections 31 to 34 of the Corporation Code, prohibiting
self-dealing and conflict of interest of directors and officers. She also invoked her right to inspect the
corporations records and prayed for Receivership and Creation of a Management Committee, pursuant to Rule
59 of the Rules of Civil Procedure, the Securities Regulation Code, the Interim Rules of Procedure Governing
Intra-Corporate Controversies, the General Banking Law of 2000, and the New Central Bank Act. She accused
the directors and officers of Banco Filipino of engaging in unsafe, unsound, and fraudulent banking practices,
more particularly, acts that violate the prohibition on self-dealing. The respondents filed their answer raising,
among others, the trial courts lack of jurisdiction to take cognizance of the case.

Issue:
Whether or not Koruga’s complaint is within the jurisdiction of the RTC.

Ruling:

NO, it is the BSP that has jurisdiction over the case. It is clear that the acts complained of pertain
to the conduct of Banco Filipinos banking business. A bank, as defined in the General Banking Law, refers to an
entity engaged in the lending of funds obtained in the form of deposits. 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. Banks are affected with public interest because they receive
funds from the general public in the form of deposits. It is the 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. In this country, that task is delegated to the BSP, which pursuant to its Charter, is authorized to
administer the monetary, banking, and credit system of the Philippines. It is further authorized to take the
necessary steps against any banking institution if its continued operation would cause prejudice to its
depositors, creditors and the general public as well.

The law vests in the BSP the supervision over operations and activities of banks, as provided under
Section 25 of the New Central Bank Act.Furthermore, the authority to determine whether a bank is conducting
business in an unsafe or unsound manner is also vested in the Monetary Board pursuant to Section 56 of
the General Banking Law of 2000.

Monetary Board Powers and Functions

ANA MARIA A. KORUGA v. TEODORO O. ARCENAS, JR., ALBERT C. AGUIRRE, CESAR S. PAGUIO,
FRANCISCO A. RIVERA, and THE HONORABLE COURT OF APPEALS, THIRD DIVISION
G.R. No. 168332 and G.R. No. 169053, June 19, 2009, NACHURA, J.

The Central Monetary Authority, through the Monetary Board, is vested with exclusive authority to assess,
evaluate and determine the condition of any bank, and finding such condition to be one of insolvency, or that its
continuance in business would involve a probable loss to its depositors or creditors, forbid bank or non-bank
financial institution to do business in the Philippines; and shall designate an official of the BSP or other competent
person as receiver to immediately take charge of its assets and liabilities.

Facts:

Petitioner Ana Maria Koruga is a minority stockholder of Banco Filipino Savings and Mortgage Bank.
She accused the directors and officers of Banco Filipino of engaging in unsafe, unsound, and fraudulent banking
practices, more particularly, acts that violate the prohibition on self-dealing. With that, she filed a complaint
before the RTC against the Board of Directors of Banco Filipinoand praying therein for Receivership and
Creation of a Management Committee.

The respondent Directors argued that the case falls under the jurisdiction of the BSP and hence they
prayed for the dismissal of the case.The RTC ruled in favor of the Koruga but it was reversed by the CA. Hence,
this petition.

Issue:

Whether the court has jurisdiction over the case.

Ruling:

NO. The Central Monetary Authority, through the Monetary Board, is vested with exclusive authority
to assess, evaluate and determine the condition of any bank, and finding such condition to be one of insolvency,
or that its continuance in business would involve a probable loss to its depositors or creditors, forbid bank or
non-bank financial institution to do business in the Philippines; and shall designate an official of the BSP or
other competent person as receiver to immediately take charge of its assets and liabilities.

This case involves not just ordinary intra-corporate matters; rather, they involve banking activities
which are, by law, regulated and supervised by the BSP. Hence, the court has no jurisdiction over the case.
______________________________________________________________________________________________________________________________

BANGKO SENTRAL NG PILIPINAS MONETARY BOARD and CHUCHI FONACIER v.


HON. NINA G. ANTONIO-VALENZUELA, in her capacity as Regional Trial Court Judge of Manila, Branch
28; RURAL BANK OF PARAÑAQUE, INC. et al.
G.R. No. 184778, October 2, 2009, VELASCO, JR., J.

Sec. 28 of RA 7653, or the New Central Bank Act, which governs examinations of banking institutions,
provides that the Report on Examination shall be submitted to the MB; the bank examined is not mentioned as a
recipient of the Report on Examination. Therefore, the BSP is not required to give copies of the Report on
Examination to the bank examined.

Facts:

The Supervision and Examination Department of the BSP conducted examinations of the books of the
respondent banks and it found that these banks had deficiencies in their capital. The respondent banks on their
part filed before the RTC an action to nullify the Report on Examination and issuance of restraining order. They
contend that their right to due process was violated because they were not furnished with the said report. They
further that the sanction of closure that the MB might imposed upon the receipt of such Report will result in
irreparable damage to them as well as to the public.

The RTC ruled in favor of the respondent banksand this was affirmed by the CA.However, the SC issued
a restraining order on the RTC and CA decision. By reason of the such, the SED was able to submit their Report
on Examination to the Monetary Board. The MB then prohibited the respondent banks from transacting
business and placed them under receivership with the Philippine Deposit Insurance Corporation as the
appointed receiver. Hence, this petition.

Issue:

Whether the respondent banks were entitled to the copy of the Report on Examination made by the
BSP before its submission to the Monetary Board.

Ruling:

NO. There was no provision of law, no section in the procedures of the BSP that shows that the BSP is
required to give copies of the Report on Examination to banks. Sec. 28 of RA 7653, or the New Central Bank Act,
which governs examinations of banking institutions, provides that the Report on Examination shall be
submitted to the MB; the bank examined is not mentioned as a recipient of the Report on Examination.
Therefore, the respondent banks cannot claim a violation of their right to due process if they are not provided
with copies of the such report.

How BSP Handles Banks in Distress

Conservatorship

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 v. THE HONORABLE COURT OF APPEALS and SULPICIO M. TOLENTINO, G.R. No. L-45710,
October 3, 1985, MAKASIAR, CJ.
The mere pecuniary inability to fulfill an engagement does not discharge the obligation of the contract,
nor does it constitute any defense to a decree of specific performance. And, the mere fact of insolvency of a debtor
is never an excuse for the non-fulfillment of an obligation but 'instead it is taken as a breach of the contract by
him.

Facts:

Private respondent SulpicioTolentino obtained a loan with real estate mortgagee from Island Savings
Bank in the amount of P80,000. But only P17, 000 was released by the bank because there was no fund yet
available for the release of the P63,000.00 balance.Thereafter, the MB declared Island Bank insolvent and
wasprohibited from doing business in the Philippines.

However, Island Savings Bank, in view of non-payment of the P17,000, filed an application for the
extra-judicial foreclosure of the real estate mortgage, this was opposed by Tolentino it his petition before the
court. The court ruled in favor of the foreclosure, but this was reversed by the CA. Hence, this petition.

Issue:

Whether the insolvency of Island Bank is a valid reason to the non-fulfillment of its obligation.

Ruling:

NO. The mere pecuniary inability to fulfill an engagement does not discharge the obligation of the
contract, nor does it constitute any defense to a decree of specific performance. And, the mere fact of insolvency
of a debtor is never an excuse for the non-fulfillment of an obligation but 'instead it is taken as a breach of the
contract by him. Hence, the Board Resolution of MB to that effect cannot interrupt the default of Island Savings
Bank in complying with its obligation of releasing the P63,000.00 balance. More so that this Resolution merely
prohibited the Bank from making new loans and investments, and nowhere did it prohibit island Savings Bank
from releasing the balance of loan agreements previously contracted.
______________________________________________________________________________________________________________________________

CENTRAL BANK OF THE PHILIPPINES and HON. JOSE B. FERNANDEZ v. HON. COURT OF APPEALS, RTC
JUDGE TEOFILO GUADIZ, JR., PRODUCERS BANK OF THE PHILIPPINES and PRODUCERS PROPERTIES,
INC.
G.R. No. 88353 and G.R. No. 92943 May 8, 1992, DAVIDE, JR., J.

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.

Facts:

CB on the basis of the report submitted by the Supervision and Examination Sector of the CB, the
Monetary Board, placed PBP under conservatorship. The PBP in turnfiled a complaint with the RTC against the
CB asserting that the conservatorship was unwarranted, ill-motivated, illegal, utterly unnecessary and
unjustified; that the appointment of the conservator was arbitrary; that CB acted in bad faith; that the CB-
designated conservators committed bank frauds and abuses; that the CB is guilty of promissory estoppel; and
that by reason of the conservatorship, it suffered losses. The complaint prayed that the CB’s conservator be
ordered to restore the viability of PBP and to fully repair the damages inflicted on PBP.
The CB, however, contends that the complaint should be dismissed on the ground of lack of legal
personality on the part of the respondent bank to bring the action as the same was filed in the name of the PBP
without the authority of the conservator.

Issue:

Whether an approval from the CB is necessary for the bank to bring action before the court.

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.
______________________________________________________________________________________________________________________________

FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and
MERCURIO RIVERA v. COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIODEMETRIA,
and JOSE JANOLO
G.R. No. 115849, January 24, 1996, PANGANIBAN, J.

The powers of conservator of a bank cannot extend to the post-facto repudiation of perfected
transactions, otherwise they would infringe against the non-impairment clause of the Constitution and would
prejudice vested rights of third persons. Instead, the law merely gives the conservator power to revoke contracts
that are, under existing law, deemed to be defective - i.e., void, voidable, unenforceable or rescissible.

Facts:

In the course of its banking operations, Producer Bank of the Philippines acquired six parcels of land.
Demetrio, Demetria and Jose O. Janolo, wanted to purchase the property and thus initiated negotiations for that
purpose. The result of such negotiation was that, respondents Janolo accepted to purchase the property in the
amount offered of the bank. During the time of the negotiation and perfection of the contract of sale took place,
petitioner Bank was under a conservator. However, the said conservatorwas replaced by Acting Conservator
Leonida T. Encarnacion. Consequently, the bank informed respondents Janolo that their proposal to purchase
the property would be under the study of the newly designated Acting Conservator of the bank.
But the Janolosfiled a suit for specific performance with damages against the bank, its Manager Rivera
and Acting Conservator Encarnacion. The basis of the suit was that the transaction had with the bank resulted
in a perfected contract of sale. The respondent court ruled that there was already a perfected contract of sale
and that the designation of a new conservatorship would not revoke such contract.

Issue:

Whether or not the conservator have theunilateral power to revoke a perfected contract of sale.

Ruling:

NO. The powers of conservator of a bank cannot extend to the post-facto repudiation of perfected
transactions, otherwise they would infringe against the non-impairment clause of the Constitution. The law
merely gives the conservator power to revoke contracts that are, under existing law, deemed to be defective -
i.e., void, voidable, unenforceable or rescissible. Hence, the conservator merely takes the place of a banks board
of directors. What the said board cannot do - such as repudiating a contract validly entered into under the
doctrine of implied authority - the conservator cannot do either. Ineluctably, his power is not unilateral and he
cannot simply repudiate valid obligations of the Bank. His authority would be only to bring court actions to
assail such contracts.

To rule otherwise would be to enable a failing bank to become solvent, at the expense of third parties,
by simply getting the conservator to unilaterally revoke all previous dealings which had one way or another
come to be considered unfavorable to the Bank, yielding nothing to perfected contractual rights nor vested
interests of the third parties who had dealt with the Bank.

Closure

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 TEOFILOTANJUATCO v. CENTRAL BANK OF THE PHILIPPINES
G.R. No. L-29352, October 4, 1971, REYES, J.B.L., J.

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. In this case, the order of CB for liquidation and the suspension of OBM should be set aside
for having been adopted in abuse of discretion, equivalent to excess of jurisdiction.

Facts:

Petitioners were majority stock holders of Overseas Bank of Manila, which during that time was in
financial distress. To address necessity and urgency of rehabilitating the OBM, the petitioners sough help from
CB for the possible extension of emergency loan in the amount of P20 Million. The CB bank, however,
recommended the need of the execution of a voting trust agreement between OBM and PNB and in such
eventuality, the Central Bank will support the PNB in order to allay the fears of depositors and creditors. With
that, OBM agreed to the execution of the trusteeship agreement.

After such execution, the CB extended an emergency loan only in the amount of P10 Million. This,
however, did not elevate the financial woes of the bank. Consequently, CB Monetary Board adopted a
Resolution ordering the Superintendent of Banks to proceed to the liquidation of the OBM, under Section 29 of
the Central Bank Act. This was opposed by the petitioners in their petition before the court arguing that CB
failed to provide an adequate financial assistance to OBM, a violation of their obligation under the voting trust
agreement and hence liquidation is not proper.On the other hand, CB argued that it is not a party to the Voting
Trust agreement, therefore cannot be compelled to implement it and that the courts cannot interfere with CB's
discretion in determining whether or not a distressed bank should be supported or liquidated.
Issue:

Whether the liquidation of OBM is proper.

Ruling:

NO.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.

In this case, 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. Furthermore, 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. 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 CB 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.

The Court conclude that having induced the petitioners to part with additional security in reliance
upon its promises and commitments to avert liquidation and to support, normalize and rehabilitate the OBM,
CB is duty bound to comply in good faith with such promises. Consequently CB Resolutions should be annulled
and set aside for having been adopted in abuse of discretion, equivalent to excess of jurisdiction.
______________________________________________________________________________________________________________________________

CENTRAL BANK OF THE PHILIPPINES v. HONORABLE COURT OF APPEALS, ISIDRO E.FERNANDEZ, and
JESUS R. JAYME
G.R. No. L-50031-32, July 27, 1981, CONCEPCION, JR., J.

The closure and liquidation of a bank may be considered an exercise of police power, however, 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 the due process and equal protection clauses of the
Constitution.

Facts:

Private respondents Isidro Fernandez and Jesus Jayme are majority and controlling stockholders of
Provident Savings Bank. In view of the unusually heavy withdrawals, Provident requested for emergency loans
from the Central Bank to meet the demands of the depositors. As a condition, the CB posits that it will only
release and continue its assistance to Provident if Fernandez and Jayme will relinquish and turn over the
management and control of the bank to Iglesia Ni Kristo. The condition was allegedly necessary because Iglesia
Ni Kristo had seizable deposit to Provident and this deposit will be converted into shares of stock. Thus,
Fernandez and Jaymeagreed to such condition.

However, the Iglesia Ni Kristodid not comply with its commitment to purchase the 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. This contributed to the deteriorating
financial condition of Provident which resultedin MB declaring it insolvent, ordering its closure and its asset
be liquidated. Consequently, Fernandez and Jayme opposed to such in its petition before the CFI.
Issue:

Whether the action of the MB in ordering the closure and liquidation of an insolvent bank can be
annulled by the court.

Ruling:

YES. 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 the due process and equal protection
clauses of the Constitution.

In this case, it is not disputed that the Central Bank had committed itself to support Provident and
restore it to its former sound financial position provided that Fernandez and Jayme should relinquish and give
up its control and management of the bank to the Iglesia Ni Kristo, and thereafter, whimsically withdrew such
support to the detriment of Provident.
______________________________________________________________________________________________________________________________

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 v. THE HONORABLE COURT OF APPEALS and SULPICIO M. TOLENTINO, G.R. No. L-45710,
October 3, 1985, MAKASIAR, CJ.

The mere pecuniary inability to fulfill an engagement does not discharge the obligation of the contract,
nor does it constitute any defense to a decree of specific performance. And, the mere fact of insolvency of a debtor
is never an excuse for the non-fulfillment of an obligation but 'instead it is taken as a breach of the contract by
him.

Facts:

Private respondent SulpicioTolentino obtained a loan with real estate mortgagee from Island Savings
Bank in the amount of P80,000. But only P17, 000 was released by the bank because there was no fund yet
available for the release of the P63,000.00 balance.Thereafter, the MB declared Island Bank insolvent and
wasprohibited from doing business in the Philippines.

However, Island Savings Bank, in view of non-payment of the P17,000, filed an application for the
extra-judicial foreclosure of the real estate mortgage, this was opposed by Tolentino it his petition before the
court. The court ruled in favor of the foreclosure, but this was reversed by the CA. Hence, this petition.

Issue:

Whether the insolvency of Island Bank is a valid reason to the non-fulfillment of its obligation.

Ruling:

NO. The mere pecuniary inability to fulfill an engagement does not discharge the obligation of the
contract, nor does it constitute any defense to a decree of specific performance. And, the mere fact of insolvency
of a debtor is never an excuse for the non-fulfillment of an obligation but 'instead it is taken as a breach of the
contract by him. Hence, the Board Resolution of MB to that effect cannot interrupt the default of Island Savings
Bank in complying with its obligation of releasing the P63,000.00 balance. More so that this Resolution merely
prohibited the Bank from making new loans and investments, and nowhere did it prohibit island Savings Bank
from releasing the balance of loan agreements previously contracted.
______________________________________________________________________________________________________________________________

SPOUSES ROMEO LIPANA and MILAGROS LIPANA v. DEVELOPMENT BANK OF RIZAL


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

It is well settled ruled that 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.The same is true notwithstanding the fact that the receivership was done after the filing of the
complaint because it is the execution that win obviously prejudice the other depositors and creditors.

Facts:

Spouses Lipanaopened and maintained time and savings deposits with theDBP of Rizal. When some of
the Time Deposit Certificates matured, spouses Lipana were not able to cash them but instead were issued a
manager's check which was dishonored upon presentment. After demands for the payment of both time and
savings deposits having failed, spouses Lipanafiled with the a Complaint. The RTC ruled in favor the spouses.

Meanwhile, the MB declared the DBP of Rizal insolvent and that its continuance in business would
result in probable loss to its depositors and creditors, decided to place it under receivership. Consequently, the
court issued an order to Stay Writ of Execution of its prior decision. Hence, this petition.

Issue:

Whether or not the placing under receivership by the Central Bank of the respondent bank, long after
the complaint became final and executory, could legally stay execution of such judgment.

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. It is well settled ruled that 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.

The same is true notwithstanding the fact that the receivership was done after the filing of the
complaint because it is the execution that win obviously prejudice the other depositors and creditors.
______________________________________________________________________________________________________________________________

OVERSEAS BANK OF MANILA v. THE COURT OF APPEALS and NATIONAL WATERWORKS AND
SEWERAGE AUTHORITY
G.R. No. L-45866, April 19, 1989, NARVASA, J.

The bank cannot be excused from its obligation which had matured long before its operation was
suspended by the Central Bank. In this case, The suspension of operations of Overseas Bank which took place in
August 1968, could not possibly excuse non-compliance with the obligations in question which matured in 1966.

Facts:
The private respondent NAWASA obtained two time deposits with the Overseas Bank of Manila for the
payment made by a certain BonifacioRegalado. The period for such time deposits were fixed at one year. Upon
the maturity date, NAWASA made a demand for the release of the funds from Overseas Bank, but the bank did
not respond. After repeated demands, NAWASA sought help from Central Bank about the matter. Consequently,
the Central Bank ordered the Overseas Bank to transfer the said government deposits in its custody to the PNB
or DBP. Apparently, even the this was ignored by Overseas Bank.NAWASA thus brought suit to recover its
deposits and damages and such was decided in its favor.

Overseas Bank contends thatthe Central Bankhas suspended its operations and because of that, it
failed to generate funds which it could pay not only its depositors and creditors but likewise, the interests due
on the deposits.

Issue:

Whether or not the failure of Overseas Bank in complying with its obligation to NAWASA should be
attributed to the act of Central Bank.

Ruling:

NO.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. The suspension of banking operations and
the further claim of distressed financial situation cannot in any sense excuse the bank from its obligation to the
NAWASA. Again, the such obligation had nothing to do with the Central Bank's actuations or the events leading
to the bank's distressed state.
______________________________________________________________________________________________________________________________

BANCO FILIPINO SAVINGS AND MORTGAGE BANK v. THE MONETARY BOARD, CENTRAL BANK OF THE
PHILIPPINES, JOSE B. FERNANDEZ, CARLOTA P. VALENZUELA, ARNULFO B. AURELLANO and RAMON V.
TIAOQUI
G.R. No. 70054, December 11, 1991, MEDIALDEA, J.

The pendency of the case regarding the validity of the closure and receivership of the bank did not
diminish the powers and authority of the designated liquidator to effectuate and carry on the a ministration of the
bank. Therefore, in this case, 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. 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

Facts:

Top Management Programs Corporation, Pilar Development Corporation and El Grande Development
Corporation obtained a loan from Banco Filipino. Thereupon, the Monetary Board issued a resolution placing
the bank under liquidation and designating Valenzuela as liquidator. Consequently, Banco Filipino filed the
petition questioning the validity of the resolutions issued by the Monetary Board authorizing the receivership
and liquidation of Banco Filipino.

Subsequently, Top Management, Pilar Development and El Grande Development failed to pay its loan
on the due date. Hence, Banco Filipino applied for extra-judicial foreclosure of the mortgage. This was opposed
on the ground that Banco Filipino has no authority to proceed with the foreclosure sale of petitioners'
properties on the ground that the resolution of the issue on the validity of the closure and liquidation of Banco
Filipino is still pending with this Court.

Issue:
Whether the liquidator appointed by the CB 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.

Ruling:

YES. Section 29 the Central Bank Act, provides that when a bank is forbidden to do business in the
Philippines and placed under receivership, the person designated as receiver shall immediately take charge of
the bank's assets and liabilities, as expeditiously as possible, collect and gather all the assets and administer
the same for the benefit of its creditors, and represent the bank personally or through counsel as he may retain
in all actions or proceedings for or against the institution, exercising all the powers necessary for these
purposes including, but not limited to, bringing and foreclosing mortgages in the name of the bank. If the
Monetary Board shall later determine and confirm that banking institution is insolvent or cannot resume
business safety to depositors, creditors and the general public, it shall, public interest requires, order its
liquidation and appoint a liquidator who shall take over and continue the functions of receiver previously
appointed by Monetary Board. The liquid for may, in the name of the bank and with the assistance counsel as
he may retain, institute such actions as may necessary in the appropriate court to collect and recover a counts
and assets of such institution or defend any action ft against the institution.

The pendency of the case regarding the validity of the closure and receivership of the bank did not
diminish the powers and authority of the designated liquidator to effectuate and carry on the a ministration of
the bank. Therefore, in this case, 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. 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
______________________________________________________________________________________________________________________________

CENTRAL BANK OF THE PHILIPPINES and HON. JOSE B. FERNANDEZ v. HON. COURT OF APPEALS, RTC
JUDGE TEOFILO GUADIZ, JR., PRODUCERS BANK OF THE PHILIPPINES and PRODUCERS PROPERTIES,
INC.
G.R. No. 88353 and G.R. No. 92943 May 8, 1992, DAVIDE, JR., J.

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. In this case, the order of CB placing PBP under conservatorship is proper on the ground
that there was neither arbitrariness nor bad faith in the issuance of thereof.

Facts:

CB on the basis of the report submitted by the Supervision and Examination Sector of the CB, the
Monetary Board, placed PBP under conservatorship. The PBP in turn filed a complaint with the RTC against the
CB asserting that the conservatorship was unwarranted, ill-motivated, illegal, utterly unnecessary and
unjustified; that the appointment of the conservator was arbitrary; that CB acted in bad faith; that the CB-
designated conservators committed bank frauds and abuses; that the CB is guilty of promissory estoppel; and
that by reason of the conservatorship, it suffered losses. The complaint prayed that the CB’s conservator be
ordered to restore the viability of PBP and to fully repair the damages inflicted on PBP.

Consequently, the court issued a preliminary injunction to restrain the MB in placing PBP under
conservatorship.

Issue:

Whether the court is correct in issuing the preliminary injunction


Ruling:

NO. 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., v. MONETARY BOARD, BANGKO SENTRAL NG PILIPINAS and
PHILIPPINE DEPOSIT INSURANCE CORPORATION
G.R. No. 150886, February 16, 2007,CORONA, J.

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.

Facts:

Petitioner Rural Bank of San Miguel, Inc. was a domestic corporation engaged in banking and in which
Hilario P. Soriano claims to be the majority stockholder.MB issued a Resolution prohibiting RBSM from doing
business in the Philippines, placing it under receivership and designating PDIC as receiver. The MB, after
evaluating and deliberating on the findings and recommendation of the Department of Rural Banks Supervision
and Examination Sector ordered the closure of the RBSM and placed its management under PDIC.

Hence, this petition contending that the closure order was bereft of any basis considering that no
complete examination had been conducted before it was issued.

Issue:

Whether a complete examination of the bank is required before it can be closed and placed under receivership.

Ruling:

NO. It is clear that under the New Central Bank Act or RA 7653 that only a report of the head of the
supervising or examining department is necessary before the MB can order for the closure of a bank and not a
complete examination of the bank.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.

In the case at bar, the reliance on the report of the head of the supervising or examining department,
the MB had sufficient basis to arrive at a sound conclusion that there were grounds that would justify RBSM’s
closure and hence the issuance of closure order was untainted with arbitrariness.
______________________________________________________________________________________________________________________________
BANGKO SENTRAL NG PILIPINAS MONETARY BOARD and CHUCHI FONACIER v.
HON. NINA G. ANTONIO-VALENZUELA, in her capacity as Regional Trial Court Judge of Manila, Branch
28; RURAL BANK OF PARAÑAQUE, INC. et al.
G.R. No. 184778, October 2, 2009, VELASCO, JR., J.

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. Hence, the MB could order the closure of the Bank even without
notice and hearing.

Facts:

The Supervision and Examination Department of the BSP conducted examinations of the books of the
respondent banks and it found that these banks had deficiencies in their capital. The respondent banks on their
part filed before the RTC an action to nullify the Report on Examination and issuance of restraining order. They
contend that their right to due process was violated because they were not furnished with the said report. They
further that the sanction of closure that the MB might imposed upon the receipt of such Report will result in
irreparable damage to them as well as to the public.

The RTC ruled in favor of the respondent banksand this was affirmed by the CA.However, the SC issued
a restraining order on the RTC and CA decision. By reason of the such, the SED was able to submit their Report
on Examination to the Monetary Board. The MB then prohibited the respondent banks from transacting
business and placed them under receivership with the Philippine Deposit Insurance Corporation as the
appointed receiver. Hence, this petition.

Issue:

Whether the sanction of closure that MB might imposed will result in irreparable damage to the
respondent banks and to the public.

Ruling:

NO. Under the law, the sanction of closure could be imposed upon a bank by the BSP even without
notice and hearing. The apparent lack of procedural due process would not result in the invalidity of action by
the MB. This is enshrined in the "close now, hear later" scheme which 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. The writ of preliminary injunction
cannot, thus, prevent the MB from taking action, by preventing the submission of the Report on Examination
and by preventing the MB from acting on such.

Receivership

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 v. THE HONORABLE COURT OF APPEALS and SULPICIO M. TOLENTINO, G.R. No. L-45710,
October 3, 1985, MAKASIAR, CJ.

The mere pecuniary inability to fulfill an engagement does not discharge the obligation of the contract,
nor does it constitute any defense to a decree of specific performance. And, the mere fact of insolvency of a debtor
is never an excuse for the non-fulfillment of an obligation but 'instead it is taken as a breach of the contract by
him.

Facts:
Private respondent SulpicioTolentino obtained a loan with real estate mortgagee from Island Savings
Bank in the amount of P80,000. But only P17, 000 was released by the bank because there was no fund yet
available for the release of the P63,000.00 balance.Thereafter, the MB declared Island Bank insolvent and
wasprohibited from doing business in the Philippines.

However, Island Savings Bank, in view of non-payment of the P17,000, filed an application for the
extra-judicial foreclosure of the real estate mortgage, this was opposed by Tolentino it his petition before the
court. The court ruled in favor of the foreclosure, but this was reversed by the CA. Hence, this petition.

Issue:

Whether the insolvency of Island Bank is a valid reason to the non-fulfillment of its obligation.

Ruling:

NO. The mere pecuniary inability to fulfill an engagement does not discharge the obligation of the
contract, nor does it constitute any defense to a decree of specific performance. And, the mere fact of insolvency
of a debtor is never an excuse for the non-fulfillment of an obligation but 'instead it is taken as a breach of the
contract by him. Hence, the Board Resolution of MB to that effect cannot interrupt the default of Island Savings
Bank in complying with its obligation of releasing the P63,000.00 balance. More so that this Resolution merely
prohibited the Bank from making new loans and investments, and nowhere did it prohibit island Savings Bank
from releasing the balance of loan agreements previously contracted.
______________________________________________________________________________________________________________________________

SPOUSES ROMEO LIPANA and MILAGROS LIPANA vs. DEVELOPMENT BANK OF RIZAL
G.R. No. 73884, September 24, 1987, PARAS, J.

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.

Facts:

Spouses Lipana maintained time and savings deposits with DBP. When the deposits matured, spouses
Lipana were issued a manager’s check instead of cash. However, the check was dishonored. The court ordered
DBP to pay the amount due.

Meanwhile, the Monetary Board placed the bank under receivership due to its insolvency. A Motion
for Execution Pending Appeal was filed by Spouses Lipana.

Issue:

Whether respondent judge could legally stay execution of judgment that has already become final and
executory.

Ruling:

YES.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., vs. THE MANILA BANKING CORPORATION.
G.R. No. 162270, April 06, 2005, GARCIA, J.

Thus, the appointment of a receiver operates to suspend the authority of the bank and of its directors and
officers over its property and effects, such authority being reposed in the receiver, and in this respect, the
receivership is equivalent to an injunction to restrain the bank officers from intermeddling with the property of
the bank in any way.

Facts:

The bank started to construct a 14-storey building on their land. However, the bank encountered
financial difficulties which rendered it unable to finish construction of the building. The Central Bank ordered
the closure of the bank and placed it under receivership.

The bank’s acting president, Vicente Puyat, started to scout investors who could finance the completion
of the building. The Laureano group offered to lease the building and wanted to be given an exclusive option to
purchase the building. The offer was accepted and the building was subleased to petitioner, Abacus Real Estate.
When Abacus expressed its desire to exercise its exclusive option to purchase the building, Manila Bank refused
to honor it.

Abacus insists that the option to purchase the lot and building granted to it by Puyat was binding upon
Manila Bank. On the other hand, the bank insists that Puyat had no authority to act for Manila bank, as it was
already placed under receivership by the Central Bank at the time of the granting of the exclusive option to
purchase.

Issue:

Whether Abacus has acquired the right to purchase the lot and building in question.

Ruling:

NO.There can be no quibbling that respondent Manila Bank was under receivership, pursuant to
Central Banks MB Resolution No. 505 dated May 22, 1987, at the time the late Vicente G. Puyat granted the
exclusive option to purchase to the Laureano group of investors. Owing to this defining reality, 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 invocation by the appellate court of the following
pronouncement in Villanueva vs. Court of Appeals, was apropos, to say the least:

The assets of the bank pass beyond its control into the possession and control of the receiver whose
duty it is to administer the assets for the benefit of the creditors of the bank. Thus, the appointment of a receiver
operates to suspend the authority of the bank and of its directors and officers over its property and effects,
such authority being reposed in the receiver, and in this respect, the receivership is equivalent to an injunction
to restrain the bank officers from intermeddling with the property of the bank in any way.

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.
______________________________________________________________________________________________________________________________
ALFEO D. VIVAS, ON HIS BEHALF AND ON BEHALF OF THE SHAREHOLDERS OF EUROCREDIT
COMMUNITY BANK v. THE MONETARY BOARD OF THE BANGKO SENTRAL NG PILIPINAS AND THE
PHILIPPINE DEPOSIT INSURANCE CORPORATION
G.R. No. 191424, August 07, 2013, MENDOZA, J.

The Court, in several cases, upheld the power of the MB to take over banks without need for prior hearing.
It is not necessary inasmuch as the law entrusts to the MB the appreciation and determination of whether any or
all of the statutory grounds for the closure and receivership of the erring bank are present.

Facts:

The examiners from the Department of Loans and Credit of the BSP arrived at the Euro Credit
Community Bank (ECBI) and cancelled the rediscounting line of the bank. A general examination of books of
ECBI was ordered by BSP, however, the former refused to comply. Thereafter, the Monetary Board issued a
cease and desist order against ECBI, which enjoined it from pursuing certain acts and transactions that were
considered unsafe or unsound banking practices.

The Monetary Board placed ECBI under receivership as it can no longer pay its liabilities nor it can
continue in business without involving probable losses to its depositors. Vivas, owner of the controlling interest
of ECBI, submits that the respondents committed grave abuse of discretion when they erroneously applied
Section 30 of R.A. No. 7653, instead of Sections 11 and 14 of the Rural Bank Act of 1992 or R.A. No. 7353. He
argues that despite the deficiencies, inadequacies and oversights in the conduct of the affairs of ECBI, it has not
committed any financial fraud and, hence, its placement under receivership was unwarranted and improper.
He posits that, instead, the BSP should have taken over the management of ECBI and extended loans to the
financially distrained bank pursuant to Sections 11 and 14 of R.A. No. 7353 because the BSP’s power is limited
only to supervision and management take-over of banks.

Issue:

Whether the Monetary Board acted in grave abuse of discretion in placing ECBI under receivership

Ruling:

NO.Accordingly, there is no conflict which would call for the application of the doctrine that a special
law should prevail over a general law. It must be emphasized that R.A .No. 7653 is a later law and under said
act, the power of the MB over banks, including rural banks, was increased and expanded. The Court, in several
cases, upheld the power of the MB to take over banks without need for prior hearing. It is not necessary
inasmuch as the law entrusts to the MB the appreciation and determination of whether any or all of the
statutory grounds for the closure and receivership of the erring bank are present. The MB, under R.A. No. 7653,
has been invested with more power of closure and placement of a bank under receivership for insolvency or
illiquidity, or because the bank’s continuance in business would probably result in the loss to depositors or
creditors.

ALFEO D. VIVAS, ON HIS BEHALF AND ON BEHALF OF THE SHAREHOLDERS OF EUROCREDIT


COMMUNITY BANK, v. THE MONETARY BOARD OF THE BANGKO SENTRAL NG PILIPINAS AND THE
PHILIPPINE DEPOSIT INSURANCE CORPORATION.
G.R. No. 191424, August 07, 2013, MENDOZA, J.

To address the growing concerns in the banking industry, the legislature has sufficiently empowered the
MB to effectively monitor and supervise banks and financial institutions and, if circumstances warrant, to forbid
them to do business, to take over their management or to place them under receivership.

Facts:
The examiners from the Department of Loans and Credit of the BSP arrived at the ECBI Community
Bank and cancelled the rediscounting line of the bank. A general examination of books of ECBI was ordered by
BSP, however, the former refused to comply. Thereafter, the Monetary Board issued a cease and desist order
against ECBI, which enjoined it from pursuing certain acts and transactions that were considered unsafe or
unsound banking practices.

The Monetary Board placed ECBI under receivership as it can no longer pay its liabilities nor it can continue in
business without involving probable losses to its depositors.

Vivas assails the constitutionality of Section 30 of R.A. No. 7653 claiming that said provision vested
upon the BSP the unbridled power to close and place under receivership a hapless rural bank instead of aiding
its financial needs. He is of the view that such power goes way beyond its constitutional limitation and has
transformed the BSP to a sovereign in its own “kingdom of banks.”

Issue:

Whether or not Section 30 of R.A. No. 7653 is unconstitutional

Ruling:

NO.Lastly, the petitioner challenges the constitutionality of Section 30 of R.A. No. 7653, as the
legislature granted the MB a broad and unrestrained power to close and place a financially troubled bank under
receivership. He claims that the said provision was an undue delegation of legislative power. The contention
deserves scant consideration.

In this case, under the two tests, there was no undue delegation of legislative authority in the issuance
of R.A. No. 7653. To address the growing concerns in the banking industry, the legislature has sufficiently
empowered the MB to effectively monitor and supervise banks and financial institutions and, if circumstances
warrant, to forbid them to do business, to take over their management or to place them under receivership.
The legislature has clearly spelled out the reasonable parameters of the power entrusted to the MB and
assigned to it only the manner of enforcing said power. In other words, the MB was given a wide discretion and
latitude only as to how the law should be implemented in order to attain its objective of protecting the interest
of the public, the banking industry and the economy.

Liquidation

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 vs. CENTRAL BANK OF THE PHILIPPINES, AND CONSOLACION V.
ODRA, in her capacity as Liquidator of the Rural Bank of Muntinlupa, Inc.,
G.R. No. L-17620 August 19, 1986, NARVASA, J.

Indeed, the failure to assert, as a ground of defense or objection to a proceeding for assistance in
liquidation, the fact that the resolution of the Monetary Board authorizing the initiation of such a proceeding is
"arbitrary and made in bad faith" would constitute a waiver thereof.

Facts:

The Monetary Board adopted two resolutions forbidding the rural bank from doing business,
thereafter, designating Odra as receiver. It also ordered the liquidation of the bank after findings that it was
insolvent.

The bank asserts that under Section 29 of the Central Bank Act, the RTC has jurisdiction to adjudicate
the question of whether the Monetary Board acted in arbitrarily and in bad faith in directing the bank’s
dissolution. The Central Bank, on the other hand, contends that such issue may only be raised in a separate
action or proceeding.

Issue:

Whether the RTC has jurisdiction to adjudicate the question of whether the Monetary Board acted in
arbitrarily and in bad faith.

Ruling:

YES.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. Indeed, the failure to
assert, as a ground of defense or objection to a proceeding for assistance in liquidation, the fact that the
resolution of the Monetary Board authorizing the initiation of such a proceeding is "arbitrary and made in bad
faith" would constitute a waiver thereof, conformably with the rule of "Waiver of Defenses," to the effect that
"defenses and objections not pleaded either in a motion to dismiss or in the answer are (generally) deemed
waived," or the "Omnibus Motion Rule," providing that "A motion attacking a pleading or a proceeding shall
include all objections then available, and all objections not so included shall be deemed waived."
______________________________________________________________________________________________________________________________

BANCO FILIPINO SAVINGS AND MORTGAGE BANK v.THE MONETARY BOARD, CENTRAL BANK OF THE
PHILIPPINES, JOSE B. FERNANDEZ, CARLOTA P. VALENZUELA, ARNULFO B. AURELLANO and RAMON V.
TIAOQUI
G.R. No. 70054, December 11, 1991, MEDIALDEA, J

There is no doubt that the prosecution of suits for collection and the foreclosure of mortgages against
debtors of the bank by the liquidator are among the usual and ordinary transactions pertaining to the
administration of a bank.

Facts:

The case pertains to nine consolidated cases concerning the legality of the closure and receivership of
Banco Filipino.

Issue:

Whether the liquidator appointed by 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

Ruling:

YES.Section 29 of the Republic Act No. 265, as amended known as the Central Bank Act, provides that
when a bank is forbidden to do business in the Philippines and placed under receivership, the person
designated as receiver shall immediately take charge of the bank’s assets and liabilities, as expeditiously as
possible, collect and gather all the assets and administer the same for the benefit of its creditors, and represent
the bank personally or through counsel as he may retain in all actions or proceedings for or against the
institution, exercising all the powers necessary for these purposes including, but not limited to, bringing and
foreclosing mortgages in the name of the bank. If the Monetary Board shall later determine and confirm that
the banking institution is insolvent or cannot resume business with safety to depositors, creditors and the
general public, it shall, if public interest requires, order its liquidation and appoint a liquidator who shall take
over and continue the functions of the receiver previously appointed by Monetary Board. The liquidator may,
in the name of the bank and with the assistance of counsel as he may retain, institute such actions as may be
necessary in the appropriate court to collect and recover accounts and assets of such institution or defend any
action filed against the institution.

When the issue on the validity of the closure and receivership of Banco Filipino bank was raised in G.R.
No. 70054, the pendency of the case did not diminish the powers and authority of the designated liquidator to
effectuate and carry on the administration of the bank. In fact when the Supreme Court adopted a resolution
on August 25, 1985 and issued a restraining order to respondents Monetary Board and Central Bank, the
Supreme Court enjoined merely 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 same to creditors and other parties for the purpose of paying the
debts of such institution. The Supreme Court did not prohibit however acts such as receiving collectibles and
receivables or paying off creditors’ claims and other transactions pertaining to normal operations of a bank.
There is no doubt that the prosecution of suits for collection and the foreclosure of mortgages against debtors
of the bank by the liquidator are among the usual and ordinary transactions pertaining to the administration
of a bank.
______________________________________________________________________________________________________________________________

JERRY ONG vs. COURT OF APPEALS and RURAL BANK OF OLONGAPO, INC., represented by its
Liquidator, GUILLERMO G. REYES, JR. and Deputy Liquidator ABEL ALLANIGUE.
G.R. No. 112830, February 1, 1996, BELLOSILLO, J.

The lawmaking body contemplated that for convenience, only one court, if possible, should pass upon
the claims against the insolvent bank.

Facts:

Two parcels of land owned by Rural Bank of Olongapo were mortgaged in favor of Ong. This is to
guarantee the payment of Omnibus Finance to Ong. When Omnibus Finance failed to settle its obligations, Ong
extrajudicially foreclosed said mortgages. A Certificate of Sale was issued in favor of Ong, however, such sale
was not yet registered in view of the fact that the title remains with RBO. He filed with the Regional Trial Court
of Quezon City a petition for the surrender of title against RBO.

RBO contends that it was undergoing liquidation, hence, it is the liquidation court which has exclusive
jurisdiction over Ong’s claim. Ong, on the other hand, submits that the liquidation court has no jurisdiction over
subject parcels of land since they are no longer assets of RBO.

Issue:

Whether the liquidation court have jurisdiction over the parcels of land

Ruling:

YES.We explained therein the rationale behind the provision, i.e., 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 regulate his operations.
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.
______________________________________________________________________________________________________________________________

DOMINGO R. MANALO vs. COURT OF APPEALS (Special Twelfth Division) and PAIC SAVINGS AND
MORTGAGE BANK.
G.R. No. 141297, October 8, 2001, PUNO, J.

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.

Facts:

Vargas obtained a loan from PAIC Savings. Vargas executed a mortgage to secure the debts. PAIC
extrajudicially foreclosed the mortgage when Vargas failed to pay the loan. The title of the lot was then
consolidated in PAIC’s name.

The Central Bank filed a petition for assistance in the liquidation of PAIC. In the meantime, PAIC
Savings petitioned RTC Pasay for the issuance of a writ of possession for the subject property as it has already
consolidated its title. During the pendency of that case, Vargas sold the land to one Angsico. Notwithstanding
this sale, Vargas, still representing herself to be the lawful owner of the property, leased the same to petitioner
Domingo R. Manalo. The court then granted the writ of possession to PAIC. Manalo entered into another lease
agreement, this time with PAIC, represented by its liquidator.

Manalo postulates that the lower court should have dismissed PAIC’s 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 the Central Bank Act.

Issue:

Whether the Liquidation Court has jurisdiction over the petition.

Ruling:

NO. The pertinent portion of Section 29 states:

The liquidator designated as hereunder provided shall, by the Solicitor General, file a petition in the
Regional Trial Court reciting the proceedings which have been taken and praying the assistance of the court in
the liquidation of such institution. The court shall have jurisdiction in the same proceedings to assist in the
adjudication of disputed claims against the bank or non-bank financial intermediary performing quasi-banking
functions and the enforcement of individual liabilites of the stockholders and do all that is necessary to preserve
the assets of such institution and to implement the liquidation plan approved by the Monetary Board.

Petitioner apparently failed to appreciate the correct meaning and import of the above-quoted law.
The legal provision 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.
______________________________________________________________________________________________________________________________

DOMINGO R. MANALO vs. COURT OF APPEALS (Special Twelfth Division) and PAIC SAVINGS AND
MORTGAGE BANK
G.R. No. 141297, October 8, 2001, PUNO, J.
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.

Facts:

Vargas obtained a loan from PAIC Savings. Vargas executed a mortgage to secure the debts. PAIC
extrajudicially foreclosed the mortgage when Vargas failed to pay the loan. The title of the lot was then
consolidated in PAIC’s name.

The Central Bank filed a petition for assistance in the liquidation of PAIC. In the meantime, PAIC
Savings petitioned RTC Pasay for the issuance of a writ of possession for the subject property as it has already
consolidated its title. During the pendency of that case, Vargas sold the land to one Angsico. Notwithstanding
this sale, Vargas, still representing herself to be the lawful owner of the property, leased the same to petitioner
Domingo R. Manalo. The court then granted the writ of possession to PAIC. Manalo entered into another lease
agreement, this time with PAIC, represented by its liquidator.

Manalo casts doubt on the capacity of the PAIC to continue litigating the petition for the issuance of the
writ. He asserts that, being under liquidation, the bank is already a dead corporation that cannot maintain the
suit in the RTC.

Issue:

Whether a bank closed by the MB retains its juridical personality.

Ruling:

YES.The argument is devoid of merit. 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.

That the law allows a bank under liquidation to participate in an action can be clearly inferred from
the third paragraph of the same Section 29 of The Central Bank Act earlier quoted, which authorizes or
empowers a liquidator to institute actions, thus:

He (liquidator) may in the name of the bank or non-bank financial intermediary performing quasi-
banking functions and with the assistance of counsel as he may retain, institute such actions as may be
necessary in the appropriate court to collect and recover accounts and assests of such institution or defend any
action filed against the institution.
______________________________________________________________________________________________________________________________

RURAL BANK OF STA. CATALINA, INC., represented by The Philippine Deposit Insurance Corporation,
in its capacity as Liquidator vs. LAND BANK OF THE PHILIPPINES
G.R. No. 148019, July 26, 2004, CALLEJO, SR., J.

It bears stressing that a defending party declared in default loses his standing in court and his right to
adduce evidence and to present his defense.

Facts:
Land Bank filed a suit for collection of sum of money against Sta. Catalina Rural Bank. The rural bank
was declared in default for its failure to file its answer. It also failed to file a motion to set aside the order of
default.

In the meantime, the Monetary Board approved the placement of the bank’s assets under receivership.
Unaware of the action of the Monetary Board, the trial court ordered Sta. Catalina Rural Bank to pay Landbank.

The rural bank asserts that its liability to the Landbank under its availments must be limited only to
the aggregate amount of its outstanding liability as of the date of its closure, inclusive of accrued interests and
penalties. It avers that the PDIC, as the liquidator, should not be faulted for failing to file its Answer to the
complaint and to move for a reconsideration of the default order in the trial court and in the CA, because it had
no knowledge of the case filed against the rural bank.

Issue:

Whether or not Rural Bank of Sta Catalina is still liable to pay interest on its loan obligation after it has
been placed under receivership/liquidation.

Ruling:

YES.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 banks 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 on June 2, 1998, but did not bother filing a motion for partial
reconsideration, under Rule 37 of the Rules of Court, 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 v PHILIPPINE DEPOSIT INSURANCE CORPORATION, BANGKO SENTRAL NG


PILIPINAS and PRIME SAVINGS BANK
G.R. No. 169334, September 8, 2006, YNARES-SANTIAGO, J.

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.

Facts:

Miranda withdrew substantial amounts from her deposits in Prime Savings Bank. She was issued a
crossed cashier’s check. When she deposited the checks into her account in another bank on the same day, the
BSP suspended the clearing privileges of Prime Savings Bank. Hence, two checks were returned to her unpaid.
BSP placed Prime Savings Bank under the receivership of the PDIC.

Miranda filed an action for sum of money to recover funds from her unpaid checks. The trial court ruled
in favor of Miranda. The Court of Appeals ruled in favor of the PDIC and BSP, dismissing the case against them,
without prejudice to the right of Miranda to file her claim before the court designated to adjudicate on claims
against Prime Savings Bank.

Issue:

Whether the claim lodged by the petitioner is a disputed claim under Section 30 of the New Central
Bank Act, and therefore, under the jurisdiction of the liquidation court
Ruling:

YES. As regards the second issue, 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.

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. Petitioners claim which involved the payment of the
two cashiers 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.
______________________________________________________________________________________________________________________________

IN RE: PETITION FOR ASSISTANCE IN THE LIQUIDATION OF THE RURAL BANK OF BOKOD (BENGUET),
INC., PHILIPPINE DEPOSIT INSURANCE CORPORATION, - versus - BUREAU OF INTERNAL REVENUE
G.R. No. 158261, December 18, 2006, CHICO-NAZARIO, J.

Section 30 of the New Central Bank Act lays down the proceedings for receivership and liquidation of a
bank. The said provision is silent as regards the securing of a tax clearance from the BIR.

Facts:

The Monetary Board placed the Rural Bank of Bokod (RBBI) bank under receivership and liquidation
due to its various loan irregularities. PDIC was appointed as the receiver of RBBI. The former filed a Motion for
Approval of Project Distribution of the assets of the RBBI in the RTC.

During the hearing, BIR contends that PDIC should secure a tax clearance certificate before it could
proceed with the dissolution of the bank. On the other hand, PDIC argues that securing a tax clearance is not a
condition precedent since the closure of banks is summary in nature. It contends that under the New Central
Bank Act,asset distribution of a closed bank requires only the approval of the liquidation court.

Issue:

Whether a bank placed under receivership by the Monetary Board still needs to secure a tax clearance
certificate from the BIR before the liquidation court approves the project of distribution of the assets of the
bank.

Ruling:

NO.Section 30 of the New Central Bank Act lays down the proceedings for receivership and liquidation
of a bank. The said provision is silent as regards the securing of a tax clearance from the BIR. The omission,
nonetheless, cannot compel this Court to apply by analogy the tax clearance requirement of the SEC, as stated
in Section 52(C) of the Tax Code of 1997 and BIR-SEC Regulations No. 1, since, again, the dissolution of a
corporation by the SEC is a totally different proceeding from the receivership and liquidation of a bank by the
BSP. This Court cannot simply replace any reference by Section 52(C) of the Tax Code of 1997 and the
provisions of the BIR-SEC Regulations No. 1 to the SEC with the BSP. To do so would be to read into the law and
the regulations something that is simply not there, and would be tantamount to judicial legislation.