BANGKO SENTRAL NG PILIPINAS LAW (NEW CENTRAL BANK ACT) would infringe against the non-impairment clause of the

(R.A. No.7653) Constitution 44 . If the legislature itself cannot revoke an existing

valid contract, how can it delegate such non-existent powers to
the conservator under Section 28-A of said law?
1. FIRST PHILIPPINE INTERNATIONAL BANK VS. CA, ET AL., G.R.
115849, JANUARY 24, 1996
Obviously, therefore, Section 28-A merely gives the conservator
power to revoke contracts that are, under existing law, deemed
Facts: to be defective — i.e., void, voidable, unenforceable or
rescissible. Hence, the conservator merely takes the place of a
Petitioner FIRST PHILIPPINE INTERNATIONAL BANK (petitioner bank's board of directors. What the said board cannot do — such
bank) is a banking institution which has been placed under as repudiating a contract validly entered into under the doctrine
conservatorship by the Central Bank since 1984, whereas, of implied authority — the conservator cannot do either.
petitioner Mercurio Rivera (Rivera) was the Head-Manager of the Ineluctably, his power is not unilateral and he cannot simply
Property Management Department of the petitioner Bank. repudiate valid obligations of the Bank. His authority would be
only to bring court actions to assail such contracts — as he has
While under conservatorship, petitioner bank, through Rivera, already done so in the instant case. A contrary understanding of
transacted with Demetrio Demetria and Jose O. Janolo, the the law would simply not be permitted by the Constitution.
original plaintiffs of this case, who wanted to purchase the Neither by common sense. To rule otherwise would be to enable
petitioner’s bank property consists of six parcels of land. a failing bank to become solvent, at the expense of third parties,
by simply getting the conservator to unilaterally revoke all
Plaintiffs made an offer which was responded by Rivera informing previous dealings which had one way or another or come to be
the latter of their counter-offer of P5,500,000.00. considered unfavorable to the Bank, yielding nothing to perfected
contractual rights nor vested interests of the third parties who
After the last counter-offer by the original plaintiffs, a meeting had dealt with the Bank.
took place between the parties, during which the Bank's offer of
P5.5 million was confirmed by Rivera. 2. RURAL BANK OF BUHI VS. CA, G.R. L-61689, JUNE 20, 1988

Thereafter, plaintiff Janolo sent a letter to petitioner bank Facts:

informing it that pursuant to their discussion, they are accepting
the bank’s offer to purchase the subject property at The petitioner Rural Bank of Buhi, Inc. (Buhi) is a rural bank
(P5,500,000.00). whose affairs and operations was put under general examination
conducted by the Director of Rural Banks and Savings and Loan
After more than seven months after Janolo’s letter of acceptance Association (DRBSLA) of the Central Bank.
and after series of demands by the plaintiffs for compliance by
the bank with what plaintiff considered as a perfected contract of The Director of DRBSLA (Respondent Director) submitted a report
sale, the latter, through their new Conservator Encarnacion, recommending to the Monetary Board of the Central Bank the
expressed their repudiation of Rivera's authority and action placing of Buhi under receivership.
towards the supposed contract.
The Monetary Board, finding the report to be true, adopted
Petitioners energetically contended that the conservator has the Resolution No. 583 placing Buhi under receivership and
power to revoke or overrule actions of the management or the designated the Director as receiver.
board of directors of a bank, under Section 28-A of Republic Act
No. 265 (otherwise known as the Central Bank Act) The petitioner filed a petition for injunction with Restraining
Order assailing the action of respondent Director in
Issue: recommending the receivership over Buhi.

Whether or not the Conservator Revoke the Perfected and The CA reversed the trial judge’s order granting the temporary
Enforceable Contract. restraining order which enjoined respondents from further
managing and administering the Rural Bank of Buhi and to deliver
Ruling: NO the possession and control thereof to the petitioner Bank.

…while admittedly, the Central Bank law gives vast and far- Petitioner Rural Bank's petitioned contending that due process
reaching powers to the conservator of a bank, it must be pointed was not observed by the Monetary Board by not giving the
out that such powers must be related to the "(preservation of) former the chance to deny and disprove such claim of insolvency
the assets of the bank, (the reorganization of) the management and/or any other ground which the Monetary Board used in
thereof and (the restoration of) its viability." Such powers, justification of its action.
enormous and extensive as they are, cannot extend to the post-
facto repudiation of perfected transactions, otherwise they Issue:
Whether or not THE MONETARY BOARD MAY PLACE A RURAL the action is plainly arbitrary and made in bad
BANK UNDER RECEIVERSHIP WITHOUT PRIOR NOTICE TO SAID faith. No restraining order or injunction shall be
RURAL BANK TO ENABLE IT TO BE HEARD ON THE GROUND issued by the court enjoining the Central Bank
RELIED UPON FOR SUCH RECEIVERSHIP. from implementing its actions under this
Section and the second paragraph of Section 34
Ruling: YES of this Act, unless there is convincing proof that
the action of the Monetary Board is plainly
Relative thereto, the provision of Republic Act No. 265 on the arbitrary and made in bad faith and the
proceedings upon insolvency reads: petitioner or plaintiff files with the clerk or
judge of the court in which the action is
pending a bond executed in favor of the Central
SEC. 29. Proceedings upon insolvency.—
Bank, in an amount to be fixed by the court.
Whenever, upon examination by the head of
xxx.
the appropriate supervising and examining
department or his examiners or agents into the
condition of any banking institution, it shall be Insolvency, under this Act, shall be understood
disclosed that the condition of the same is one to mean the inability of a banking institution to
of insolvency, or that its continuance in pay its liabilities as they fall due in the usual and
business would involve probable loss to its ordinary course of business: Provided,
depositors or creditors, it shall be the duty of however, that this shall not include the inability
the department head concerned forthwith, in to pay of an otherwise non-insolvent bank
writing, to inform the Monetary Board of the caused by extraordinary demands induced by
facts, and the Board may, upon finding the financial panic commonly evidenced by a run
statements of the department head to be true, on the banks in the banking community.
forbid the institution to do business in the
Philippines and shall designate an official of the The appointment of a conservator under
Central Bank, or a person of recognized Section 28-A of this Act or the appointment of
competence in banking, as receiver to receiver under this Section shall be vested
immediately take charge of its assets and exclusively with the Monetary Board, the
liabilities, as expeditiously as possible collect provision of any law, general or special, to the
and gather all the assets and administer the contrary notwithstanding.
same for the benefit of its creditors, exercising
all the powers necessary for these purposes It will be observed from the foregoing provision of law, that there
including, but not limited to, bringing suits and is no requirement whether express or implied, that a hearing be
foreclosing mortgages in the name of the first conducted before a banking institution may be placed under
banking institution. receivership. On the contrary, the law is explicit as to the
conditions prerequisite to the action of the Monetary Board to
The Monetary Board shall thereupon forbid the institution to do business in the Philippines and to
determine within sixty days whether the appoint a receiver to immediately take charge of the bank's
institution may be recognized or otherwise assets and liabilities. They are: (a) an examination made by the
placed in such a condition so that it may be examining department of the Central Bank; (b) report by said
permitted to resume business with safety to its department to the Monetary Board; and (c) prima facie showing
depositors and creditors and the general public that the bank is in a condition of insolvency or so situated that its
and shall prescribe the conditions under which continuance in business would involve probable loss to its
such redemption of business shall take place as depositors or creditors.
the time for fulfillment of such conditions. xxx
Supportive of this theory is the ruling of this Court, which
If the Monetary Board shall determine and established the authority of the Central Bank under the foregoing
confirm within the said period that the banking circumstances, which reads:
institution is insolvent or cannot resume
business with safety to its depositors, creditors As will be noted, whenever it shall appear
and the general public, it shall, if the public prima facie that a banking institution is in "a
interest requires, order its liquidation, indicate condition of insolvency" or so situated "that its
the manner of its liquidation and approve a continuance in business would involved
liquidation plan. xxx. The provisions of any law probable loss to its depositors or creditors," the
to the contrary notwithstanding the actions of Monetary Board has authority:
the Monetary Board under this Section and the
second paragraph of Section 34 of this Act shall First, to forbid the institution to do business
be final and executory, and can be set aside by and appoint a receiver therefor; and
the court only if there is convincing proof that
 Second, to determine, within 60 days, whether 3. RURAL BANK OF SAN MIGUEL, ET AL. VS. MONETARY BOARD,
or not: ET AL., G.R. 150886, FEBRUARY 16, 2007.

1) the institution may be Facts:

reorganized and rehabilitated
to such an extent as to be Petitioner Rural Bank of San Miguel, Inc. (RBSM) was a domestic
permitted to resume business bank which, by virtue of Resolution No. 105 of the Monetary
with safety to depositors, Board of the Central Bank, was prohibited from doing business in
creditors and the general the Philippines, and placed under receivership with respondent
public; or Philippine Deposit Insurance Corporation (PDIC) as receiver.

2) it is indeed insolvent or The Monetary Board based its resolution on the

cannot resume business with comptrollership/monitoring report of Mr. Wilfredo B. Domo-ong,
safety to depositors, creditors Director, Department of Rural Banks, which showed that [RBSM]
and the general public, and (a) is unable to pay its liabilities as they become due in the
public interest requires that it ordinary course of business; (b) cannot continue in business
be liquidated. without involving probable losses to its depositors and creditors

In this latter case (i.e., the bank can no longer resume business Petitioners contend that there must be a current, thorough and
with safety to depositors, creditors and the public, etc.) its complete examination before a bank can be closed under Section
liquidation will be ordered and a liquidator appointed by the 30 of RA 7653; that according to Secs. 25 and 28, the "report of
Monetary Board. The Central Bank shall thereafter file a petition the supervising or examining department" required under Section
in the Regional Trial Court praying for the Court's assistance in 30 refers to the report on the examination of the bank which,
the liquidation of the bank." ... (Salud vs. Central Bank, 143 SCRA under Section 28, must be made to the Monetary Board after the
590 [1986]). supervising or examining head conducts an examination
mandated by Sections 25 and 28.
xxx It has long been established and recognized in this jurisdiction
that the closure and liquidation of a bank may be considered as Petitioners assert that an examination is necessary and not a
an exercise of police power. Such exercise may, however, be mere report, otherwise the decision to close a bank would be
subject to judicial inquiry and could be set aside if found to be arbitrary.
capricious, discriminatory, whimsical, arbitrary, unjust or a denial
of the due process and equal protection clauses of the Issue:
Constitution (Central Bank vs. Court of Appeals, 106 SCRA 155
[1981]).
Whether or not a current, thorough and complete examination is
necessary in order to place a bank under receivership.
The evident implication of the law, therefore, is that the
appointment of a receiver may be made by the Monetary Board
Ruling: NO
without notice and hearing but its action is subject to judicial
inquiry to insure the protection of the banking institution. Stated
otherwise, due process does not necessarily require a prior Thus in Banco Filipino, we ruled that an "examination [conducted]
by the head of the appropriate supervising or examining
hearing; a hearing or an opportunity to be heard may
department or his examiners or agents into the condition of the
be subsequent to the closure. One can just imagine the dire
bank"23 is necessary before the MB can order its closure.
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 However, RA 265, including Section 29 thereof, was expressly
entire banking community. 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
xxx
misplaced.
There is no question that the action of the Monetary Board in this
In RA 7653, only a "report of the head of the supervising or
regard may be subject to judicial review. Thus, it has been held
examining department" is necessary. It is an established rule in
that the courts may interfere with the Central Bank's exercise of
statutory construction that where the words of a statute are
discretion in determining whether or not a distressed bank shall
clear, plain and free from ambiguity, it must be given its literal
be supported or liquidated. Discretion has its limits and has never
meaning and applied without attempted interpretation: 24
been held to include arbitrariness, discrimination or bad faith
(Ramos vs. Central Bank of the Philippines, 41 SCRA 567 [1971]).
This plain meaning rule or verba legis derived from the
maxim index animi sermo est (speech is the index of intention)
rests on the valid presumption that the words employed by the
legislature in a statute correctly express its intention or will and In short, MB and BSP complied with all the requirements of RA
preclude the court from construing it differently. The legislature 7653. By relying on a report before placing a bank under
is presumed to know the meaning of the words, to have used receivership, the MB and BSP did not only follow the letter of the
words advisedly, and to have expressed its intent by use of such law, they were also faithful to its spirit, which was to act
words as are found in the statute. Verba legis non est expeditiously. Accordingly, the issuance of Resolution No. 105
recedendum, or from the words of a statute there should be no was untainted with arbitrariness.
departure.25
4. KORUGA VS. ARCENAS, ET AL., G.R. 168332, JUNE 19, 2009.
The word "report" has a definite and unambiguous meaning
which is clearly different from "examination." A report, as a noun, Facts:
may be defined as "something that gives information" or "a
usually detailed account or statement."26 On the other hand, an Petitioner Koruga is a minority stockholder of Banco Filipino
examination is "a search, investigation or scrutiny."27 Savings and Mortgage Bank.

This Court cannot look for or impose another meaning on the Koruga filed before the RTC Makati City a Complaint which
term "report" or to construe it as synonymous with charged defendants with violation of Sections 31 to 34 of the
"examination." From the words used in Section 30, it is clear that Corporation Code, prohibiting self-dealing and conflict of interest
RA 7653 no longer requires that an examination be made before of directors and officers; invoked her right to inspect the
the MB can issue a closure order. We cannot make it a corporation’s records under Sections 74 and 75 of the
requirement in the absence of legal basis. Corporation Code; and prayed for Receivership and Creation of a
Management Committee, pursuant to Rule 59 of the Rules of Civil
Laying down the requisites for the closure of a bank under the Procedure, the Securities Regulation Code, the Interim Rules of
law is the prerogative of the legislature and what its wisdom Procedure Governing Intra-Corporate Controversies, the General
dictates. The lawmakers could have easily retained the word Banking Law of 2000, and the New Central Bank Act.
"examination" (and in the process also preserved the
jurisprudence attached to it) but they did not and instead opted The original defendants averred that RTC lacked jurisdiction over
to use the word "report." The insistence on an examination is not the subject matter of the case which is vested by law in the BSP.
sanctioned by RA 7653 and we would be guilty of judicial
legislation were we to make it a requirement when such is not
After the dismissal of its motion to dismiss, the original
supported by the language of the law.
defendants filed a Petition for Review on Certiorari under Rule 45
before the CA which upheld the jurisdiction of the RTC and
What is being raised here as grave abuse of discretion on the part remanded the case to the latter.
of the respondents was the lack of an examination and not the
supposed arbitrariness with which the conclusions of the director
Issue:
of the Department of Rural Banks Supervision and Examination
Sector had been reached in the report which became the basis of
Whether or not the RTC has jurisdiction over the complaint filed
Resolution No. 105.1awphi1.net
by Koruga.
The absence of an examination before the closure of RBSM did
not mean that there was no basis for the closure order. Needless Ruling: NO
to say, the decision of the MB and BSP, like any other
administrative body, must have something to support itself and It is clear that the acts complained of pertain to the conduct of
its findings of fact must be supported by substantial evidence. Banco Filipino’s banking business. A bank, as defined in the
But it is clear under RA 7653 that the basis need not arise from an General Banking Law,21 refers to an entity engaged in the lending
examination as required in the old law. of funds obtained in the form of deposits.22The banking business
is properly subject to reasonable regulation under the police
power of the state because of its nature and relation to the fiscal
We thus rule that the MB had sufficient basis to arrive at a sound
affairs of the people and the revenues of the state. Banks are
conclusion that there were grounds that would justify RBSM’s
affected with public interest because they receive funds from the
closure. It relied on the report of Mr. Domo-ong, the head of the
general public in the form of deposits. It is the Government’s
supervising or examining department, with the findings that: (1)
responsibility to see to it that the financial interests of those who
RBSM was unable to pay its liabilities as they became due in the
deal with banks and banking institutions, as depositors or
ordinary course of business and (2) that it could not continue in
otherwise, are protected. In this country, that task is delegated to
business without incurring probable losses to its depositors and
the BSP, which pursuant to its Charter, is authorized to
creditors.30 The report was a 50-page memorandum detailing the
administer the monetary, banking, and credit system of the
facts supporting those grounds, an extensive chronology of
Philippines. It is further authorized to take the necessary steps
events revealing the multitude of problems which faced RBSM
against any banking institution if its continued operation would
and the recommendations based on those findings.
cause prejudice to its depositors, creditors and the general public
as well.23
The law vests in the BSP the supervision over operations and as receiver to immediately take charge of its assets and
activities of banks. The New Central Bank Act provides: liabilities.27

Section 25. Supervision and Examination. - The Bangko Sentral Correlatively, the General Banking Law of 2000 specifically deals
shall have supervision over, and conduct periodic or special with loans contracted by bank directors or officers, The General
examinations of, banking institutions and quasi-banks, including Banking Law of 2000 provides:
their subsidiaries and affiliates engaged in allied activities.24
SECTION 36. Restriction on Bank Exposure to Directors, Officers,
Specifically, the BSP’s supervisory and regulatory powers include: Stockholders and Their Related Interests. — xxx

4.1 The issuance of rules of conduct or the The Monetary Board may regulate the amount of loans, credit
establishment of standards of operation for uniform accommodations and guarantees that may be extended, xxx
application to all institutions or functions covered, taking
into consideration the distinctive character of the SECTION 56. Conducting Business in an Unsafe or Unsound
operations of institutions and the substantive similarities Manner. — In determining whether a particular act or omission,
of specific functions to which such rules, modes or which is not otherwise prohibited by any law, rule or regulation
standards are to be applied; affecting banks, quasi-banks or trust entities, may be deemed as
conducting business in an unsafe or unsound manner for
4.2 The conduct of examination to determine compliance purposes of this Section, the Monetary Board shall consider any
with laws and regulations if the circumstances so warrant of the following circumstances xxx
as determined by the Monetary Board;
Furthermore, the authority to determine whether a bank is
4.3 Overseeing to ascertain that laws and Regulations are conducting business in an unsafe or unsound manner is also
complied with; vested in the Monetary Board.

4.4 Regular investigation which shall not be oftener than Finally, the New Central Bank Act grants the Monetary Board the
once a year from the last date of examination to power to impose administrative sanctions on the erring bank:
determine whether an institution is conducting its
business on a safe or sound basis: Provided, That the Section 37. Administrative Sanctions on Banks and Quasi-banks. -
deficiencies/irregularities found by or discovered by an xxx, the Monetary Board may, at its discretion, impose upon any
audit shall be immediately addressed; bank or quasi-bank, xxx

4.5 Inquiring into the solvency and liquidity of the Koruga’s invocation of the provisions of the Corporation Code is
institution (2-D); or misplaced. In an earlier case with similar antecedents, we ruled
that:
4.6 Enforcing prompt corrective action.25
The Corporation Code, however, is a general law applying to all
Koruga alleges that "the dispute in the trial court involves the types of corporations, while the New Central Bank Act regulates
manner with which the Directors’ (sic) have handled the Bank’s specifically banks and other financial institutions, including the
affairs, specifically the fraudulent loans and dacion en pago dissolution and liquidation thereof. As between a general and
authorized by the Directors in favor of several dummy special law, the latter shall prevail – generalia specialibus non
corporations known to have close ties and are indirectly derogant.31
controlled by the Directors."26 Her allegations, then, call for the
examination of the allegedly questionable loans. Whether these Consequently, it is not the Interim Rules of Procedure on Intra-
loans are covered by the prohibition on self-dealing is a matter Corporate Controversies,32 or Rule 59 of the Rules of Civil
for the BSP to determine. These are not ordinary intra-corporate Procedure on Receivership, that would apply to this case. Instead,
matters; rather, they involve banking activities which are, by law, Sections 29 and 30 of the New Central Bank Act should be
regulated and supervised by the BSP. As the Court has previously followed, xxx
held:
On the strength of these provisions, it is the Monetary Board that
It is well-settled in both law and jurisprudence that the Central exercises exclusive jurisdiction over proceedings for receivership
Monetary Authority, through the Monetary Board, is vested with of banks.
exclusive authority to assess, evaluate and determine the
condition of any bank, and finding such condition to be one of Crystal clear in Section 30 is the provision that says the
insolvency, or that its continuance in business would involve a "appointment of a receiver under this section shall be vested
probable loss to its depositors or creditors, forbid bank or non- exclusively with the Monetary Board." The term "exclusively"
bank financial institution to do business in the Philippines; and connotes that only the Monetary Board can resolve the issue of
shall designate an official of the BSP or other competent person whether a bank is to be placed under receivership and, upon an
affirmative finding, it also has authority to appoint a receiver. This Monetary Board (MB), or if the ROE had already been submitted,
is further affirmed by the fact that the law allows the Monetary the MB be enjoined from acting on the basis of said ROE,
Board to take action "summarily and without need for prior
hearing." Ruling on the petition for certiorari under Rule 65, CA favoured
the Respondent banks which were held to be entitled to copies of
And, as a clincher, the law explicitly provides that "actions of the the ROEs prior to or simultaneously with their submission to the
Monetary Board taken under this section or under Section 29 of MB, on the principles of fairness and transparency.
this Act shall be final and executory, and may not be restrained or
set aside by the court except on a petition for certiorari on the Issue:
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 Whether or not the respondent banks are entitled to copies of
jurisdiction."1avvphi1 the ROEs prior to or simultaneously with their submission to the
MB, and consequently, whether or not the Trial Court can enjoin
From the foregoing disquisition, there is no doubt that the RTC the SEB to submit the ROEs to the MB, or the MB from acting on
has no jurisdiction to hear and decide a suit that seeks to place the ROEs.
Banco Filipino under receivership.
Ruling: NO
Thus, the court’s jurisdiction could only have been invoked after
the Monetary Board had taken action on the matter and only on As such, a writ of preliminary injunction may be issued only upon
the ground that the action taken was in excess of jurisdiction or clear showing of an actual existing right to be protected during
with such grave abuse of discretion as to amount to lack or the pendency of the principal action. The twin requirements of a
excess of jurisdiction. 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.
5. BANGKO SENTRAL, ET AL. VS. VALENZUELA, ET AL., G.R.
184778, OCTOBER 2, 2009.
The respondent banks have failed to show that they are entitled
Facts: 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
The Supervision and Examination Department (SED) of the required to give them copies of the ROEs. Sec. 28 of RA 7653, or
Bangko Sentral ng Pilipinas (BSP) conducted examinations of the the New Central Bank Act, which governs examinations of
books of several rural banks (respondent banks). banking institutions, provides that the ROE shall be submitted to
the MB; the bank examined is not mentioned as a recipient of the
After the examinations, exit conferences were held with the ROE.
officers or representatives of the banks wherein the SED
examiners provided them with copies of Lists of The respondent banks cannot claim a violation of their right to
Findings/Exceptions containing the deficiencies discovered during due process if they are not provided with copies of the ROEs. The
the examinations, and required them to comment and to same ROEs are based on the lists of findings/exceptions
undertake the remedial measures stated in these lists which containing the deficiencies found by the SED examiners when
included the infusion of additional capital. they examined the books of the respondent banks. As found by
the RTC, these lists of findings/exceptions were furnished to the
Though the banks claimed that they made the additional capital officers or representatives of the respondent banks, and the
infusions, petitioner Chuchi Fonacier, officer-in-charge of the respondent banks were required to comment and to undertake
SED, sent separate letters to the Board of Directors of each bank, remedial measures stated in said lists. Despite these instructions,
informing them that the SED found that the banks failed to carry respondent banks failed to comply with the SED’s directive.
out the required remedial measures.
Respondent banks are already aware of what is required of them
Thereafter, respondent banks made several requests to be given by the BSP, and cannot claim violation of their right to due
more time to comply with the remedial measures, and for the process simply because they are not furnished with copies of the
disclosure of the basis for the capital infusion figures, noting that ROEs. xxx if the banks are already aware of the contents of the
none of them had received the Report of Examination (ROE). ROEs, they cannot say that fairness and transparency are not
present. If sanctions are to be imposed upon the respondent
banks, they are already well aware of the reasons for the
Failing to obtain their requests, respondent banks filed their
sanctions, having been informed via the lists of
respective complaint before the RTC with a prayer that Fonacier,
findings/exceptions, demolishing that particular argument. The
her subordinates, agents, or any other person acting in her behalf
ROEs would then be superfluities to the respondent banks, and
be enjoined from submitting the ROE or any similar report to the
should not be the basis for a writ of preliminary injunction.
The issuance by the RTC of writs of preliminary injunction is an Issue:
unwarranted interference with the powers of the MB. Secs. 29 Ruling:
and 30 of RA 765310 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 writs of preliminary injunction order are
precisely what cannot be done under the law by preventing the
MB from taking action under either Sec. 29 or Sec. 30 of RA 7653.

As to the third requirement, 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. The apparent lack of procedural
due process would not result in the invalidity of action by the MB.
This was the ruling in Central Bank of the Philippines v. Court of
Appeals.11 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. The writ of preliminary injunction cannot, thus,
prevent the MB from taking action, by preventing the submission
of the ROEs and worse, by preventing the MB from acting on such
ROEs.

The respondent banks cannot—through seeking a writ of

preliminary injunction by appealing to lack of due process, in a
roundabout manner— prevent their closure by the MB. Their
remedy, as stated, is a subsequent one, which will determine
whether the closure of the bank was attended by grave abuse of
discretion. 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. 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.

THE SECRECY OF BANK DEPOSITS (R.A. NO.1405)

6. Mellon Bank, N.A. vs. Magsino, G.R. No. 71479, October 18,
1990
Facts: