Resolution No. 1496 (Exh. "1") liquidating the RSB.

Subsequently, a masterlist or
G.R. No. 118917 December 22, 1997 inventory of the RSB assets and liabilities was prepared. However, the certificates
PHILIPPINE DEPOSIT INSURANCE CORPORATION, petitioner, vs. COURT of time deposit of plaintiffs-appellees were not included in the list on the ground
OF APPEALS, ROSA AQUERO, GERARD YU, ERIC YU, MINA YU, ELIZABETH that the certificates were not funded by the PFC or duly recorded as liabilities of
NGKAION, MERLY CUESCANO, LETICIA TAN, FELY RUMBANA, LORNA RSB.
ACUB, represented by their Attorney-in-Fact, JOHN FRANCIS COTAOCO,
respondents. On September 4, 1984, plaintiffs-appellees filed with the PDIC their respective
claims for the amount of the certificates (Exhs. "C," "C-1" to "C-12"). Sabina Yu,
James Ngkaion, Elaine Ngkaion and Jeffrey Ngkaion, who have similar claims on
KAPUNAN, J.: their certificates of time deposit with the RSB, likewise filed their claims with the
PDIC. To their dismay, PDIC refused the aforesaid claims on the ground that the
Petitioner Philippine Deposit Insurance Corporation (PDIC) seeks the reversal of Traders Royal Bank Check No. 299255 dated September 22, 1983 for the amount
the decision of the Court of Appeals affirming with modification the decision of the of P125,846.07 (Exh. "B") issued by PFC for the aforementioned certificates was
Regional Trial Court holding petitioner liable for the value of thirteen (13) returned by the drawee bank for having been drawn against insufficient funds; and
certificates of time deposit (CTDs) in the possession of private respondents. said check was not replaced by the PFC, resulting in the cancellation of the
certificates as indebtedness or liabilities of
The facts, as found by the Court of Appeals, are as follows: RSB. 1

On September 22, 1983, plaintiffs-appellees invested in money market placements Consequently, on March 31, 1987, private respondents filed an action for collection
with the Premiere Financing Corporation (PFC) in the sum of P10,000.00 each for against PDIC, RSB and the Central Bank.
which they were issued by the PFC corresponding promissory notes and checks.
On the same date (September 22, 1983), John Francis Cotaoco, for and in behalf On September 14, 1987, the trial court, declared the Central Bank in default for
of plaintiffs-appellees, went to the PFC to encash the promissory notes and failing to file an answer.
checks, but the PFC referred him to the Regent Saving Bank (RSB). Instead of
paying the promissory notes and checks, the RSB, upon agreement of Cotaoco, On May 29, 1989, the trial court rendered its decision ordering the defendants
issued the subject 13 certificates of time deposit with Nos. 09648 to 09660, therein to pay plaintiffs, jointly and severally, the amount corresponding to the
inclusive, each stating, among others, that the same certifies that the bearer latter's certificates of time deposit.
thereof has deposited with the RSB the sum of P10,000.00; that the certificate
shall bear 14% interest per annum; that the certificate is insured up to P15,000.00 Both PDIC and RSB appealed. The Central Bank, on the other hand, filed a
with the PDIC; and that the maturity date thereof is on November 3, 1983 (Exhs. petition for certiorari, prohibition and mandamus before the Court of Appeals
"B", "B-1 to "B-12"). praying that the writ of execution issued by the trial court against it be set aside.

On the aforesaid maturity dated (November 3, 1983), Cotaoco went to the RSB to On February 8, 1995, the Court of Appeals rendered its decision granting the
encash the said certificates. Thereat, RSB Executive Vice President Jose M. Central Bank's petition but dismissing the appeals of PDIC and RSB. Hence, this
Damian requested Cotaoco for a deferment or an extension of a few days to petition by PDIC assigning the following errors:
enable the RSB to raise the amount to pay for the same (Exh. "D"). Cotaoco
agreed. Despite said extension, the RSB still failed to pay the value of the I
certificates. Instead, RSB advised Cotaoco to file a claim with the PDIC. THE CA ERRED IN HOLDING THAT THE SUBJECT CTDS ARE NEGOTIABLE
INSTRUMENTS
Meanwhile, on June 15, 1984, the Monetary Board of the Central Bank issued
Resolution No. 788 (Exh. "2", Records, p. 159) suspending the operations of the II
RSB. Eventually, the records of RSB were secured and its deposit liabilities were THE CA ERRED IN HOLDING THAT THE CTDS WERE ACQUIRED FOR VALUE
eventually determined. On December 7, 1984, the Monetary Board issued AND CONSIDERATION

1
 . . . The argument confuses negotiability of commercial paper with statutory
III guaranty of deposits. The guaranty is something extrinsic to all forms of evidence
THE CA ERRED WHEN IT HELD THAT BECAUSE THE CTDS STATE THAT of bank obligation; and negotiability of instruments has no dependence on
THESE WERE INSURED PETITIONER SHOULD BE HELD LIABLE FOR THE existence or nonexistence of the guaranty.
SAME.
. . . Whatever the status of the plaintiffs may be as holders in due course under the
We deal jointly with petitioner's first and third assigned errors. Negotiable Instruments Law, they cannot be assignees of a deposit which was not
made, and cannot be entitled to the benefit of a guaranty which did not come into
Relying on this Court's ruling in Caltex (Philippines), Inc. v. Court of Appeals and existence. . . .
Security Bank and Trust Company, 2 the Court of Appeals concluded that the
subject CTDs are negotiable. Petitioner, on the other hand, contends that the In arriving at the above decision, the Kansas Supreme Court relied on its earlier
CTDs are non-negotiable since they do not contain an unconditional promise or ruling in American State Bank v. Foster,6 which arose from the same facts as the
order to pay a sum certain in money nor are they made payable to order or bearer, Fourth National Bank case. There, the Court held:
as required by Section 1 of the Negotiable Instruments Law.
. . . Even if the plaintiff were to be regarded as an innocent purchaser of the
Whether the CTDs in question are negotiable or not is, however, immaterial in the certificates as negotiable instruments, its situation would be in no wise bettered so
present case. The Philippine Deposit Insurance Corporation was created by law far as relate to a claim against the guaranty fund. The fund protects deposits only.
and, as such, is governed primarily by the provisions of the special law creating it. And if no deposit is made, or no deposit within the protection of the guaranty law,
3 The liability of the PDIC for insured deposits therefore is statutory and, under the transfer of a certificate cannot impose a liability on the fund. . . . where a
Republic Act No. 3591,4 as amended, such liability rests upon the existence of certificate of deposit is given under such circumstances that it is not protected by
deposits with the insured bank, not on the negotiability or non-negotiability of the the guaranty fund, although that fact is not indicated by anything on its face, its
certificates evidencing these deposits. indorsement to an innocent holder cannot confer that quality upon it.

The authority for this conclusion finds support in decisions by American state In like fashion did the Supreme Court of Nebraska brush aside a similar contention
courts applying their respective bank guaranty laws. Invariably, the plaintiffs in in State v. Farmers' Stale Bank:7
these cases argued that the negotiability of the certificates of deposit in their
possession entitled them to be paid out of the bank guaranty fund, a contention In this contention we think the appellants fail to distinguish between the liability of
that the courts uniformly rejected. the maker of a negotiable instrument, which rests upon the law pertaining to
negotiable paper, and the liability of the guaranty fund, which is purely statutory.
Thus, the plaintiffs in Fourth Nat. Bank of Wichita v. Wilson5 argued that: The circumstances under which the guaranty fund may be liable are entirely apart
from the law pertaining to negotiable paper. A holder of a certificate of deposit in a
. . . the court should hold the certificates to be guaranteed because they are bank who seeks to hold the guaranty fund liable for its payment must show that the
negotiable instruments, and were acquired by the present holders in due course; transaction leading up to the issuance of the certificate was such that the law holds
otherwise it is said certificates of deposit will be deprived of the quality of the guaranty fund liable for its payment. . . .
commercial paper. Certificates of deposit have been regarded as the highest form
of collateral. They are of wide currency in the banking and business worlds, and The Farmers' State Bank ruling was reiterated by the Nebraska Supreme Court in
are particularly useful to persons of small means, because they bear interest, and State v. Home State Bank of Dunning 8 and in State v. Kilgore State Bank. 9 The
may be readily cashed; therefore to deprive them of the benefit of the guaranty same ruling was adopted by the Supreme Court of South Dakota in Mildenstein v.
fund would be a calamity. . . . Hirning. 10

The Supreme Court of Kansas, however, found the plaintiffs' contention to be In the case at bar, the Court of Appeals initially found the subject CTDs to be
without merit, ruling thus: negotiable. Subsequently, however, respondent court deemed the issue
immaterial, albeit for entirely different reasons.

2
. . . Besides, whether the certificates are negotiable or not is of no moment. The obliged to give credit to a commercial, checking, savings, time or thrift account or
fact remains that the certificates categorically state that their bearer [sic] have a which is evidenced by passbook, check and/or certificate of deposit printed or
deposit in the RSB; that the same will mature on November 3, 1993; and that the issued in accordance with Central Bank rules and regulations and other applicable
certificates are insured by PDIC. 11 laws, together with such other obligations of a bank which, consistent with banking
usage and practices, the Board of Directors shall determine and prescribe by
We disagree with respondent court's rationale. The fact that the certificates state regulations to be deposit liabilities of the Bank . . . . (Emphasis ours.)
that the certificates are insured by PDIC does not ipso facto make the latter liable
for the same should the contingency insured against arise. As stated earlier, the Did RSB receive money or its equivalent when it issued the certificates of time
deposit liability of PDIC is determined by the provisions of R.A. No. 3519, and deposit? The Court of Appeals, in resolving who between RSB and PFC issued the
statements in the certificates that the same are insured by PDIC are not binding certificates to private respondents, answered this question in the negative. A
upon the latter. perusal of the impugned decision, however, reveals that such finding is grounded
entirely on speculation, and thus, cannot bind this Court: 13
. . . The mere fact that a certificate recites on its face that a certain sum has been
deposited, or that officers of the bank may have stated that the deposit is protected Equally unimpressive is the contention of PDIC and RSB that the certificates were
by the guaranty law, does not make the guaranty fund liable for payment, if in fact issued to PFC which did not acquire the same for value because the check issued
a deposit has not been made . . . . The banks have nothing to do with the guaranty by the latter for the certificates bounced for insufficiency of funds. First, granting
fund as such. It is a fund raised by assessments against all state banks, arguendo that the certificates were originally issued in favor of PFC, such issuance
administered by officers of the state to protect deposits in banks. . . . 12 could only give rise to the presumption that the amount stated in the certificates
have been deposited to RSB. Had not PFC deposited the amount stated therein,
We come now to petitioner's second assigned error. then RSB would have surely refused to issue the certificates certifying to such fact.
Second, why did not RSB demand that PFC pay the certificates or file a claim
In order that a claim for deposit insurance with the PDIC may prosper, the law against PFC on the ground that the latter failed to pay for the value of the
requires that a corresponding deposit be placed in the insured bank. This is implicit certificates? It could very well be that the reason why RSB did not run after PFC
from a reading of the following provisions of R.A. 3519: for payment of the value of the certificates was because the instruments were
issued to the latter by RSB for value or were already paid to RSB by plaintiffs-
Sec. 1. There is hereby created a Philippine Deposit Insurance Corporation . . . appellees. Third, if it is true that at the time RSB issued the certificates to PFC, the
which shall insure, as provided, the deposits of all banks which are entitled to the instruments were paid for with checks still to be encashed, then why did not RSB
benefits of insurance under this Act . . . . (Emphasis supplied). specifically state in the certificates that the validity thereof hinges on the
xxx xxx xxx encashment of said check? Fourth, even if it is true that PFC did not deposit with
or pay the RSB the amount stated in the certificates, the latter is not be such
Sec. 10(a) . . . reason freed from civil liability to plaintiffs-appellees. For, by issuing the
xxx xxx xxx certificates, RSB bound itself to pay the amount stated therein to whoever is the
bearer upon its presentment for encashment. Truly, there is no reason to depart
(c) Whenever an insured bank shall have been closed on account of insolvency, from the established principle that where a bank issues a certificate of deposit
payment of the insured deposits in such bank shall be made by the Corporation as acknowledging a deposit made with a third person or an officer of the bank, or with
soon as possible . . . .(Emphasis supplied.) another bank representing it to be the certificate of the bank, upon which
assurance the depositor accepts it, the bank is liable for the amount of the deposit
A deposit as defined in Section 3(f) of R.A. No. 3591, may be constituted only if (Michis, Banks and Banking, Vol. 5A, pp. 48-49, as cited in the Decision on p. 3
money or the equivalent of money is received by a bank: thereof). 14

Sec. 3. As used in this Act — Moreover, such finding totally ignores the evidence presented by defendants.
(f) The term "deposit" means the unpaid balance of money or its equivalent Cardola de Jesus, RSB Deputy Liquidator, testified that RSB received three (3)
received by a bank in the usual course of business and for which it has given or is checks in consideration for the issuance of several CTDs, including the ones in

3
dispute. The first check amounted to P159,153.93, the second, P121,665.95, and
the third, P125,846.07 In consideration of the third check, private respondents
received thirteen (13) certificates of deposit with Nos. 09648 to 09660, inclusive,
with a value of P10,000.00 each or a total of P130,000.00. To conform with the
value of the third check, CTD No. 09648 was "chopped," and only the sum of
P5,846.07 was credited in favor of private respondents. The first two checks "made
good in the clearing" while the third was returned for being "drawn against
insufficient funds."

The check in question appears on the records as Exhibit "3" (for Regent), 15 and is
described in RSB's offer or evidence as "Traders Royal Bank Check No. 292555
dated September 22, 1983 covering the amount or P125,846.07 . . . issued by
Premiere Financing Corporation." 16 At the back of said check are the words
"Refer to Drawer," 17 indicating that the drawee bank (Traders Royal Bank)
refused to pay the value represented by said check. By reason of the check's
dishonor, RSB cancelled the corresponding as evidence by an RSB "ticket" dated
November 4, 1983. 18

These pieces of evidence convincingly show that the subject CTDs were indeed
issued without RSB receiving any money therefor. No deposit, as defined in
Section 3 (f) of R.A. No. 3591, therefore came into existence. Accordingly,
petitioner PDIC cannot be held liable for value of the certificates of time deposit
held by private respondents.

ACCORDINGLY, the instant petition is hereby GRANTED and the decision of the
Court of Appeals REVERSED. Petitioner is absolved from any liability to private
respondents.

SO ORDERED.

4
G.R. No. 176438 January 24, 2011 Complaint-Affidavit filed by a corporate depositor, the Philippine School of
PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC), Petitioner, vs. Entrepreneurship and Management (PSEMI) through its president, Jacinto L.
PHILIPPINE COUNTRYSIDE RURAL BANK, INC., RURAL BANK OF CARMEN Jamero.
(CEBU), INC., BANK OF EAST ASIA (MINGLANILLA, CEBU), INC., and
PILIPINO RURAL BANK (CEBU), INC., Respondents. On June 3, 2005, in accordance with the two PDIC Board resolutions, then PDIC
President and Chief Executive Officer Ricardo M. Tan issued the Notice of
DECISION Investigation to the President or The Highest Ranking Officer of PCRBI.

MENDOZA, J.: On June 7, 2005, the PDIC Investigation Team personally served the Notice of
Investigation on PCRBI at its Head Office in Pajo, Lapu-Lapu City.
This is a petition for review on certiorari under Rule 45 of the Rules of Court filed
by the Philippine Deposit Insurance Corporation (PDIC) assailing the September According to PDIC, in the course of its investigation, PCRBI was found to have
18, 2006 Decision of the Court of Appeals-Cebu (CA-Cebu), which granted the granted loans to certain individuals, which were settled by way of dacion of
petition for injunction filed by respondents Philippine Countryside Rural Bank, Inc. properties. These properties, however, had already been previously foreclosed
(PCRBI), Rural Bank of Carmen (Cebu), Inc. (RBCI), Bank of East Asia and consolidated under the names of PRBI, BEAI and RBCI.
(Minglanilla, Cebu), Inc. (BEAI), and Pilipino Rural Bank (Cebu), Inc. (PRBI), all
collectively referred to as "Banks." The dispositive portion of the CA-Cebu decision On June 15, 2005, PDIC issued similar notices of investigation to PRBI8 and BEAI.
reads:
The notices stated that the investigation was to be conducted pursuant to Section
WHEREFORE, in view of all the foregoing premises, the petition for injunction is 9 (b-1) of the PDIC Charter and upon authority of PDIC Board Resolution No.
hereby GRANTED. The respondent PDIC is restrained from further conducting 2005-03-032 authorizing the twelve (12) named representatives of PDIC to
investigations or examination on petitioners-banks without the requisite approval conduct the investigation.
from the Monetary Board.
The investigation was sought because the Banks were found to be among the ten
SO ORDERED. (10) banks collectively known as "Legacy Banks." The Reports of General and
Special Examinations of the BSP as of June 30, 2004, disclosed, among others,
In a resolution dated January 25, 2007, the CA-Cebu denied petitioner’s motion for that the Legacy Banks were commonly owned and/or controlled by Legacy Plans
reconsideration for "lack of merit." Inc. (now Legacy Consolidated Plans, Inc.), and Celso Gancayco delos Angles, Jr.
and his family.
THE FACTS
The notice of investigation was served on PRBI the next day, June 16, 2005.
On March 9, 2005, the Board of Directors of the PDIC (PDIC Board) adopted
Resolution No. 2005-03-0323 approving the conduct of an investigation, in On June 25, 2005, a separate notice of investigation13 was served on RBCI. The
accordance with Section 9(b-1) of Republic Act (R.A.) No. 3591, as amended, on latter provided the PDIC Investigation Team with certified copies of the loan
the basis of the Reports of Examination of the Bangko Sentral ng Pilipinas (BSP) documents they had requested, until its president received an order directing him
on ten (10) banks, four (4) of which are respondents in this petition for review. The not to allow the investigation.
said resolution also created a Special Investigation Team to conduct the said
investigation, with the authority to administer oaths, to examine, take and preserve Subsequently, PRBI and BEAI refused entry to their bank premises and access to
testimony of any person relating to the subject of the investigation, and to examine their records and documents by the PDIC Investigation Team, upon advice of their
pertinent bank records. respective counsels.

On May 25, 2005, the PDIC Board adopted another resolution, Resolution No. On June 16 and 17, 2005, Atty. Victoria G. Noel (Atty. Noel) of the Tiongson &
2005-05-056,4 approving the conduct of an investigation on PCRBI based on a Antenor Cruz Law Office sent letters to the PDIC16 informing it of her legal advice

5
to PCRBI and BEAI not to submit to PDIC investigation on the ground that its PDIC filed a motion to dismiss alleging that the RTC had no jurisdiction over the
investigatory power pursuant to Section 9(b-1) of R.A. No. 3591, as amended (An said petition since a breach had already been committed by the Banks when they
Act Establishing The Philippine Deposit Insurance Corporation, Defining Its received the notices of investigation, and because PDIC need not secure prior
Powers And Duties And For Other Purposes), cannot be differentiated from the Monetary Board approval since "examination" and "investigation" are two different
examination powers accorded to PDIC under Section 8, paragraph 8 of the same terms.27
law, under which, prior approval from the Monetary Board is required.
Later, the Banks withdrew their application for a temporary restraining order (TRO)
On June 17, 2005, PDIC General Counsel Romeo M. Mendoza sent a reply to reasoning that lower courts cannot issue injunctions against PDIC. Thus, the
Atty. Noel stating that "PDIC’s investigation power, as distinguished from the Banks instituted a petition for injunction with application for TRO and/or Preliminary
examination power of the PDIC under Section 8 of the same law, does not need Injunction (CA-Manila petition) before the Court of Appeals-Manila (CA-Manila).
prior approval of the Monetary Board."17 PDIC then urged PRBI and BEAI "not to The case was docketed as CA-G.R. SP No. 91038.28
impede the conduct of PDIC’s investigation" as the same "constitutes a violation of
the PDIC Charter for which PRBI and BEAI may be held criminally and/or Even before the CA-Manila could rule on the application for a TRO and/or writ of
administratively liable."18 preliminary injunction, the RTC-Makati dismissed the petition on the ground that
there already existed a breach of law that isolated the case from the jurisdiction of
On June 27 and 28, 2005, the Banks, through counsel, sought further clarification the trial court.
from PDIC on its source of authority to conduct the impending investigations and
requested that PDIC refrain from proceeding with the investigations.19 The Banks filed a motion for reconsideration but it was denied by the RTC for lack
of merit.30 On February 10, 2006, the Banks filed a notice of appeal31 which they
Simultaneously, the Banks wrote to the Monetary Board requesting a clarification later withdrew on February 28, 2006.
on the parameters of PDIC’s power of investigation/examination over the Banks
and for an issuance of a directive to PDIC not to pursue the investigations pending In view of the dismissal of the RTC-Makati petition, the CA-Manila dismissed the
the requested clarification.20 petition for injunction for being moot and academic. In its Decision, dated February
1, 2006, the CA-Manila wrote:
On June 28, 2005, PRBI and BEAI again received letters from PDIC, dated June
24, 2005, which appeared to be final demands on them to allow its investigation.21 What remained for the petitioners to do was to litigate over the breach or violation
PRBI and BEAI replied that letters of clarification had been sent to PDIC and the by ordinary action, as the circumstances ensuing from the breach or violation
Monetary Board.22 Pending action on such requests, PDIC was requested to warrant. The ordinary action may either be in the same case, if the RTC permitted
refrain from proceeding with the investigation.23 the conversion, in which event the RTC may allow the parties to file such pleadings
as may be necessary or proper, pursuant to Sec. 5, Rule 63; or the petitioners may
Notwithstanding, on July 11, 2005, the Banks received a letter, dated July 8, 2005, file another action in the proper court (e.g. including the Court of Appeals, should
from the PDIC General Counsel reiterating its position that prior Monetary Board injunction be among the reliefs to be sought) upon some cause of action that has
approval was not a pre-requisite to PDIC’s exercise of its investigative power.24 arisen from the breach or violation.

Not in conformity, on July 28, 2005, the Banks filed a Petition for Declaratory Relief Thereafter, on March 14, 2006, the Banks filed their Petition for Injunction with
with a Prayer for the Issuance of a TRO and/or Writ of Preliminary Injunction (RTC Prayer for Preliminary Injunction (CA-Cebu Petition) with the CA-Cebu (CA-Cebu).
Petition) before the Regional Trial Court of Makati (RTC-Makati) which was
docketed as Civil Case No. 05-697.25 On March 15, 2006, the CA-Cebu issued a resolution granting the Bank’s
application for a TRO. This enjoined the PDIC, its representatives or agents or any
In the RTC Petition, the Banks prayed for a judgment interpreting Section 9(b-1) of other persons or agency assisting them or acting for and in their behalf from
the PDIC Charter, as amended, to require prior Monetary Board approval before conducting examinations/investigations on the Banks’ head and branch offices
PDIC could exercise its investigation/examination power over the Banks.26 without securing the requisite approval from the Monetary Board of BSP.36

6
During the pendency of the CA-Cebu petition, PDIC filed with this Court a Petition Collin’s Dictionary of Banking and Finance, the word "investigation" is defined as
for Certiorari, Prohibition and Mandamus with Prayer for Issuance of Temporary an "examination to find out what is wrong."
Restraining Order and/or Writ of Preliminary Injunction under Rule 65 docketed as
G.R. No. 173370.37 It alleged that the CA-Cebu committed grave abuse of In the case of Anti-Graft League of the Philippines, Inc. vs. Hon. Ortega, et al.,41
discretion amounting to lack or excess of jurisdiction in taking cognizance of the the Supreme Court using Ballentine’s Law Dictionary defines an "investigation" as
Banks’ petition, and in issuing a TRO and a writ of preliminary injunction.38 an inquiry, judicial or otherwise, for the discovery or collection of facts concerning
the matter or matters involved. Such common definitions would show that there is
On July 31, 2006, this Court issued a resolution dismissing the petition for really nothing to distinguish between these two (2) terms as to support the PDIC
certiorari in G.R. No. 173370. The Resolution reads: view differentiating Section 9 (b-1) from paragraph 8, Section 8 of the PDIC
Charter.
Considering the allegations, issues and arguments adduced in the petition for
certiorari, prohibition and mandamus with prayer for preliminary injunction and/or In the realm of the PDIC rules, specifically under Section 3 of PDIC Regulatory
restraining order dated 19 July 2006, the Court resolves to DISMISS the petition Issuance No. 2205-0242 "investigation" is defined as: Investigation shall refer to
for failure to sufficiently show that the questioned resolution of the Court of fact-finding examination, study, inquiry, for determining whether the allegations in a
Appeals is tainted with grave abuse of discretion. Moreover, the petition failed to complaint or findings in a final report of examination may properly be the subject of
conform with Rule 65 and other related provisions of the 1997 Rules of Civil an administrative, criminal or civil action.
Procedure, as amended, governing petitions for certiorari, prohibition and
mandamus filed with the Supreme Court, since petitioner failed to submit a verified From the foregoing definition alone, it can be easily deduced that investigation and
statement of material date of receipt of the assailed resolution dated 16 May 2006 examination are synonymous terms. Simply stated, investigation encompasses a
in accordance with Section 4, Rule 65 in relation to the second paragraph of fact-finding examination. Thus, it is inconsistent with the rules if respondent PDIC
Section 3, Rule 46. In any event, the petition is premature since no motion for be (sic) allowed to conduct an investigation without the approval of the Monetary
reconsideration of the questioned resolution of the Court of Appeals was filed prior Board.
to the availment of this special civil action and there are no sufficient allegations to
bring the case within the recognized exceptions to this rule.39 Moreover, the Court sees that the rationale of the law in requiring a (sic) prior
approval from the Monetary Board whenever an examination or in this case an
On September 18, 2006, after both parties had submitted their respective investigation needs to be conducted by the PDIC is obviously to ensure that there
memoranda, the CA-Cebu rendered a decision granting the writ of preliminary is no overlapping of efforts, duplication of functions and more importantly to
injuction,40 pertinent portions of which read: provide a check and balance to the otherwise unrestricted power of respondent
PDIC to conduct investigations on banks insured by it.
[A]fter undergoing a series of amendments, the controlling law with respect to
PDIC’s power to conduct examination of banks is-prior approval of the Monetary With the foregoing premises, this Court rules that a prior approval from the
Board is a condition sine qua non for PDIC to exercise its power of examination. Monetary Board is necessary before respondent PDIC can proceed with its
To rule otherwise would disregard the amendatory law of the PDIC’s charter. investigations on petitioners-banks.

The Court is not also swayed by the contention of respondent that what it seeks to PDIC moved for reconsideration but it was denied in a resolution dated January
conduct is an investigation and not an examination of petitioners’ transactions, 25, 2007.
hence prior approval of the Monetary Board is a mere surplusage.
Hence, this petition.
The ordinary definition of the words "examination" and "investigation" would lead
one to conclude that both pertain to the same thing and there seems to be no fine THE ISSUES
line differentiating one from the other. Black’s Law Dictionary defines the word I. WHETHER RESPONDENT BANKS VIOLATED THE RULE AGAINST FORUM
"investigate" as "to examine and inquire into with care and accuracy; to find out by SHOPPING WHEN THEY FILED THE PETITION FOR INJUNCTION BEFORE
careful inquisition; examination and the word "examination" as an investigation. In THE COURT OF APPEALS-CEBU.

7
II. WHETHER THE PRONOUNCEMENT OF THE REGIONAL TRIAL COURT OF and congests court dockets. A willful and deliberate violation of the rule against
MAKATI IN THE PETITION FOR DECLARATORY RELIEF CONSTITUTES RES forum shopping is a ground for summary dismissal of the case, and may also
JUDICATA TO THE PETITION FOR INJUNCTION IN THE COURT OF APPEALS- constitute direct contempt.46
CEBU.
Juxtaposing the RTC-Makati, CA-Manila and CA-Cebu petitions, what must be
III. WHETHER PETITIONER WAS DEPRIVED OF ITS OPPORTUNITY TO BE determined here, is whether the elements of litis pendentia are present between
HEARD WHEN THE COURT OF APPEALS-CEBU ISSUED THE WRIT OF and among these petitions, i.e. whether (a) there is identity of parties, or at least
INJUNCTION. such parties as represent the same interest in both actions; (b) there is identity of
rights asserted and relief prayed for, the relief being founded on the same set of
IV. WHETHER THE ISSUES RAISED BY PETITIONERS ARE THE SAME facts; and (c) the identity of the two preceding particulars is such that any judgment
ISSUES RAISED IN G.R. NO. 173370 WHICH WAS EARLIER DISMISSED BY rendered in the pending case, regardless of which party is successful, would
THIS COURT. amount to res judicata in the other.

V. WHETHER THE COURT OF APPEALS ERRED IN FINDING THAT PRIOR The first element is clearly present as between the RTC-Makati petition and the
APPROVAL OF THE MONETARY BOARD OF THE BANGKO SENTRAL NG CA-Cebu petition. Both involved the Banks on one hand, and the PDIC on the
PILIPINAS IS NECESSARY BEFORE THE PDIC MAY CONDUCT AN other.
INVESTIGATION OF RESPONDENT BANKS.
The second and third elements of litis pendentia, however, are patently wanting.
THE COURT’S RULING The rights asserted and reliefs prayed for were different, though founded on the
same set of facts. The RTC-Makati Petition was one for declaratory relief while the
I - Whether respondent banks violated the rule against forum shopping when they CA-Manila Petition was one for injunction with a prayer for preliminary injunction.
filed the petition for injunction before the Court of Appeals-Cebu.
A petition for declaratory relief is filed by any person interested under a deed, will,
II - Whether the pronouncement of the Regional Trial Court of Makati in the petition contract or other written instrument, or whose rights are affected by a statute,
for declaratory relief constitutes res judicata to the petition for injunction in the executive order or regulation, ordinance, or any other governmental regulation,
Court of Appeals-Cebu. before breach or violation, thereof, to determine any question of construction or
validity arising, and for a declaration of his rights or duties thereunder.47
In the recent case of Sameer Oversees Placement Agency, Inc. v. Mildred R.
Santos,45 the Court discussed the matter of forum shopping: Injunction, on the other hand, is "a judicial writ, process or proceeding whereby a
party is directed either to do a particular act, in which case it is called a mandatory
Forum shopping is defined as an act of a party, against whom an adverse injunction, or to refrain from doing a particular act, in which case it is called a
judgment or order has been rendered in one forum, of seeking and possibly getting prohibitory injunction. As a main action, injunction seeks to permanently enjoin the
a favorable opinion in another forum, other than by appeal or special civil action for defendant through a final injunction issued by the court and contained in the
certiorari. It may also be the institution of two or more actions or proceedings judgment."48
grounded on the same cause on the supposition that one or the other court would
make a favorable disposition. There is forum shopping where the elements of litis Clearly, there is a marked difference between the reliefs sought under an action for
pendentia are present, namely: (a) there is identity of parties, or at least such declaratory relief and an action for injunction. While an action for declaratory relief
parties as represent the same interest in both actions; (b) there is identity of rights seeks a declaration of rights or duties, or the determination of any question or
asserted and relief prayed for, the relief being founded on the same set of facts; validity arising under a statute, executive order or regulation, ordinance, or any
and (c) the identity of the two preceding particulars is such that any judgment other governmental regulation, or under a deed, will, contract or other written
rendered in the pending case, regardless of which party is successful, would instrument, under which his rights are affected, and before breach or violation, an
amount to res judicata in the other. It is expressly prohibited by this Court because action for injunction ultimately seeks to enjoin or to compel a party to perform
it trifles with and abuses court processes, degrades the administration of justice, certain acts.

8
Moreover, as stated in the RTC-Makati Decision, because the Banks had already As can be gleaned from the above-cited portions of the CA-Manila and CA-Cebu
breached the provisions of law on which declaratory judgment was being sought, it petitions, the petitions seek different reliefs.
was without jurisdiction to take cognizance of the same. Any judgment rendered in
the RTC-Makati petition would not amount to res judicata in the CA-Manila Therefore, as between and among the RTC Makati, and the CA-Manila and CA-
Petition. Thus, the RTC was correct in dismissing the case, having been bereft of Cebu petitions, there is no forum shopping.
jurisdiction to take cognizance of the action for declaratory judgment.
III - Whether petitioner was deprived of its opportunity to be heard when the Court
As between the CA-Manila and the CA-Cebu petitions, the second and third of Appeals-Cebu issued the writ of injunction.
elements of litis pendentia are absent. The rights asserted and reliefs prayed for
were different, although founded on the same set of facts. PDIC alleges that the CA-Cebu, in issuing the TRO in its March 15, 2006
Resolution, and subsequently, the preliminary injunction in its May 16, 2006
The CA-Manila Petition is a petition for injunction wherein the Banks prayed that: Resolution, violated the fundamental rule that courts should avoid issuing
injunctive relief which would in effect dispose of the main case without trial.51
1) Immediately upon filing of this Petition, a Writ of Preliminary Injunction and/or PDIC argues that a TRO is intended only as a restraint until the propriety of
Temporary Restraining Order be issued commanding the respondent and all its granting a temporary injunction can be determined, and it goes no further than to
officers, employees and agents to cease and desist from proceeding with the preserve the status until that determination.52 Moreover, its purpose is merely to
investigations sought to be conducted on the petitioners’ head and branch offices suspend proceedings until such time when there may be an opportunity to inquire
while the Petition for Declaratory Relief before Branch 58 of the Makati Regional whether any injunction should be granted, and it is not intended to operate as an
Trial Court is pending. injunction pendente lite, and should not, in effect, determine the issues involved
before the parties can have their day in court, or give an advantage to either party
2) After due proceedings, judgment be rendered declaring as permanent the Writ by proceeding in the acquisition or alteration of the property the right to which is
of Preliminary Injunction and/or Temporary Restraining Order prayed for above. disputed while the hands of the other party are tied.53

Other equitable reliefs are likewise prayed for.49 On the other hand, the Banks claim that PDIC was given every opportunity to
present its arguments against the issuance of the injunction.54 Its active
[Underscoring supplied] participation in the proceedings negates its assertion that it was denied procedural
due process in the issuance of the writ of injunction.55 Citing Salonga v. Court of
The CA-Cebu Petition, on the other hand, is denominated as a Petition for Appeals,56 the Banks state that the essence of due process is the reasonable
Injunction With Prayer for Writ of Preliminary Injunction and/or Restraining Order. opportunity to be heard and to submit evidence one may have in support of one’s
The Banks prayed therein that: defense,57 and PDIC was able to do so.

1) Upon filing of this Petition, a Writ of Preliminary Injunction and/or Temporary On March 15, 2006, the CA-Cebu issued a resolution granting their prayer for a
Restraining Order be issued forthwith, enjoining Respondent PDIC and all its 60-day TRO, and requiring PDIC to file its comment.58 The latter thereafter filed its
officers, employees and agents to cease and desist from conducting Comment ad Cautelam dated March 30, 2006.59 [Underscoring ours]
examinations/investigations on Petitioner Banks’ head and branch offices without On May 16, 2006, the CA-Cebu issued another resolution, this time granting the
securing the requisite approval from the Monetary Board of the Bangko Sentral ng prayer for a preliminary injunction and requiring the parties to file their respective
Pilipinas, as required by Sec. 8, Paragraph 8 of the PDIC Charter, as amended; memoranda. PDIC thereafter filed its memorandum dated July 31, 2006.60

2) After due proceedings, judgment be rendered declaring as permanent the Writ On September 18, 2006, the CA-Cebu promulgated its Decision granting the
of Preliminary Injunction and/or Temporary Restraining Order prayed for above. Petition for Injunction.61 PDIC filed a motion for reconsideration dated October 10,
2006,62 which was subsequently denied.
Other equitable reliefs are likewise prayed for.50

9
The essence of procedural due process is found in the reasonable opportunity to (b) The complaint alleges, or the BSP and/or PDIC Report of Examination contains
be heard and submit one’s evidence in support of his defense.63 The Court finds adverse findings of, fraud, irregularities or anomalies committed by the Bank
that procedural due process was observed by the CA-Cebu. The parties were and/or its directors, officers, employees or agents; and,
afforded equal opportunity to present their arguments. In the absence of any (c) The investigation is upon the authority of the PDIC Board of Directors.65
indication to the contrary, the CA-Cebu must be accorded the presumption of
regularity in the performance of their functions. However, as discussed herein, the It argues that when it commenced its investigation on the Banks, all of the
matter of whether it erred in its conclusion and issuance of the TRO, preliminary aforementioned requirements were met. PDIC stresses that its power of
injunction and final injunction is another matter altogether. examination is different from its power of investigation, in such that the former
requires prior approval of the Monetary Board while the latter requires merely the
IV – Whether the issues raised by petitioner are the same issues raised in G.R. approval of the PDIC Board.66 It further claims that the power of examination
No. 173370 which was earlier dismissed by this Court. cannot be exercised within twelve (12) months from the last examination
conducted, whereas the power of investigation is without limitation as to the
In G.R. 173370, a petition for certiorari under Rule 65 of the Rules of Court, PDIC frequency of its conduct. It states that the purpose of the PDIC’s power of
alleged that the CA-Cebu committed grave abuse of discretion amounting to lack examination is merely to look into the condition of the bank, whereas the power of
or excess of jurisdiction in taking cognizance of the Bank’s petition, and in issuing investigation aims to address fraud, irregularities and anomalies based on
a TRO and a writ of preliminary injunction.64 complaints from depositors and other government agencies or upon reports of
examinations conducted by the PDIC itself or by the BSP.67
In the case at bench, a petition for review under Rule 45, PDIC’s core contention is
that the CA-Cebu erred in finding that prior approval of the Monetary Board of the The Banks, on the other hand, are of the opinion that a holistic reading of the PDIC
BSP is necessary before it may conduct an investigation of the Banks. charter shows that petitioner’s power of examination is synonymous with its power
of investigation.68 They cite, as bases, the law dictionary definitions, Section 8,
Clearly then, the two petitions were of different nature raising different issues. Eighth paragraph69 and Section 9(b-1)70 of the PDIC Charter, and Rule 1,
Section 3(1) of PDIC Regulatory Issuance No. 2005-02, which defines
G.R. 173370 challenged the CA-Cebu’s having taken cognizance of the Bank’s "investigation" as follows:
petition and interlocutory orders on the issuance of a TRO and a writ of preliminary
injunction. This case, however, strikes at the core of the final decision on the (l) ‘Investigation’ shall refer to fact-finding examination, study or inquiry for
merits of the CA-Cebu, and not merely the interlocutory orders. While both G.R. determining whether the allegations in a complaint or findings in a final report of
173370 and the present case may have been anchored on the same set of facts, examination may properly be the subject of an administrative, criminal or civil
that is, the refusal of the Banks to allow PDIC to conduct an investigation without action.
the prior consent of the Monetary Board, the issues raised in the two petitions are
not identical. Moreover, the disposal of the first case does not amount to res The Banks further cite Section X658 of the Manual of Regulations for Banks, which
judicata in this case. states:

V – Whether the Court of Appeals-Cebu erred in finding that prior approval of the Sec. X658 - Examination by the BSP. The term ‘examination’ shall, henceforth,
Monetary Board of the Bangko Sentral ng Pilipinas is necessary before the PDIC refer to an investigation of an institution under the supervisory authority of the BSP
may conduct an investigation of respondent banks. to determine compliance with laws and regulations. It shall include determination
that the institution is conducting its business on a safe and sound basis.
PDIC is of the position that in order for it to exercise its power of investigation, the Examination requires full and comprehensive looking into the operations and
law requires that: books of institutions, and shall include, but need not be limited to the following:

(a) The investigation is based on a complaint of a depositor or any other a. Determination of the bank’s solvency and liquidity position;
government agency, or on the report of examination of [the] Bangko Sentral ng b. Evaluation of asset quality as well as determination of sufficiency of valuation
Pilipinas (BSP) and/or PDIC; and, reserves on loans and other risk assets;

10
c. Review of all aspects of bank operations; Section 1 of R.A. No. 9576 further provides: An Act Increasing the Maximum
d. Assessment of risk management system, including the evaluation of the Deposit Insurance Coverage, and in connection therewith, to Strengthen the
effectiveness of the bank management’s oversight functions, policies, procedures, Regulatory and Administrative Authority, and Financial Capability of the Philippine
internal control and audit; Deposit Insurance Corporation (PDIC), amending for this purpose R.A. No. 3591,
e. Appraisal of overall management of the bank; as Amended, otherwise known as the PDIC Charter.
f. Review of compliance and applicable laws, rules and regulations; and any other
activities relevant to the above." SECTION 1. Statement of State Policy and Objectives. - It is hereby declared to be
the policy of the State to strengthen the mandatory deposit insurance coverage
After an evaluation of the respective positions of the parties, the Court is of the system to generate, preserve, maintain faith and confidence in the country’s
view that the Monetary Board approval is not required for PDIC to conduct an banking system, and protect it from illegal schemes and machinations.
investigation on the Banks.
Towards this end, the government must extend all means and mechanisms
The disagreement stems from the interpretation of these two key provisions of the necessary for the Philippine Deposit Insurance Corporation to effectively fulfill its
PDIC Charter. The confusion can be attributed to the fact that although vital task of promoting and safeguarding the interests of the depositing public by
"investigation" and "examination" are two separate and distinct procedures under way of providing permanent and continuing insurance coverage on all insured
the charter of the PDIC and the BSP, the words seem to be used loosely and deposits, and in helping develop a sound and stable banking system at all
interchangeably. times.1âwphi1

It does not help that indeed these terms are very closely related in a generic Under its charter, the PDIC is empowered to conduct examination of banks with
sense. However, while "examination" connotes a mere generic perusal or prior approval of the Monetary Board:
inspection, "investigation" refers to a more intensive scrutiny for a more specific
fact-finding purpose. The latter term is also usually associated with proceedings Eighth – To conduct examination of banks with prior approval of the Monetary
conducted prior to criminal prosecution. Board: Provided, That no examination can be conducted within twelve (12) months
from the last examination date: Provided, however, That the Corporation may, in
The PDIC was created by R.A. No. 3591 on June 22, 1963 as an insurer of coordination with the Bangko Sentral, conduct a special examination as the Board
deposits in all banks entitled to the benefits of insurance under the PDIC Charter to of Directors, by an affirmative vote of a majority of all its members, if there is a
promote and safeguard the interests of the depositing public by way of providing threatened or impending closure of a bank; Provided, further, That,
permanent and continuing insurance coverage of all insured deposits. It is a notwithstanding the provisions of Republic Act No. 1405, as amended, Republic
government instrumentality that operates under the Department of Finance. Its Act No. 6426, as amended, Republic Act No. 8791, and other laws, the
primary purpose is to act as deposit insurer, as a co-regulator of banks, and as Corporation and/or the Bangko Sentral, may inquire into or examine deposit
receiver and liquidator of closed banks.71 accounts and all information related thereto in case there is a finding of unsafe or
unsound banking practice; Provided, That to avoid overlapping of efforts, the
Section 1 of the PDIC Charter states: examination shall maximize the efficient use of the relevant reports, information,
SECTION 1. There is hereby created a Philippine Deposit Insurance Corporation and findings of the Bangko Sentral, which it shall make available to the
hereinafter referred to as the "Corporation" which shall insure, as herein provided, Corporation; (As amended by R.A. 9302, 12 August 2004, R.A. 9576, 1 June
the deposits of all banks which are entitled to the benefits of insurance under this 2009)
Act, and which shall have the powers hereinafter granted.
Section 9(b-1) of the PDIC Charter further provides that the PDIC Board shall have
The Corporation shall, as a basic policy, promote and safeguard the interests of the power to:
the depositing public by way of providing permanent and continuing insurance
coverage on all insured deposits. POWERS AND RESPONSIBILITIES AND PROHIBITIONS

SECTION 9. xxx

11
(b) The Board of Directors shall appoint examiners who shall have power, on Section 2 of RI No. 2005-02 states that its coverage shall be applicable to "all fact-
behalf of the Corporation to examine any insured bank. Each such examiner shall finding investigations on fraud, irregularities and/or anomalies committed in banks
have the power to make a thorough examination of all the affairs of the bank and in that are conducted by PDIC based on: [a] complaints from depositors or other
doing so, he shall have the power to administer oaths, to examine and take and government agencies; and/or [b] final reports of examinations of banks conducted
preserve the testimony of any of the officers and agents thereof, and, to compel by the Bangko Sentral ng Pilipinas and/or PDIC."
the presentation of books, documents, papers, or records necessary in his
judgment to ascertain the facts relative to the condition of the bank; and shall make The same issuance states that the Final Report of Examination72 is one of the
a full and detailed report of the condition of the bank to the Corporation. The Board three pre-requisites to the conduct of an investigation, in addition to the
of Directors in like manner shall appoint claim agents who shall have the power to authorization of the PDIC Board73 and a complaint.74 Juxtaposing this provision
investigate and examine all claims for insured deposits and transferred deposits. with Section 9(b-1) of the PDIC Charter, since an examination is explicitly made
Each claim agent shall have the power to administer oaths and to examine under the basis of a fact-finding examination, then clearly examination and investigation
oath and take and preserve testimony of any person relating to such claim. (As are two different proceedings. It would obviously defy logic to make the result of an
amended by E.O. 890, 08 April 1983; R.A. 7400, 13 April 1992) "investigation" the basis of the same proceeding. Thus, RI No. 2005-02 defines an
"investigation" as a "fact-finding examination, study or inquiry for determining
(b-1) The investigators appointed by the Board of Directors shall have the power whether the allegations in a complaint or findings in a final report of examination
on behalf of the Corporation to conduct investigations on frauds, irregularities and may properly be the subject of an administrative, criminal or civil action."75
anomalies committed in banks, based on reports of examination conducted by the
Corporation and Bangko Sentral ng Pilipinas or complaints from depositors or from The Banks cite the dictionary definitions of "examination" and "investigation" to
other government agency. Each such investigator shall have the power to justify their conclusion that these terms refer to one and the same proceeding. It is
administer oaths, and to examine and take and preserve the testimony of any tempting to use these two terms interchangeably, which practice may be perfectly
person relating to the subject of investigation. (As added by R.A. 9302, 12 August justified in a purely literary sense. Indeed, a reading of the PDIC Charter shows
2004) that the two terms have been used interchangeably at some point. However,
based on the provisions aforecited, the intention of the laws is clearly to
As stated above, the charter empowers the PDIC to conduct an investigation of a differentiate between the process of investigation and that of examination.
bank and to appoint examiners who shall have the power to examine any insured
bank. Such investigators are authorized to conduct investigations on frauds, In 2009, to clarify procedural matters, PDIC released RI No. 2009-05 or the Rules
irregularities and anomalies committed in banks, based on an examination and Regulations on Examination of Banks. Section 2 thereof differentiated
conducted by the PDIC and the BSP or on complaints from depositors or from between the two types of examination as follows:
other government agencies.
Section 2. Types of Examination
The distinction between the power to investigate and the power to examine is a. Regular Examination - An examination conducted independently or jointly with
emphasized by the existence of two separate sets of rules governing the the BSP. It requires the prior approval of the PDIC Board of Directors and the
procedure in the conduct of investigation and examination. Regulatory Issuance Monetary Board (MB). It may be conducted only after an interval of at least twelve
(RI) No. 2005-02 or the PDIC Rules on Fact-Finding Investigation of Fraud, (12) months from the closing date of the last Regular Examination.
Irregularities and Anomalies Committed in Banks covers the procedural
requirements of the exercise of the PDIC’s power of investigation. On the other b. Special Examination – An examination conducted at any time in coordination
hand, RI No. 2009-05 sets forth the guidelines for the conduct of the power of with the BSP, by an affirmative vote of a majority of all the members of the PDIC
examination. Board of Directors, without need of prior MB approval, if there is a threatened or
impending bank closure as determined by the PDIC Board of Directors.
The definitions provided under the two aforementioned regulatory issuances [Underscoring supplied]
elucidate on the distinction between the power of examination and the power of
investigation. Section 3 of RI No. 2009-05 provides for the general scope of the PDIC
examination:

12
Section 3. Scope of Examination An examination entails a review of essentially all the functions and facets of a bank
and its operation. It necessitates poring through voluminous documents, and
The examination shall include, but need not be limited to, the following: requires a detailed evaluation thereof. Such a process then involves an intrusion
into a bank’s records.
a. Determination of the bank’s solvency and liquidity position;
b. Evaluation of asset quality as well as determination of sufficiency of valuation In contrast, although it also involves a detailed evaluation, an investigation centers
reserves on loans and other risk assets; on specific acts of omissions and, thus, requires a less invasive assessment.
c. Review of all aspects of bank operations;
d. Assessment of risk management system, including the evaluation of the The practical justification for not requiring the Monetary Board approval to conduct
effectiveness of the bank management’s oversight functions, policies, procedures, an investigation of banks is the administrative hurdles and paperwork it entails,
internal control and audit; and the correspondent time to complete those additional steps or requirements. As
e. Appraisal of overall management of the bank; in other types of investigation, time is always of essence, and it is prudent to
f. Review of compliance with applicable banking laws, and rules and regulations, expedite the proceedings if an accurate conclusion is to be arrived at, as an
including PDIC issuances; investigation is only as precise as the evidence on which it is based. The
g. Follow-through of specific exceptions/ violations noted during a previous promptness with which such evidence is gathered is always of utmost importance
examination; and because evidence, documentary evidence in particular, is remarkably fungible. A
h. Any other activity relevant to the above. PDIC investigation is conducted to "determine[e] whether the allegations in a
complaint or findings in a final report of examination may properly be the subject of
Rule 2, Section 1 of PDIC RI No. 2005-02 or the PDIC Rules on Fact-Finding an administrative, criminal or civil action."76 In other words, an investigation is
Investigation of Fraud, Irregularities and Anomalies Committed in Banks provides based on reports of examination and an examination is conducted with prior
for the scope of fact-finding investigations as follows: Monetary Board approval. Therefore, it would be unnecessary to secure a
separate approval for the conduct of an investigation. Such would merely prolong
SECTION 1. Scope of the Investigation. the process and provide unscrupulous individuals the opportunity to cover their
tracks.
Fact-finding Investigations shall be limited to the particular acts or omissions
subject of a complaint or a Final Report of Examination. Indeed, while in a literary sense, the two terms may be used interchangeably,
under the PDIC Charter, examination and investigation refer to two different
From the above-cited provisions, it is clear that the process of examination covers processes. To reiterate, an examination of banks requires the prior consent of the
a wider scope than that of investigation. Monetary Board, whereas an investigation based on an examination report, does
Examination involves an evaluation of the current status of a bank and determines not.
its compliance with the set standards regarding solvency, liquidity, asset valuation, WHEREFORE, the petition is GRANTED. The Decision and Resolution of the
operations, systems, management, and compliance with banking laws, rules and Court of Appeals in CA G.R. CEB SP. No. 01550, dated September 18, 2006 and
regulations. January 25, 2007 are REVERSED and SET ASIDE.

Investigation, on the other hand, is conducted based on specific findings of certain SO ORDERED.
acts or omissions which are subject of a complaint or a Final Report of
Examination.

Clearly, investigation does not involve a general evaluation of the status of a

bank.1âwphi1 An investigation zeroes in on specific acts and omissions uncovered
via an examination, or which are cited in a complaint.

13
G.R. No. 230020, March 19, 2018 It also declared that, pursuant to its Charter (RA 3591), PDIC is empowered to
PETER L. SO, Petitioner, v. PHILIPPINE DEPOSIT INSURANCE determine and pass upon the validity of the insurance deposits claims, it being the
CORPORATION, Respondent. deposit insurer. As such, when it rules on such claims, it is exercising a quasi-
judicial function. Thus, it was held that petitioner's remedy to the dismissal of his
DECISION claim is to file a petition for certiorari with the Court of Appeals under Section 4,13
Rule 65, stating that if the petition involves the acts or omissions of a quasi-judicial
TIJAM, J.: agency, unless otherwise provided by law or the rules, it shall be filed in and
cognizable only by the Court of Appeals (CA).
This is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court,
assailing the Decision2 dated November 7, 2016 and Order3 dated February 17, In addition, the RTC also cited Section 2215 of Republic Act (RA) No. 3591, as
2017 of the Regional Trial Court (RTC) of Makati, Branch 138, in Special Civil amended, which essentially states that only the CA shall issue temporary
Case No. 16-031, which dismissed Peter L. So's (petitioner's) Petition for restraining orders, preliminary injunctions or preliminary mandatory injunctions
Certiorari4 on the ground of lack of jurisdiction. against the PDIC for any action under the said Act.

Factual Antecedents The RTC disposed, thus:

Petitioner opened an account with the Cooperative Rural Bank Bulacan (CRBB) on
April 17, 2013, amounting to P300,000, for which he was assigned the Special WHEREFORE, in view of the foregoing, for lack of jurisdiction, the petition for
Incentive Savings Account (SISA) No. 05-15712-1.5 certiorari filed by the petitioner is hereby DISMISSED.

On the same year, however, petitioner learned that CRBB closed its operations SO ORDERED.
and was placed under Philippine Deposit Insurance Corporation's (PDIC's)
receivership. This prompted petitioner, together with other depositors, to file an In its February 17, 2017 Order, the RTC denied petitioner's motion for
insurance claim with the PDIC on November 8, 2013.6 reconsideration.

Acting upon such claim, PDIC sent a letter/notice dated November 22, 2013, Hence, this petition, filed directly to this Court on pure question of law.
requiring petitioner to submit additional documents, which petitioner averred of
having complied with.7 Issue
Does the RTC have jurisdiction over a petition for certiorari filed under Rule 65,
Upon investigation, the PDIC found that petitioner's account originated from and assailing the PDIC's denial of a deposit insurance claim?
was funded by the proceeds of a terminated SISA (mother account), jointly owned
by a certain Reyes family.8 Thus, based on the determination that petitioner's Our Ruling
account was among the product of the splitting of the said mother account which is The petition lacks merit.
prohibited by law, PDIC denied petitioner's claim for payment of deposit
insurance.9 Petitioner filed a Request for Reconsideration, which was likewise There is no controversy as to the proper remedy to question the PDIC's denial of
denied by the PDIC on January 6, 2016.10 petitioner's deposit insurance claim. Section 4(f) of its Charter, as amended,
clearly provides that:
Aggrieved, petitioner filed a Petition for Certiorari11 under Rule 65 before the RTC.
The actions of the Corporation taken under this section shall be final and
RTC Ruling executory, and may not be restrained or set aside by the court, except on
In its November 7, 2016 assailed Decision, the RTC upheld the factual findings appropriate petition for certiorari on the ground that the action was taken in excess
and conclusions of the PDIC. According to the RTC, based on the records, the of jurisdiction or with such grave abuse of discretion as to amount to a lack or
PDIC correctly denied petitioner's claim for insurance on the ground of splitting of excess of jurisdiction. The petition for certiorari may only be filed within thirty (30)
deposits which is prohibited by law. days from notice of denial of claim for deposit insurance. (emphasis supplied)

14
The issue, however, is which court has jurisdiction over such petition. Quasi-judicial or administrative adjudicatory power on the other hand is the power
of the administrative agency to adjudicate the rights of persons before it. It is the
Petitioner's stance is that the petition for certiorari, questioning PDIC's action, power to hear and determine questions of fact to which the legislative policy is to
denying a deposit insurance claim should be filed with the RTC, arguing in this apply and to decide in accordance with the standards laid down by the law itself in
manner: PDIC is not a quasi-judicial agency and it does not possess any quasi- enforcing and administering the same law. The administrative body exercises its
judicial power under its Charter; It merely performs fact-finding functions based on quasi-judicial power when it performs in a judicial manner an act which is
its regulatory power. As such, applying Section 4, Rule 65 of the Rules of Court, as essentially of an executive or administrative nature, where the power to act in such
amended by A.M. 07-7-12-SC, which in part states that if the petition relates to an manner is incidental to or reasonably necessary for the performance of the
act or omission of a corporation, such as the PDIC, it shall be filed with the RTC executive or administrative duty entrusted to it. In carrying out their quasi-judicial
exercising jurisdiction over the territorial area as defined by this Court; Also, Batas functions the administrative officers or bodies are required to investigate facts or
Pambansa Blg. 129 or the Judiciary Reorganization Act provides that this Court, ascertain the existence of facts, hold hearings, weigh evidence, and draw
the CA, and the RTC have original concurrent jurisdiction over petitions for conclusions from them as basis for their official action and exercise of discretion in
certiorari, prohibition, and mandamus. Applying the principle of hierarchy of courts, a judicial nature.
the RTC indeed has jurisdiction over such petition for certiorari.
The Court has laid down the test for determining whether an administrative body is
We do not agree. exercising judicial or merely investigatory functions: adjudication signifies the
exercise of the power and authority to adjudicate upon the rights and obligations of
On June 22, 1963, PDIC was created under RA 3591 as an insurer of deposits in the parties. Hence, if the only purpose of an investigation is to evaluate the
all banks entitled to the benefits of insurance under the said Act to promote and evidence submitted to an agency based on the facts and circumstances presented
safeguard the interests of the depositing public.17 As such, PDIC has the duty and to it, and if the agency is not authorized to make a final pronouncement affecting
authority to determine the validity of and grant or deny deposit insurance claims. the parties, then there is an absence of judicial discretion and judgment. (emphasis
Section 16(a) of its Charter, as amended, provides that PDIC shall commence the supplied)
determination of insured deposits due the depositors of a closed bank upon its
actual take over of the closed bank. Also, Section 1 of PDIC's Regulatory Issuance Thus, the legislative intent in creating PDIC as a quasi-judicial agency is clearly
No. 2011-03, provides that as it is tasked to promote and safeguard the interests of manifest. Indeed, PDIC exercises judicial discretion and judgment in determining
the depositing public by way of providing permanent and continuing insurance whether a claimant is entitled to a deposit insurance claim, which determination
coverage on all insured deposits, and in helping develop a sound and stable results from its investigation of facts and weighing of evidence presented before it.
banking system at all times, PDIC shall pay all legitimate deposits held by bona Noteworthy also is the fact that the law considers PDIC's action as final and
fide depositors and provide a mechanism by which depositors may seek executory and may be reviewed only on the ground of grave abuse of discretion.
reconsideration from its decision, denying a deposit insurance claim. Further, it
bears stressing that as stated in Section 4(f) of its Charter, as amended, PDIC's That being established, We proceed to determine where such petition for certiorari
action, such as denying a deposit insurance claim, is considered as final and should be filed. In this matter, We cite the very provision invoked by the petitioner,
executory and may be reviewed by the court only through a petition for certiorari i.e., Section 4, Rule 65 of the Rules, as amended by A.M. No. 07-7-12-SC:
on the ground of grave abuse of discretion.
Sec. 4. When and where to file the petition. - The petition shall be filed not later
Considering the foregoing, the legislative intent in creating the PDIC as a quasi- than sixty (60) days from notice of the judgment, order or resolution. In case a
judicial agency is clearly manifest. motion for reconsideration or new trial is timely filed, whether such motion is
required or not, the petition shall be filed not later than sixty (60) days counted
In the case of Lintang Bedol v. Commission on Elections,18 cited in Carlito C. from the notice of the denial of the motion.
Encinas v. PO1 Alfredo P. Agustin, Jr. and PO1 Joel S. Caubang,19 this Court
explained the nature of a quasi-judicial agency, viz.: If the petition relates to an act or an omission of a municipal trial court or of a
corporation, a board, an officer or a person, it shall be filed with the Regional Trial
Court exercising jurisdiction over the territorial area as defined by the Supreme

15
Court. It may also be filed with the Court of Appeals or with the Sandiganbayan,
whether or not the same is in aid of the court's appellate jurisdiction. If the petition
involves an act or an omission of a quasi-judicial agency, unless otherwise
provided by law or these rules, the petition shall be filed with and be cognizable
only by the Court of Appeals. (emphasis supplied)

Clearly, a petition for certiorari, questioning the PDIC's denial of a deposit

insurance claim should be filed before the CA, not the RTC. This further finds
support in Section 22 of the PDIC's Charter, as amended, which states that:

Section 22. No court, except the Court of Appeals, shall issue any temporary
restraining order, preliminary injunction or preliminary mandatory injunction against
the Corporation for any action under this Act. xxx.

This prohibition shall apply in all cases, disputes or controversies instituted by a

private party, the insured bank, or any shareholder of the insured bank. xxx.

xxxx

Finally, the new amendment in PDIC's Charter under RA 10846, specifically

Section 5(g) thereof, confirms such conclusion, viz.:

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

As it stands, the controversy as to which court has jurisdiction over a petition for
certiorari filed to question the PDIC's action is already settled. Therefore, We find
no reversible error from the findings and conclusion of the court a quo.

WHEREFORE, the instant petition is DENIED for lack of merit. SO ORDERED.

16
G.R. No. 170290 April 11, 2012 Believing that litigation would inevitably arise from this dispute, Citibank and BA
PHILIPPINE DEPOSIT INSURANCE CORPORATION, Petitioner, vs. CITIBANK, each filed a petition for declaratory relief before the Court of First Instance (now
N.A. and BANK OF AMERICA, S.T. & N.A., Respondents. the Regional Trial Court) of Rizal on July 19, 1979 and December 11, 1979,
respectively.9 In their petitions, Citibank and BA sought a declaratory judgment
DECISION stating that the money placements they received from their head office and other
foreign branches were not deposits and did not give rise to insurable deposit
MENDOZA, J.: liabilities under Sections 3 and 4 of R.A. No. 3591 (the PDIC Charter) and, as a
consequence, the deficiency assessments made by PDIC were improper and
This is a petition for review under Rule 45 of the 1997 Revised Rules of Civil erroneous.10 The cases were then consolidated.11
Procedure, assailing the October 27, 2005 Decision1 of the Court of Appeals (CA)
in CA-G.R. CV No. 61316, entitled "Citibank, N.A. and Bank of America, S.T. & On June 29, 1998, the Regional Trial Court, Branch 163, Pasig City (RTC)
N.A. v. Philippine Deposit Insurance Corporation." promulgated its Decision12 in favor of Citibank and BA, ruling that the subject
money placements were not deposits and did not give rise to insurable deposit
The Facts liabilities, and that the deficiency assessments issued by PDIC were improper and
Petitioner Philippine Deposit Insurance Corporation (PDIC) is a government erroneous. Therefore, Citibank and BA were not liable to pay the same. The RTC
instrumentality created by virtue of Republic Act (R.A.) No. 3591, as amended by reasoned out that the money placements subject of the petitions were not
R.A. No. 9302.2 assessable for insurance purposes under the PDIC Charter because said
placements were deposits made outside of the Philippines and, under Section
Respondent Citibank, N.A. (Citibank) is a banking corporation while respondent 3.05(b) of the PDIC Rules and Regulations,13 such deposits are excluded from the
Bank of America, S.T. & N.A. (BA) is a national banking association, both of which computation of deposit liabilities. Section 3(f) of the PDIC Charter likewise
are duly organized and existing under the laws of the United States of America and excludes from the definition of the term "deposit" any obligation of a bank payable
duly licensed to do business in the Philippines, with offices in Makati City.3 at the office of the bank located outside the Philippines. The RTC further stated
that there was no depositor-depository relationship between the respondents and
In 1977, PDIC conducted an examination of the books of account of Citibank. It their head office or other branches. As a result, such deposits were not included as
discovered that Citibank, in the course of its banking business, from September third-party deposits that must be insured. Rather, they were considered inter-
30, 1974 to June 30, 1977, received from its head office and other foreign branch deposits which were excluded from the assessment base, in accordance
branches a total of ₱11,923,163,908.00 in dollars, covered by Certificates of Dollar with the practice of the United States Federal Deposit Insurance Corporation
Time Deposit that were interest-bearing with corresponding maturity dates.4 These (FDIC) after which PDIC was patterned.
funds, which were lodged in the books of Citibank under the account "Their
Account-Head Office/Branches-Foreign Currency," were not reported to PDIC as Aggrieved, PDIC appealed to the CA which affirmed the ruling of the RTC in its
deposit liabilities that were subject to assessment for insurance.5 As such, in a October 27, 2005 Decision. In so ruling, the CA found that the money placements
letter dated March 16, 1978, PDIC assessed Citibank for deficiency in the sum of were received as part of the bank’s internal dealings by Citibank and BA as agents
₱1,595,081.96.6 of their respective head offices. This showed that the head office and the
Philippine branch were considered as the same entity. Thus, no bank deposit
Similarly, sometime in 1979, PDIC examined the books of accounts of BA which could have arisen from the transactions between the Philippine branch and the
revealed that from September 30, 1976 to June 30, 1978, BA received from its head office because there did not exist two separate contracting parties to act as
head office and its other foreign branches a total of ₱629,311,869.10 in dollars, depositor and depositary.14 Secondly, the CA called attention to the purpose for
covered by Certificates of Dollar Time Deposit that were interest-bearing with the creation of PDIC which was to protect the deposits of depositors in the
corresponding maturity dates and lodged in their books under the account "Due to Philippines and not the deposits of the same bank through its head office or foreign
Head Office/Branches."7 Because BA also excluded these from its deposit branches.15 Thirdly, because there was no law or jurisprudence on the treatment
liabilities, PDIC wrote to BA on October 9, 1979, seeking the remittance of of inter-branch deposits between the Philippine branch of a foreign bank and its
₱109,264.83 representing deficiency premium assessments for dollar deposits.8 head office and other branches for purposes of insurance, the CA was guided by
the procedure observed by the FDIC which considered inter-branch deposits as

17
non-assessable.16 Finally, the CA cited Section 3(f) of R.A. No. 3591, which specifically, Section 3(b) of R.A. No. 3591, which defines the terms "bank" and
specifically excludes obligations payable at the office of the bank located outside "banking institutions," PDIC contends that the law treats a branch of a foreign bank
the Philippines from the definition of a deposit or an insured deposit. Since the as a separate and independent banking unit.
subject money placements were made in the respective head offices of Citibank
and BA located outside the Philippines, then such placements could not be subject The respondents, on the other hand, initially point out that the factual findings of
to assessment under the PDIC Charter.17 the RTC and the CA, with regard to the nature of the money placements, the
capacity in which the same were received by the respondents and the exclusion of
Hence, this petition. inter-branch deposits from assessment, can no longer be disturbed and should be
accorded great weight by this Court.22 They also argue that the money
The Issues placements are not deposits. They postulate that for a deposit to exist, there must
PDIC raises the issue of whether or not the subject dollar deposits are assessable be at least two parties – a depositor and a depository – each with a legal
for insurance purposes under the PDIC Charter with the following assigned errors: personality distinct from the other. Because the respondents’ respective head
offices and their branches form only a single legal entity, there is no creditor-debtor
A. relationship and the funds placed in the Philippine branch belong to one and the
The appellate court erred in ruling that the subject dollar deposits are money same bank. A bank cannot have a deposit with itself.23
placements, thus, they are not subject to the provisions of Republic Act No. 6426
otherwise known as the "Foreign Currency Deposit Act of the Philippines." This Court is of the opinion that the key to the resolution of this controversy is the
relationship of the Philippine branches of Citibank and BA to their respective head
B. offices and their other foreign branches.
The appellate court erred in ruling that the subject dollar deposits are not covered
by the PDIC insurance.18 The Court begins by examining the manner by which a foreign corporation can
establish its presence in the Philippines. It may choose to incorporate its own
Respondents similarly identify only one issue in this case: subsidiary as a domestic corporation, in which case such subsidiary would have its
own separate and independent legal personality to conduct business in the
Whether or not the money placements subject matter of these petitions are country. In the alternative, it may create a branch in the Philippines, which would
assessable for insurance purposes under the PDIC Act.19 not be a legally independent unit, and simply obtain a license to do business in the
Philippines.
The sole question to be resolved in this case is whether the funds placed in the
Philippine branch by the head office and foreign branches of Citibank and BA are In the case of Citibank and BA, it is apparent that they both did not incorporate a
insurable deposits under the PDIC Charter and, as such, are subject to separate domestic corporation to represent its business interests in the
assessment for insurance premiums. Philippines. Their Philippine branches are, as the name implies, merely branches,
without a separate legal personality from their parent company, Citibank and BA.
The Court’s Ruling Thus, being one and the same entity, the funds placed by the respondents in their
The Court rules in the negative. respective branches in the Philippines should not be treated as deposits made by
third parties subject to deposit insurance under the PDIC Charter.
A branch has no separate legal personality; Purpose of the PDIC
For lack of judicial precedents on this issue, the Court seeks guidance from
PDIC argues that the head offices of Citibank and BA and their individual foreign American jurisprudence.1âwphi1 In the leading case of Sokoloff v. The National
branches are separate and independent entities. It insists that under American City Bank of New York,25 where the Supreme Court of New York held:
jurisprudence, a bank’s head office and its branches have a principal-agent
relationship only if they operate in the same jurisdiction. In the case of foreign Where a bank maintains branches, each branch becomes a separate business
branches, however, no such relationship exists because the head office and said entity with separate books of account. A depositor in one branch cannot issue
foreign branches are deemed to be two distinct entities.20 Under Philippine law, checks or drafts upon another branch or demand payment from such other branch,

18
and in many other respects the branches are considered separate corporate Section 1. There is hereby created a Philippine Deposit Insurance Corporation
entities and as distinct from one another as any other bank. Nevertheless, when hereinafter referred to as the "Corporation" which shall insure, as herein provided,
considered with relation to the parent bank they are not independent agencies; the deposits of all banks which are entitled to the benefits of insurance under this
they are, what their name imports, merely branches, and are subject to the Act, and which shall have the powers hereinafter granted.
supervision and control of the parent bank, and are instrumentalities whereby the
parent bank carries on its business, and are established for its own particular The Corporation shall, as a basic policy, promote and safeguard the interests of
purposes, and their business conduct and policies are controlled by the parent the depositing public by way of providing permanent and continuing insurance
bank and their property and assets belong to the parent bank, although nominally coverage on all insured deposits.
held in the names of the particular branches. Ultimate liability for a debt of a
branch would rest upon the parent bank. [Emphases supplied] R.A. No. 9576, which amended the PDIC Charter, reaffirmed the rationale for the
establishment of the PDIC:
This ruling was later reiterated in the more recent case of United States v. BCCI
Holdings Luxembourg26 where the United States Court of Appeals, District of Section 1. Statement of State Policy and Objectives. - It is hereby declared to be
Columbia Circuit, emphasized that "while individual bank branches may be treated the policy of the State to strengthen the mandatory deposit insurance coverage
as independent of one another, each branch, unless separately incorporated, must system to generate, preserve, maintain faith and confidence in the country's
be viewed as a part of the parent bank rather than as an independent entity." banking system, and protect it from illegal schemes and machinations.

In addition, Philippine banking laws also support the conclusion that the head Towards this end, the government must extend all means and mechanisms
office of a foreign bank and its branches are considered as one legal entity. necessary for the Philippine Deposit Insurance Corporation to effectively fulfill its
Section 75 of R.A. No. 8791 (The General Banking Law of 2000) and Section 5 of vital task of promoting and safeguarding the interests of the depositing public by
R.A. No. 7221 (An Act Liberalizing the Entry of Foreign Banks) both require the way of providing permanent and continuing insurance coverage on all insured
head office of a foreign bank to guarantee the prompt payment of all the liabilities deposits, and in helping develop a sound and stable banking system at all times.
of its Philippine branch, to wit:
The purpose of the PDIC is to protect the depositing public in the event of a bank
Republic Act No. 8791: closure. It has already been sufficiently established by US jurisprudence and
Philippine statutes that the head office shall answer for the liabilities of its branch.
Sec. 75. Head Office Guarantee. – In order to provide effective protection of the Now, suppose the Philippine branch of Citibank suddenly closes for some reason.
interests of the depositors and other creditors of Philippine branches of a foreign Citibank N.A. would then be required to answer for the deposit liabilities of Citibank
bank, the head office of such branches shall fully guarantee the prompt payment of Philippines. If the Court were to adopt the posture of PDIC that the head office and
all liabilities of its Philippine branch. the branch are two separate entities and that the funds placed by the head office
and its foreign branches with the Philippine branch are considered deposits within
Residents and citizens of the Philippines who are creditors of a branch in the the meaning of the PDIC Charter, it would result to the incongruous situation
Philippines of foreign bank shall have preferential rights to the assets of such where Citibank, as the head office, would be placed in the ridiculous position of
branch in accordance with the existing laws. having to reimburse itself, as depositor, for the losses it may incur occasioned by
the closure of Citibank Philippines. Surely our law makers could not have
Republic Act No. 7721: envisioned such a preposterous circumstance when they created PDIC.

Sec. 5. Head Office Guarantee. – The head office of foreign bank branches shall Finally, the Court agrees with the CA ruling that there is nothing in the definition of
guarantee prompt payment of all liabilities of its Philippine branches. a "bank" and a "banking institution" in Section 3(b) of the PDIC Charter27 which
explicitly states that the head office of a foreign bank and its other branches are
Moreover, PDIC must be reminded of the purpose for its creation, as espoused in separate and distinct from their Philippine branches.
Section 1 of R.A. No. 3591 (The PDIC Charter) which provides:

19
There is no need to complicate the matter when it can be solved by simple logic previously credited to the account of the Philippine branch is debited, together with
bolstered by law and jurisprudence. Based on the foregoing, it is clear that the the cost for obtaining the funds, and credited to the account of the other branch.
head office of a bank and its branches are considered as one under the eyes of The respondents insist that the interest rate and maturity date are simply the basis
the law. While branches are treated as separate business units for commercial and for the debit and credit entries made by the head office in the accounts of its
financial reporting purposes, in the end, the head office remains responsible and branches to reflect the inter-branch accommodation.30 As regards the
answerable for the liabilities of its branches which are under its supervision and maintenance of currency cover over the subject money placements, the
control. As such, it is unreasonable for PDIC to require the respondents, Citibank respondents point out that they maintain foreign currency cover in excess of what
and BA, to insure the money placements made by their home office and other is required by law as a matter of prudent banking practice.31
branches. Deposit insurance is superfluous and entirely unnecessary when, as in
this case, the institution holding the funds and the one which made the placements PDIC attempts to define money placement in order to impugn the respondents’
are one and the same legal entity. claim that the funds received from their head office and other branches are money
placements and not deposits, as defined under the PDIC Charter. In the process, it
Funds not a deposit under the definition of the PDIC Charter; Excluded from loses sight of the important issue in this case, which is the determination of
assessment whether the funds in question are subject to assessment for deposit insurance as
required by the PDIC Charter. In its struggle to find an adequate definition of
PDIC avers that the funds are dollar deposits and not money placements. Citing "money placement," PDIC desperately cites R.A. No. 6848, The Charter of the Al-
R.A. No. 6848, it defines money placement as a deposit which is received with Amanah Islamic Investment Bank of the Philippines. Reliance on the said law is
authority to invest. Because there is no evidence to indicate that the respondents unfounded because nowhere in the law is the term "money placement" defined.
were authorized to invest the subject dollar deposits, it argues that the same Additionally, R.A. No. 6848 refers to the establishment of an Islamic bank subject
cannot be considered money placements.28 PDIC then goes on to assert that the to the rulings of Islamic Shari’a to assist in the development of the Autonomous
funds received by Citibank and BA are deposits, as contemplated by Section 3(f) Region of Muslim Mindanao (ARMM),32 making it utterly irrelevant to the case at
of R.A. No. 3591, for the following reasons: (1) the dollar deposits were received bench. Since Citibank and BA are neither Islamic banks nor are they located
by Citibank and BA in the course of their banking operations from their respective anywhere near the ARMM, then it should be painfully obvious that R.A. No. 6848
head office and foreign branches and were recorded in their books as "Account- cannot aid us in deciding this case.
Head Office/Branches-Time Deposits" pursuant to Central Bank Circular No. 343
which implements R.A. No. 6426; (2) the dollar deposits were credited as dollar Furthermore, PDIC heavily relies on the fact that the respondents documented the
time accounts and were covered by Certificates of Dollar Time Deposit which were money placements with certificates of time deposit to simply conclude that the
interest-bearing and payable upon maturity, and (3) the respondents maintain funds involved are deposits, as contemplated by the PDIC Charter, and are
100% foreign currency cover for their deposit liability arising from the dollar time consequently subject to assessment for deposit insurance. It is this kind of
deposits as required by Section 4 of R.A. No. 6426.29 reasoning that creates non-existent obscurities in the law and obstructs the prompt
resolution of what is essentially a straightforward issue, thereby causing this case
To refute PDIC’s allegations, the respondents explain the inter-branch transactions to drag on for more than three decades.1âwphi1
which necessitate the creation of the accounts or placements subject of this case.
When the Philippine branch needs to procure foreign currencies, it will coordinate Noticeably, PDIC does not dispute the veracity of the internal transactions of the
with a branch in another country which handles foreign currency purchases. Both respondents which gave rise to the issuance of the certificates of time deposit for
branches have existing accounts with their head office and when a money the funds the subject of the present dispute. Neither does it question the findings of
placement is made in relation to the acquisition of foreign currency from the the RTC and the CA that the money placements were made, and were payable,
international market, the amount is credited to the account of the Philippine branch outside of the Philippines, thus, making them fall under the exclusions to deposit
with its head office while the same is debited from the account of the branch which liabilities. PDIC also fails to impugn the truth of the testimony of John David
facilitated the purchase. This is further documented by the issuance of a certificate Shaffer, then a Fiscal Agent and Head of the Assessment Section of the FDIC, that
of time deposit with a stated interest rate and maturity date. The interest rate inter-branch deposits were excluded from the assessment base. Therefore, the
represents the cost of obtaining the funds while the maturity date represents the determination of facts of the lower courts shall be accepted at face value by this
date on which the placement must be returned. On the maturity date, the amount Court, following the well-established principle that factual findings of the trial court,

20
when adopted and confirmed by the CA, are binding and conclusive on this Court,
and will generally not be reviewed on appeal.33

As explained by the respondents, the transfer of funds, which resulted from the
inter-branch transactions, took place in the books of account of the respective
branches in their head office located in the United States. Hence, because it is
payable outside of the Philippines, it is not considered a deposit pursuant to
Section 3(f) of the PDIC Charter:

Sec. 3(f) The term "deposit" means the unpaid balance of money or its equivalent
received by a bank in the usual course of business and for which it has given or is
obliged to give credit to a commercial, checking, savings, time or thrift account or
which is evidenced by its certificate of deposit, and trust funds held by such bank
whether retained or deposited in any department of said bank or deposit in another
bank, together with such other obligations of a bank as the Board of Directors shall
find and shall prescribe by regulations to be deposit liabilities of the Bank;
Provided, that any obligation of a bank which is payable at the office of the bank
located outside of the Philippines shall not be a deposit for any of the purposes of
this Act or included as part of the total deposits or of the insured deposits;
Provided further, that any insured bank which is incorporated under the laws of the
Philippines may elect to include for insurance its deposit obligation payable only at
such branch. [Emphasis supplied]

The testimony of Mr. Shaffer as to the treatment of such inter-branch deposits by

the FDIC, after which PDIC was modelled, is also persuasive. Inter-branch
deposits refer to funds of one branch deposited in another branch and both
branches are part of the same parent company and it is the practice of the FDIC to
exclude such inter-branch deposits from a bank’s total deposit liabilities subject to
assessment.34

All things considered, the Court finds that the funds in question are not deposits
within the definition of the PDIC Charter and are, thus, excluded from assessment.

WHEREFORE, the petition is DENIED. The October 27, 2005 Decision of the
Court of Appeals in CA-G.R. CV No. 61316 is AFFIRMED.

21
G.R. No. 70054 December 11, 1991 Top Management obtained a loan of P4,836,000 from Banco Filipino as evidenced
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner, vs. THE by a promissory note dated January 7, 1982 payable in three years from date. The
MONETARY BOARD, CENTRAL BANK OF THE PHILIPPINES, JOSE B. loan was secured by real estate mortgage in its various properties in Cavite.
FERNANDEZ, CARLOTA P. VALENZUELA, ARNULFO B. AURELLANO and Likewise, Pilar Development obtained loans from Banco Filipino between 1982 and
RAMON V. TIAOQUI, respondents. 1983 in the principal amounts of P6,000,000, P7,370,000 and P5,300,000 with
maturity dates on December 28, 1984, January 5, 1985 and February 16, 1984,
MEDIALDEA, J.: respectively. To secure the loan, Pilar Development mortgaged to Banco Filipino
various properties in Dasmariñas, Cavite.
This refers to nine (9) consolidated cases concerning the legality of the closure
and receivership of petitioner Banco Filipino Savings and Mortgage Bank (Banco On January 25, 1985, the Monetary Board issued a resolution finding Banco
Filipino for brevity) pursuant to the order of respondent Monetary Board. Six (6) of Filipino insolvent and unable to do business without loss to its creditors and
these cases, namely, G.R. Nos. 68878, 77255-68, 78766, 81303, 81304 and depositors. It placed Banco Filipino under receivership of Carlota Valenzuela,
90473 involve the common issue of whether or not the liquidator appointed by the Deputy Governor of the Central Bank.
respondent Central Bank (CB for brevity) has the authority to prosecute as well as
to defend suits, and to foreclose mortgages for and in behalf of the bank while the On March 22, 1985, the Monetary Board issued another resolution placing the
issue on the validity of the receivership and liquidation of the latter is pending bank under liquidation and designating Valenzuela as liquidator. By virtue of her
resolution in G.R. No. 7004. Corollary to this issue is whether the CB can be sued authority as liquidator, Valenzuela appointed the law firm of Sycip, Salazar, et al. to
to fulfill financial commitments of a closed bank pursuant to Section 29 of the represent Banco Filipino in all litigations.
Central Bank Act. On the other hand, the other three (3) cases, namely, G.R. Nos.
70054, which is the main case, 78767 and 78894 all seek to annul and set aside On March 26, 1985, Banco Filipino filed the petition for certiorari in G.R. No. 70054
M.B. Resolution No. 75 issued by respondents Monetary Board and Central Bank questioning the validity of the resolutions issued by the Monetary Board
on January 25, 1985. authorizing the receivership and liquidation of Banco Filipino.

The antecedent facts of each of the nine (9) cases are as follows: In a resolution dated August 29, 1985, this Court in G.R. No. 70054 resolved to
issue a temporary restraining order, effective during the same period of 30 days,
G.R No. 68878 enjoining the respondents from executing further acts of liquidation of the bank;
This is a motion for reconsideration, filed by respondent Celestina Pahimuntung, of that acts such as receiving collectibles and receivables or paying off creditors'
the decision promulgated by thisCourt on April 8, 1986, granting the petition for claims and other transactions pertaining to normal operations of a bank are not
review on certiorari and reversing the questioned decision of respondent appellate enjoined. The Central Bank is ordered to designate a comptroller for Banco
court, which annulled the writ of possession issued by the trial court in favor of Filipino.
petitioner.
Subsequently, Top Management failed to pay its loan on the due date. Hence, the
The respondent-movant contends that the petitioner has no more personality to law firm of Sycip, Salazar, et al. acting as counsel for Banco Filipino under
continue prosecuting the instant case considering that petitioner bank was placed authority of Valenzuela as liquidator, applied for extra-judicial foreclosure of the
under receivership since January 25, 1985 by the Central Bank pursuant to the mortgage over Top Management's properties. Thus, the Ex-Officio Sheriff of the
resolution of the Monetary Board. Regional Trial Court of Cavite issued a notice of extra-judicial foreclosure sale of
the properties on December 16, 1985.
G.R. Nos. 77255-58
Petitioners Top Management Programs Corporation (Top Management for brevity) On December 9, 1985, Top Management filed a petition for injunction and
and Pilar Development Corporation (Pilar Development for brevity) are prohibition with the respondent appellate court docketed as CA-G.R. SP No. 07892
corporations engaged in the business of developing residential subdivisions. seeking to enjoin the Regional Trial Court of Cavite, the ex-officio sheriff of said
court and Sycip, Salazar, et al. from proceeding with foreclosure sale.

22
Similarly, Pilar Development defaulted in the payment of its loans. The law firm of restrained Carlota Valenzuela from acting as liquidator and allowed Banco Filipino
Sycip, Salazar, et al. filed separate applications with the ex-officio sheriff of the to resume banking operations only under a Central Bank comptroller.
Regional Trial Court of Cavite for the extra-judicial foreclosure of mortgage over its
properties. On March 2, 1987, the Court of Appeals rendered a decision dismissing the
petition.
Hence, Pilar Development filed with the respondent appellate court a petition for
prohibition with prayer for the issuance of a writ of preliminary injunction docketed Hence this petition for review on certiorari was filed alleging that the respondent
as CA-G.R SP Nos. 08962-64 seeking to enjoin the same respondents from court erred when it held in its decision that although Carlota P. Valenzuela was
enforcing the foreclosure sale of its properties. CA-G.R. SP Nos. 07892 and restrained by this Honorable Court from exercising acts in liquidation of Banco
08962-64 were consolidated and jointly decided. Filipino Savings & Mortgage Bank, she was not legally precluded from foreclosing
the mortgage over the properties of the petitioner through counsel retained by her
On October 30, 1986, the respondent appellate court rendered a decision for the purpose.
dismissing the aforementioned petitions.
G.R. No. 81303
Hence, this petition was filed by the petitioners Top Management and Pilar On November 8, 1985, petitioner Pilar Development Corporation (Pilar
Development alleging that Carlota Valenzuela, who was appointed by the Development for brevity) filed an action against Banco Filipino, the Central Bank
Monetary Board as liquidator of Banco Filipino, has no authority to proceed with and Carlota Valenzuela for specific performance, docketed as Civil Case No.
the foreclosure sale of petitioners' properties on the ground that the resolution of 12191. It appears that the former management of Banco Filipino appointed
the issue on the validity of the closure and liquidation of Banco Filipino is still Quisumbing & Associates as counsel for Banco Filipino. On June 12, 1986 the
pending with this Court in G.R. 70054. said law firm filed an answer for Banco Filipino which confessed judgment against
Banco Filipino.
G.R. No. 78766
Petitioner El Grande Development Corporation (El Grande for brevity) is engaged On June 17, 1986, petitioner filed a second amended complaint. The Central Bank
in the business of developing residential subdivisions. It was extended by and Carlota Valenzuela, thru the law firm Sycip, Salazar, Hernandez and
respondent Banco Filipino a credit accommodation to finance its housing program. Gatmaitan filed an answer to the complaint.
Hence, petitioner was granted a loan in the amount of P8,034,130.00 secured by
real estate mortgages on its various estates located in Cavite. On June 23, 1986, Sycip, et al., acting for all the defendants including Banco
Filipino moved that the answer filed by Quisumbing & Associates for defendant
On January 15, 1985, the Monetary Board forbade Banco Filipino to do business, Banco Filipino be expunged from the records. Despite opposition from Quisumbing
placed it under receivership and designated Deputy Governor Carlota Valenzuela & Associates, the trial court granted the motion to expunge in an order dated
as receiver. On March 22, 1985, the Monetary Board confirmed Banco Filipino's March 17, 1987. Petitioner Pilar Development moved to reconsider the order but
insolvency and designated the receiver Carlota Valenzuela as liquidator. the motion was denied.

When petitioner El Grande failed to pay its indebtedness to Banco Filipino, the Petitioner Pilar Development filed with the respondent appellate court a petition for
latter thru its liquidator, Carlota Valenzuela, initiated the foreclosure with the Clerk certiorari and mandamus to annul the order of the trial court. The Court of Appeals
of Court and Ex-officio sheriff of RTC Cavite. Subsequently, on March 31, 1986, rendered a decision dismissing the petition. A petition was filed with this Court but
the ex-officio sheriff issued the notice of extra-judicial sale of the mortgaged was denied in a resolution dated March 22, 1988. Hence, this instant motion for
properties of El Grande scheduled on April 30, 1986. reconsideration.

In order to stop the public auction sale, petitioner El Grande filed a petition for G.R. No. 81304
prohibition with the Court of Appeals alleging that respondent Carlota Valenzuela On July 9, 1985, petitioner BF Homes Incorporated (BF Homes for brevity) filed an
could not proceed with the foreclosure of its mortgaged properties on the ground action with the trial court to compel the Central Bank to restore petitioner's;
that this Court in G.R. No. 70054 issued a resolution dated August 29, 1985, which financing facility with Banco Filipino.

23
The Central Bank filed a motion to dismiss the action. Petitioner BF Homes in a On June 16, 1989, respondent Court of Appeals rendered a decision dismissing
supplemental complaint impleaded as defendant Carlota Valenzuela as receiver of the petition.
Banco Filipino Savings and Mortgage Bank.
Not satisfied with the decision, petitioner filed the instant petition for review on
On April 8, 1985, petitioner filed a second supplemental complaint to which certiorari.
respondents filed a motion to dismiss.
G.R. No. 70054
On July 9, 1985, the trial court granted the motion to dismiss the supplemental Banco Filipino Savings and Mortgage Bank was authorized to operate as such
complaint on the grounds (1) that plaintiff has no contractual relation with the under M.B. Resolution No. 223 dated February 14, 1963. It commenced operations
defendants, and (2) that the Intermediate Appellate Court in a previous decision in on July 9, 1964. It has eighty-nine (89) operating branches, forty-six (46) of which
AC-G.R. SP. No. 04609 had stated that Banco Filipino has been ordered closed are in Manila, with more than three (3) million depositors.
and placed under receivership pending liquidation, and thus, the continuation of
the facility sued for by the plaintiff has become legally impossible and the suit has As of July 31, 1984, the list of stockholders showed the major stockholders to be:
become moot. Metropolis Development Corporation, Apex Mortgage and Loans Corporation,
Filipino Business Consultants, Tiu Family Group, LBH Inc. and Anthony Aguirre.
The order of dismissal was appealed by the petitioner to the Court of Appeals. On
November 4, 1987, the respondent appellate court dismissed the appeal and Petitioner Bank had an approved emergency advance of P119.7 million under M.B.
affirmed the order of the trial court. Resolution No. 839 dated June 29, 1984. This was augmented with a P3 billion
credit line under M.B. Resolution No. 934 dated July 27, 1984.
Hence, this petition for review on certiorari was filed, alleging that the respondent
court erred when it found that the private respondents should not be the ones to On the same date, respondent Board issued M.B. Resolution No. 955 placing
respond to the cause of action asserted by the petitioner and the petitioner did not petitioner bank under conservatorship of Basilio Estanislao. He was later replaced
have any cause of action against the respondents Central Bank and Carlota by Gilberto Teodoro as conservator on August 10, 1984. The latter submitted a
Valenzuela. report dated January 8, 1985 to respondent Board on the conservatorship of
petitioner bank, which report shall hereinafter be referred to as the Teodoro report.
G.R. No. 90473
Petitioner El Grande Development Corporation (El Grande for brevity) obtained a Subsequently, another report dated January 23, 1985 was submitted to the
loan from Banco Filipino in the amount of P8,034,130.00, secured by a mortgage Monetary Board by Ramon Tiaoqui, Special Assistant to the Governor and Head,
over its five parcels of land located in Cavite which were covered by Transfer SES Department II of the Central Bank, regarding the major findings of
Certificate of Title Nos. T-82187, T-109027, T-132897, T-148377, and T-79371 of examination on the financial condition of petitioner BF as of July 31, 1984. The
the Registry of Deeds of Cavite. report, which shall be referred to herein as the Tiaoqui Report contained the
following conclusion and recommendation:
When Banco Filipino was ordered closed and placed under receivership in 1985,
the appointed liquidator of BF, thru its counsel Sycip, Salazar, et al. applied with The examination findings as of July 31, 1984, as shown earlier, indicate one of
the ex-officio sheriff of the Regional Trial Court of Cavite for the extrajudicial insolvency and illiquidity and further confirms the above conclusion of the
foreclosure of the mortgage constituted over petitioner's properties. On March 24, Conservator.
1986, the ex-officio sheriff issued a notice of extrajudicial foreclosure sale of the
properties of petitioner. All the foregoing provides sufficient justification for forbidding the bank from
engaging in banking.
Thus, petitioner filed with the Court of Appeals a petition for prohibition with prayer
for writ of preliminary injunction to enjoin the respondents from foreclosing the Foregoing considered, the following are recommended:
mortgage and to nullify the notice of foreclosure.

24
1. Forbid the Banco Filipino Savings & Mortgage Bank to do business in the 3. To designate Mr. Arnulfo B. Aurellano, Special Assistant to the Governor, and
Philippines effective the beginning of office January 1985, pursuant to Sec. 29 of Mr. Ramon V. Tiaoqui, Special Assistant to the Governor and Head, Supervision
R.A No. 265, as amended; and Examination Sector Department II, as Deputy Receivers who are likewise
hereby directly vested with jurisdiction and authority to do all things necessary or
2. Designate the Head of the Conservator Team at the bank, as Receiver of Banco proper to carry out the functions entrusted to them by the Receiver and otherwise
Filipino Savings & Mortgage Bank, to immediately take charge of the assets and to assist the Receiver in carrying out the functions vested in the Receiver by law or
liabilities, as expeditiously as possible collect and gather all the assets and Monetary Board Resolutions;
administer the same for the benefit of all the creditors, and exercise all the powers
necessary for these purposes including but not limited to bringing suits and 4. To direct and authorize Management to do all other things and carry out all other
foreclosing mortgages in the name of the bank. measures necessary or proper to implement this Resolution and to safeguard the
interests of depositors, creditors and the general public; and
3. The Board of Directors and the principal officers from Senior Vice Presidents, as
listed in the attached Annex "A" be included in the watchlist of the Supervision and 5. In consequence of the foregoing, to terminate the conservatorship over Banco
Examination Sector until such time that they shall have cleared themselves. Filipino Savings and Mortgage Bank. (pp. 10-11, Rollo, Vol. I)

4. Refer to the Central Bank's Legal Department and Office of Special On February 2, 1985, petitioner BF filed a complaint docketed as Civil Case No.
Investigation the report on the findings on Banco Filipino for investigation and 9675 with the Regional Trial Court of Makati to set aside the action of the Monetary
possible prosecution of directors, officers, and employees for activities which led to Board placing BF under receivership.
its insolvent position. (pp- 61-62, Rollo)
On February 28, 1985, petitioner filed with this Court the instant petition for
On January 25, 1985, the Monetary Board issued the assailed MB Resolution No. certiorari and mandamus under Rule 65 of the Rules of Court seeking to annul the
75 which ordered the closure of BF and which further provides: resolution of January 25, 1985 as made without or in excess of jurisdiction or with
grave abuse of discretion, to order respondents to furnish petitioner with the
After considering the report dated January 8, 1985 of the Conservator for Banco reports of examination which led to its closure and to afford petitioner BF a hearing
Filipino Savings and Mortgage Bank that the continuance in business of the bank prior to any resolution that may be issued under Section 29 of R.A. 265, also
would involve probable loss to its depositors and creditors, and after discussing known as Central Bank Act.
and finding to be true the statements of the Special Assistant to the Governor and
Head, Supervision and Examination Sector (SES) Department II as recited in his On March 19, 1985, Carlota Valenzuela, as Receiver and Arnulfo Aurellano and
memorandum dated January 23, 1985, that the Banco Filipino Savings & Mortgage Ramon Tiaoqui as Deputy Receivers of Banco Filipino submitted their report on
Bank is insolvent and that its continuance in business would involve probable loss the receivership of BF to the Monetary Board, in compliance with the mandate of
to its depositors and creditors, and in pursuance of Sec. 29 of RA 265, as Sec. 29 of R.A. 265 which provides that the Monetary Board shall determine within
amended, the Board decided: sixty (60) days from date of receivership of a bank whether such bank may be
reorganized/permitted to resume business or ordered to be liquidated. The report
1. To forbid Banco Filipino Savings and Mortgage Bank and all its branches to do contained the following recommendation:
business in the Philippines;
In view of the foregoing and considering that the condition of the banking institution
2. To designate Mrs. Carlota P. Valenzuela, Deputy Governor as Receiver who is continues to be one of insolvency, i.e., its realizable assets are insufficient to meet
hereby directly vested with jurisdiction and authority to immediately take charge of all its liabilities and that the bank cannot resume business with safety to its
the bank's assets and liabilities, and as expeditiously as possible collect and depositors, other creditors and the general public, it is recommended that:
gather all the assets and administer the same for the benefit of its creditors,
exercising all the powers necessary for these purposes including but not limited to, 1. Banco Filipino Savings & Mortgage Bank be liquidated pursuant to paragraph 3,
bringing suits and foreclosing mortgages in the name of the bank; Sec. 29 of RA No. 265, as amended;

25
2. The Legal Department, through the Solicitor General, be authorized to file in the from conducting such hearing. Hence, this Court directed Judge Manuel Cosico to
proper court a petition for assistance in th liquidation of the Bank; expedite the hearing and submit his report to this Court.

3. The Statutory Receiver be designated as the Liquidator of said bank; and On February 20, 1988, Judge Manuel Cosico submitted his report to this Court
with the recommendation that the resolutions of respondents Monetary Board and
4. Management be instructed to inform the stockholders of Banco Filipino Savings Central Bank authorizing the closure and liquidation of petitioner BP be upheld.
& Mortgage Bank of the Monetary Board's decision liquidate the Bank. (p. 167,
Rollo, Vol. I) On October 21, 1988, petitioner BF filed an urgent motion to reopen hearing to
which respondents filed their comment on December 16, 1988. Petitioner filed their
On July 23, 1985, petitioner filed a motion before this Court praying that a reply to respondent's comment of January 11, 1989. After having deliberated on
restraining order or a writ of preliminary injunction be issued to enjoin respondents the grounds raised in the pleadings, this Court in its resolution dated August 3,
from causing the dismantling of BF signs in its main office and 89 branches. This 1989 declared that its intention as expressed in its resolution of August 29, 1985
Court issued a resolution on August 8, 1985 ordering the issuance of the aforesaid had not been faithfully adhered to by the herein petitioner and respondents. The
temporary restraining order. aforementioned resolution had ordered a healing on the reports that led
respondents to order petitioner's closure and its alleged pre-planned liquidation.
On August 20, 1985, the case was submitted for resolution. This Court noted that during the referral hearing however, a different scheme was
followed. Respondents merely submitted to the commissioner their findings on the
In a resolution dated August 29, 1985, this Court Resolved direct the respondents examinations conducted on petitioner, affidavits of the private respondents relative
Monetary Board and Central Bank hold hearings at which the petitioner should be to the findings, their reports to the Monetary Board and several other documents in
heard, and terminate such hearings and submit its resolution within thirty (30) support of their position while petitioner had merely submitted objections to the
days. This Court further resolved to issue a temporary restraining order enjoining findings of respondents, counter-affidavits of its officers and also documents to
the respondents from executing further acts of liquidation of a bank. Acts such as prove its claims. Although the records disclose that both parties had not waived
receiving collectibles and receivables or paying off creditors' claims and other cross-examination of their deponents, no such cross-examination has been
transactions pertaining to normal operations of a bank were no enjoined. The conducted. The reception of evidence in the form of affidavits was followed
Central Bank was also ordered to designate comptroller for the petitioner BF. This throughout, until the commissioner submitted his report and recommendations to
Court also ordered th consolidation of Civil Cases Nos. 8108, 9676 and 10183 in the Court. This Court also held that the documents pertinent to the resolution of the
Branch 136 of the Regional Trial Court of Makati. instant petition are the Teodoro Report, Tiaoqui Report, Valenzuela, Aurellano and
Tiaoqui Report and the supporting documents which were made as the bases by
However, on September 12, 1985, this Court in the meantime suspended the the reporters of their conclusions contained in their respective reports. This Court
hearing it ordered in its resolution of August 29, 1985. also Resolved in its resolution to re-open the referral hearing that was terminated
after Judge Cosico had submitted his report and recommendation with the end in
On October 8, 1985, this Court submitted a resolution order ing Branch 136 of the view of allowing petitioner to complete its presentation of evidence and also for
Regional Trial Court of Makati the presided over by Judge Ricardo Francisco to respondents to adduce additional evidence, if so minded, and for both parties to
conduct the hear ing contemplated in the resolution of August 29, 1985 in the most conduct the required cross-examination of witnesses/deponents, to be done within
expeditious manner and to submit its resolution to this Court. a period of three months. To obviate all doubts on Judge Cosico's impartiality, this
Court designated a new hearing commissioner in the person of former Judge
In the Court's resolution of February 19, 1987, the Court stated that the hearing Consuelo Santiago of the Regional Trial Court, Makati, Branch 149 (now Associate
contemplated in the resolution of August 29, 1985, which is to ascertain whether Justice of the Court of Appeals).
substantial administrative due process had been observed by the respondent
Monetary Board, may be expedited by Judge Manuel Cosico who now presides Three motions for intervention were filed in this case as follows: First, in G.R. No.
the court vacated by Judge Ricardo Francisco, who was elevated to the Court of 70054 filed by Eduardo Rodriguez and Fortunate M. Dizon, stockholders of
Appeals, there being no legal impediment or justifiable reason to bar the former petitioner bank for and on behalf of other stockholders of petitioner; second, in
G.R. No. 78894, filed by the same stockholders, and, third, again in G.R. No.

26
70054 by BF Depositors' Association and others similarly situated. This Court, on argrument will therefore allow the parties to directly confront the issues before this
March 1, 1990, denied the aforesaid motions for intervention. Court.

On January 28, 1991, the hearing commissioner, Justice Consuelo Santiago of the On March 12, 1991 petitioner filed its opposition to the motion for oral argument.
Court of Appeals submitted her report and recommendation (to be hereinafter On March 20, 1991, it filed its reply to respondents' objections to the Santiago
called, "Santiago Report") on the following issues stated therein as follows: Report.

l) Had the Monetary Board observed the procedural requirements laid down in On June 18, 1991, a hearing was held where both parties were heard on oral
Sec. 29 of R.A. 265, as amended to justify th closure of the Banco Filipino Savings argument before this Court. The parties, having submitted their respective
and Mortgage Bank? memoranda, the case is now submitted for decision.

2) On the date of BF's closure (January 25, 1985) was its condition one of G.R. No. 78767
insolvency or would its continuance in business involve probable loss to its On February 2, 1985, Banco Filipino filed a complaint with the trial court docketed
depositors or creditors? as Civil Case No. 9675 to annul the resolution of the Monetary Board dated
January 25, 1985, which ordered the closure of the bank and placed it under
The commissioner after evaluation of the evidence presented found and receivership.
recommended the following:
On February 14, 1985, the Central Bank and the receivers filed a motion to dismiss
1. That the TEODORO and TIAOQUI reports did not establish in accordance with the complaint on the ground that the receivers had not authorized anyone to file
See. 29 of the R.A. 265, as amended, BF's insolvency as of July 31, 1984 or that the action. In a supplemental motion to dismiss, the Central Bank cited the
its continuance in business thereafter would involve probable loss to its depositors resolution of this Court dated October 15, 1985 in G.R. No. 65723 entitled, "Central
or creditors. On the contrary, the evidence indicates that BF was solvent on July Bank et al. v. Intermediate Appellate Court" whereby We held that a complaint
31, 1984 and that on January 25, 1985, the day it was closed, its insolvency was questioning the validity of the receivership established by the Central Bank
not clearly established; becomes moot and academic upon the initiation of liquidation proceedings.

2. That consequently, BF's closure on January 25, 1985, not having satisfied the While the motion to dismiss was pending resolution, petitioner herein Metropolis
requirements prescribed under Sec. 29 of RA 265, as amended, was null and void. Development Corporation (Metropolis for brevity) filed a motion to intervene in the
aforestated civil case on the ground that as a stockholder and creditor of Banco
3. That accordingly, by way of correction, BF should be allowed to re-open subject Filipino, it has an interest in the subject of the action.
to such laws, rules and regulations that apply to its situation.
On July 19, 1985, the trial court denied the motion to dismiss and also denied the
Respondents thereafter filed a motion for leave to file objections to the Santiago motion for reconsideration of the order later filed by Central Bank. On June 5,
Report. In the same motion, respondents requested that the report and 1985, the trial court allowed the motion for intervention.
recommendation be set for oral argument before the Court. On February 7, 1991,
this Court denied the request for oral argument of the parties. Hence, the Central Bank and the receivers of Banco Filipino filed a petition for
certiorari with the respondent appellate court alleging that the trial court committed
On February 25, 1991, respondents filed their objections to the Santiago Report. grave abuse of discretion in not dismissing Civil Case No. 9675.
On March 5, 1991, respondents submitted a motion for oral argument alleging that
this Court is confronted with two conflicting reports on the same subject, one On March 17, 1986, the respondent appellate court rendered a decision annulling
upholding on all points the Monetary Board's closure of petitioner, (Cosico Report and setting aside the questioned orders of the trial court, and ordering the
dated February 19, 1988) and the other (Santiago Report dated January 25, 1991) dismissal of the complaint filed by Banco Filipino with the trial court as well as the
holding that petitioner's closure was null and void because petitioner's insolvency complaint in intervention of petitioner Metropolis Development Corporation.
was not clearly established before its closure; and that such a hearing on oral

27
Hence this petition was filed by Metropolis Development Corporation questioning placed under receivership, the person designated as receiver shall immediately
the decision of the respondent appellate court. 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,
G.R. No. 78894 and represent the bank personally or through counsel as he may retain in all
On February 2, 1985, a complaint was filed with the trial court in the name of actions or proceedings for or against the institution, exercising all the powers
Banco Filipino to annul the resolution o the Monetary Board dated January 25, necessary for these purposes including, but not limited to, bringing and foreclosing
1985 which ordered the closure of Banco Filipino and placed it under receivership. mortgages in the name of the bank. If the Monetary Board shall later determine
The receivers appointed by the Monetary Board were Carlota Valenzuela, Arnulfo and confirm that banking institution is insolvent or cannot resume business safety
Aurellano and Ramon Tiaoqui. 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
On February 14, 1985, the Central Bank and the receiver filed a motion to dismiss functions of receiver previously appointed by Monetary Board. The liquid for may,
the complaint on the ground that the receiver had not authorized anyone to file the in the name of the bank and with the assistance counsel as he may retain, institute
action. 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.
On March 22, 1985, the Monetary Board placed the bank under liquidation and
designated Valenzuela as liquidator and Aurellano and Tiaoqui as deputy When the issue on the validity of the closure and receivership of Banco Filipino
liquidators. bank was raised in G.R. No. 70054, pendency of the case did not diminish the
powers and authority of the designated liquidator to effectuate and carry on the a
The Central Bank filed a supplemental motion to dismiss which was denied. ministration of the bank. In fact when We adopted a resolute on August 25, 1985
Hence, the latter filed a petition for certiorari with the respondent appellate court to and issued a restraining order to respondents Monetary Board and Central Bank,
set aside the order of the trial court denying the motion to dismiss. On March 17, We enjoined me further acts of liquidation. Such acts of liquidation, as explained in
1986, the respondent appellate court granted the petition and dismissed the Sec. 29 of the Central Bank Act are those which constitute the conversion of the
complaint of Banco Filipino with the trial court. assets of the banking institution to money or the sale, assignment or disposition of
the s to creditors and other parties for the purpose of paying debts of such
Thus, this petition for certiorari was filed with the petitioner contending that a bank institution. We did not prohibit however acts a as receiving collectibles and
which has been closed and placed under receivership by the Central Bank under receivables or paying off credits claims and other transactions pertaining to normal
Section 29 of RA 265 could file suit in court in its name to contest such acts of the operate of a bank. There is no doubt that the prosecution of suits collection and the
Central Bank, without the authorization of the CB-appointed receiver. foreclosure of mortgages against debtors the bank by the liquidator are among the
usual and ordinary transactions pertaining to the administration of a bank. their did
After deliberating on the pleadings in the following cases: Our order in the same resolution dated August 25, 1985 for the designation by the
Central Bank of a comptroller Banco Filipino alter the powers and functions; of the
1. In G.R. No. 68878, the respondent's motion for reconsideration; liquid insofar as the management of the assets of the bank is concerned. The mere
2. In G.R. Nos. 77255-58, the petition, comment, reply, rejoinder and sur-rejoinder; duty of the comptroller is to supervise counts and finances undertaken by the
2. In G.R. No. 78766, the petition, comment, reply and rejoinder; liquidator and to d mine the propriety of the latter's expenditures incurred behalf of
3. In G.R. No. 81303, the petitioner's motion for reconsideration; the bank. Notwithstanding this, the liquidator is empowered under the law to
4. In G.R.No. 81304, the petition, comment and reply; continue the functions of receiver is preserving and keeping intact the assets of the
5. Finally, in G.R. No. 90473, the petition comment and reply. bank in substitution of its former management, and to prevent the dissipation of its
assets to the detriment of the creditors of the bank. These powers and functions of
We find the motions for reconsideration in G.R. Nos. 68878 and 81303 and the the liquidator in directing the operations of the bank in place of the former
petitions in G.R. Nos. 77255-58, 78766, 81304 and 90473 devoid of merit. management or former officials of the bank include the retaining of counsel of his
choice in actions and proceedings for purposes of administration.
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

28
Clearly, in G.R. Nos. 68878, 77255-58, 78766 and 90473, the liquidator by himself agents into the condition of any bank or non-bank financial intermediary performing
or through counsel has the authority to bring actions for foreclosure of mortgages quasi-banking functions, it shall be disclosed that the condition of the same is one
executed by debtors in favor of the bank. In G.R. No. 81303, the liquidator is of insolvency, or that its continuance in business would involve probable loss to its
likewise authorized to resist or defend suits instituted against the bank by debtors depositors or creditors, it shall be the duty of the department head concerned
and creditors of the bank and by other private persons. Similarly, in G.R. No. forthwith, in writing, to inform the Monetary Board of the facts. The Board may,
81304, due to the aforestated reasons, the Central Bank cannot be compelled to upon finding the statements of the department head to be true, forbid the institution
fulfill financial transactions entered into by Banco Filipino when the operations of to do business in the Philippines and designate an official of the Central Bank or a
the latter were suspended by reason of its closure. The Central Bank possesses person of recognized competence in banking or finance, as receiver to
those powers and functions only as provided for in Sec. 29 of the Central Bank immediately take charge of its assets and liabilities, as expeditiously as possible
Act. collect and gather all the assets and administer the same for the benefit's of its
creditors, and represent the bank personally or through counsel as he may retain
While We recognize the actual closure of Banco Filipino and the consequent legal in all actions or proceedings for or against the institution, exercising all the powers
effects thereof on its operations, We cannot uphold the legality of its closure and necessary for these purposes including, but not limited to, bringing and foreclosing
thus, find the petitions in G.R. Nos. 70054, 78767 and 78894 impressed with merit. mortgages in the name of the bank or non-bank financial intermediary performing
We hold that the closure and receivership of petitioner bank, which was ordered by quasi-banking functions.
respondent Monetary Board on January 25, 1985, is null and void.
The Monetary Board shall thereupon determine within sixty days whether the
It is a well-recognized principle that administrative and discretionary functions may institution may be reorganized or otherwise placed in such a condition so that it
not be interfered with by the courts. In general, courts have no supervising power may be permitted to resume business with safety to its depositors and creditors
over the proceedings and actions of the administrative departments of the and the general public and shall prescribe the conditions under which such
government. This is generally true with respect to acts involving the exercise of resumption of business shall take place as well as the time for fulfillment of such
judgment or discretion, and findings of fact. But when there is a grave abuse of conditions. In such case, the expenses and fees in the collection and
discretion which is equivalent to a capricious and whimsical exercise of judgment administration of the assets of the institution shall be determined by the Board and
or where the power is exercised in an arbitrary or despotic manner, then there is a shall be paid to the Central Bank out of the assets of such institution.
justification for the courts to set aside the administrative determination reached
(Lim, Sr. v. Secretary of Agriculture and Natural Resources, L-26990, August 31, If the Monetary Board shall determine and confirm within the said period that the
1970, 34 SCRA 751) bank or non-bank financial intermediary performing quasi-banking functions is
insolvent or cannot resume business with safety to its depositors, creditors, and
The jurisdiction of this Court is called upon, once again, through these petitions, to the general public, it shall, if the public interest requires, order its liquidation,
undertake the delicate task of ascertaining whether or not an administrative indicate the manner of its liquidation and approve a liquidation plan which may,
agency of the government, like the Central Bank of the Philippines and the when warranted, involve disposition of any or all assets in consideration for the
Monetary Board, has committed grave abuse of discretion or has acted without or assumption of equivalent liabilities. The liquidator designated as hereunder
in excess of jurisdiction in issuing the assailed order. Coupled with this task is the provided shall, by the Solicitor General, file a petition in the regional trial court
duty of this Court not only to strike down acts which violate constitutional reciting the proceedings which have been taken and praying the assistance of the
protections or to nullify administrative decisions contrary to legal mandates but court in the liquidation of such institutions. The court shall have jurisdiction in the
also to prevent acts in excess of authority or jurisdiction, as well as to correct same proceedings to assist in the adjudication of the disputed claims against the
manifest abuses of discretion committed by the officer or tribunal involved. bank or non-bank financial intermediary performing quasi-banking functions and in
the enforcement of individual liabilities of the stockholders and do all that is
The law applicable in the determination of these issues is Section 29 of Republic necessary to preserve the assets of such institutions and to implement the
Act No. 265, as amended, also known as the Central Bank Act, which provides: liquidation plan approved by the Monetary Board. The Monetary Board shall
designate an official of the Central bank or a person of recognized competence in
SEC. 29. Proceedings upon insolvency. — Whenever, upon examination by the banking or finance, as liquidator who shall take over and continue the functions of
head of the appropriate supervising or examining department or his examiners or the receiver previously appointed by the Monetary Board under this Section. The

29
liquidator shall, with all convenient speed, convert the assets of the banking xxx xxx xxx
institutions or non-bank financial intermediary performing quasi-banking function to
money or sell, assign or otherwise dispose of the same to creditors and other Based on the aforequoted provision, the Monetary Board may order the cessation
parties for the purpose of paying the debts of such institution and he may, in the of operations of a bank in the Philippine and place it under receivership upon a
name of the bank or non-bank financial intermediary performing quasi-banking finding of insolvency or when its continuance in business would involve probable
functions and with the assistance of counsel as he may retain, institute such loss its depositors or creditors. If the Monetary Board shall determine and confirm
actions as may be necessary in the appropriate court to collect and recover within sixty (60) days that the bank is insolvent or can no longer resume business
accounts and assets of such institution or defend any action filed against the with safety to its depositors, creditors and the general public, it shall, if public
institution: Provided, However, That after having reasonably established all claims interest will be served, order its liquidation.
against the institution, the liquidator may, with the approval of the court, effect
partial payments of such claims for assets of the institution in accordance with their Specifically, the basic question to be resolved in G.R. Nos. 70054, 78767 and
legal priority. 78894 is whether or not the Central Bank and the Monetary Board acted arbitrarily
and in bad faith in finding and thereafter concluding that petitioner bank is
The assets of an institution under receivership or liquidation shall be deemed in insolvent, and in ordering its closure on January 25, 1985.
custodia legis in the hands of the receiver or liquidator and shall from the moment
of such receivership or liquidation, be exempt from any order of garnishment, levy, As We have stated in Our resolution dated August 3, 1989, the documents
attachment, or execution. pertinent to the resolution of these petitions are the Teodoro Report, Tiaoqui
Report, and the Valenzuela, Aurellano and Tiaoqui Report and the supporting
The provisions of any law to the contrary notwithstanding, the actions of the documents made as bases by the supporters of their conclusions contained in their
Monetary Board under this Section, Section 28-A, an the second paragraph of respective reports. We will focus Our study and discussion however on the Tiaoqui
Section 34 of this Act shall be final an executory, and can be set aside by a court Report and the Valenzuela, Aurellano and Tiaoqui Report. The former
only if there is convince proof, after hearing, that the action is plainly arbitrary and recommended the closure and receivership of petitioner bank while the latter
made in bad faith: Provided, That the same is raised in an appropriate pleading report made the recommendation to eventually place the petitioner bank under
filed by the stockholders of record representing the majority of th capital stock liquidation. This Court shall likewise take into consideration the findings contained
within ten (10) days from the date the receiver take charge of the assets and in the reports of the two commissioners who were appointed by this Court to hold
liabilities of the bank or non-bank financial intermediary performing quasi-banking the referral hearings, namely the report by Judge Manuel Cosico submitted
functions or, in case of conservatorship or liquidation, within ten (10) days from February 20, 1988 and the report submitted by Justice Consuelo Santiago on
receipt of notice by the said majority stockholders of said bank or non-bank January 28, 1991.
financial intermediary of the order of its placement under conservatorship o
liquidation. No restraining order or injunction shall be issued by an court enjoining There is no question that under Section 29 of the Central Bank Act, the following
the Central Bank from implementing its actions under this Section and the second are the mandatory requirements to be complied with before a bank found to be
paragraph of Section 34 of this Act in th absence of any convincing proof that the insolvent is ordered closed and forbidden to do business in the Philippines: Firstly,
action of the Monetary Board is plainly arbitrary and made in bad faith and the an examination shall be conducted by the head of the appropriate supervising or
petitioner or plaintiff files a bond, executed in favor of the Central Bank, in an examining department or his examiners or agents into the condition of the bank;
amount be fixed by the court. The restraining order or injunction shall be refused secondly, it shall be disclosed in the examination that the condition of the bank is
or, if granted, shall be dissolved upon filing by the Central Bank of a bond, which one of insolvency, or that its continuance in business would involve probable loss
shall be in the form of cash or Central Bank cashier's check, in an amount twice to its depositors or creditors; thirdly, the department head concerned shall inform
the amount of the bond of th petitioner or plaintiff conditioned that it will pay the the Monetary Board in writing, of the facts; and lastly, the Monetary Board shall
damages which the petitioner or plaintiff may suffer by the refusal or the dissolution find the statements of the department head to be true.
of the injunction. The provisions of Rule 58 of the New Rules of Court insofar as
they are applicable and not inconsistent with the provision of this Section shall Anent the first requirement, the Tiaoqui report, submitted on January 23, 1985,
govern the issuance and dissolution of the re straining order or injunction revealed that the finding of insolvency of petitioner was based on the partial list of
contemplated in this Section. exceptions and findings on the regular examination of the bank as of July 31, 1984

30
conducted by the Supervision and Examination Sector II of the Central Bank of the that as of July 31, 1984, total capital accounts consisting of paid-in capital and
PhilippinesCentral Bank (p. 1, Tiaoqui Report). other capital accounts such as surplus, surplus reserves and undivided profits
aggregated P351.8 million; that capital adjustments, however, wiped out the capital
On December 17, 1984, this list of exceptions and finding was submitted to the accounts and placed the bank with a capital deficiency amounting to P334.956
petitioner bank (p. 6, Tiaoqui Report) This was attached to the letter dated million; that the biggest adjustment which contributed to the deficit is the provision
December 17, 1984, of examiner-in-charge Dionisio Domingo of SES Department for estimated losses on accounts classified as doubtful and loss which was
II of the Central Bank to Teodoro Arcenas, president of petitione bank, which computed at P600.4 million pursuant to the examination. This provision is also
disclosed that the examination of the petitioner bank as to its financial condition as known as valuation reserves which was set up or deducted against the capital
of July 31, 1984 was not yet completed or finished on December 17, 1984 when accounts of the bank in arriving at the latter's financial condition.
the Central Bank submitted the partial list of findings of examination to th petitioner
bank. The letter reads: Tiaoqui however admits the insufficiency and unreliability of the findings of the
examiner as to the setting up of recommended valuation reserves from the assets
In connection with the regular examination of your institution a of July 31, 1984, we of petitioner bank. He stated:
are submitting herewith a partial list of our exceptions/findings for your comments.
The recommended valuation reserves as bases for determining the financial status
Please be informed that we have not yet officially terminated our examination of the bank would need to be discussed with the bank, consistent with standard
(tentatively scheduled last December 7, 1984) and that we are still awaiting for the examination procedure, for which the bank would in turn reply. Also, the
unsubmitted replies to our previous letters requests. Moreover, other findings/ examination has not been officially terminated. (p. 7. Tiaoqui report; p. 59, Rollo,
observations are still being summarized including the classification of loans and Vol. I)
other risk assets. These shall be submitted to you in due time (p. 810, Rollo, Vol.
III; emphasis ours). In his testimony in the second referral hearing before Justice Santiago, Tiaoqui
testified that on January 21, 1985, he met with officers of petitioner bank to discuss
It is worthy to note that a conference was held on January 21, 1985 at the Central the advanced findings and exceptions made by Mr. Dionisio Domingo which
Bank between the officials of the latter an of petitioner bank. What transpired and covered 70%-80% of the bank's loan portfolio; that at that meeting, Fortunato
what was agreed upon during the conference was explained in the Tiaoqui report. Dizon (BF's Executive Vice President) said that as regards the unsecured loans
granted to various corporations, said corporations had large undeveloped real
... The discussion centered on the substantial exposure of the bank to the various estate properties which could be answerable for the said unsecured loans and that
entities which would have a relationship with the bank; the manner by which some a reply from BF was forthcoming, that he (Tiaoqui) however prepared his report
bank funds were made indirectly available to several entities within the group; and despite the absence of such reply; that he believed, as in fact it is stated in his
the unhealth financial status of these firms in which the bank was additionally report, that despite the meeting on January 21, 1985, there was still a need to
exposed through new funds or refinancing accommodation including accrued discuss the recommended valuation reserves of petitioner bank and; that he
interest. however, did not wait anymore for a discussion of the recommended valuation
reserves and instead prepared his report two days after January 21, 1985 (pp.
Queried in the impact of these clean loans, on the bank solvency Mr. Dizon (BF 3313-3314, Rollo).
Executive Vice President) intimated that, collectively these corporations have large
undeveloped real estate properties in the suburbs which can be made answerable Records further show that the examination of petitioner bank was officially
for the unsecured loans a well as the Central Bank's credit accommodations. A terminated only when Central Bank Examination-charge Dionisio Domingo
formal reply of the bank would still be forthcoming. (pp. 58-59, Rollo, Vol. I; submitted his final report of examination on March 4,1985.
emphasis ours)
It is evident from the foregoing circumstances that the examination contemplated
Clearly, Tiaoqui based his report on an incomplete examination of petitioner bank in Sec. 29 of the CB Act as a mandatory requirement was not completely and fully
and outrightly concluded therein that the latter's financial status was one of complied with. Despite the existence of the partial list of findings in the examination
insolvency or illiquidity. He arrived at the said conclusion from the following facts: of the bank, there were still highly significant items to be weighed and determined

31
such as the matter of valuation reserves, before these can be considered in the law (Rural Bank of Bato v. IAC, G.R. No. 65642, October 15, 1984, Rural Bank v.
financial condition of the bank. It would be a drastic move to conclude prematurely Court of Appeals, G.R. 61689, June 20, 1988,162 SCRA 288).
that a bank is insolvent if the basis for such conclusion is lacking and insufficient,
especially if doubt exists as to whether such bases or findings faithfully represent Notwithstanding the foregoing, administrative due process does not mean that the
the real financial status of the bank. other important principles may be dispensed with, namely: the decision of the
administrative body must have something to support itself and the evidence must
The actuation of the Monetary Board in closing petitioner bank on January 25, be substantial. Substantial evidence is more than a mere scintilla. It means such
1985 barely four days after a conference with the latter on the examiners' partial relevant evidence as a reasonable mind might accept as adequate to support a
findings on its financial position is also violative of what was provided in the CB conclusion (Ang Tibay vs. CIR, supra). Hence, where the decision is merely based
Manual of Examination Procedures. Said manual provides that only after the upon pieces of documentary evidence that are not sufficiently substantial and
examination is concluded, should a pre-closing conference led by the examiner-in- probative for the purpose and conclusion they are presented, the standard of
charge be held with the officers/representatives of the institution on the fairness mandated in the due process clause is not met. In the case at bar, the
findings/exception, and a copy of the summary of the findings/violations should be conclusion arrived at by the respondent Board that the petitioner bank is in an
furnished the institution examined so that corrective action may be taken by them illiquid financial position on January 23, 1985, as to justify its closure on January
as soon as possible (Manual of Examination Procedures, General Instruction, p. 25, 1985 cannot be given weight and finality as the report itself admits the
14). It is hard to understand how a period of four days after the conference could inadequacy of its basis to support its conclusion.
be a reasonable opportunity for a bank to undertake a responsive and corrective
action on the partial list of findings of the examiner-in-charge. The second requirement provided in Section 29, R.A. 265 before a bank may be
closed is that the examination should disclose that the condition of the bank is one
We recognize the fact that it is the responsibility of the Central Bank of the of insolvency.
Philippines to administer the monetary, banking and credit system of the country
and that its powers and functions shall be exercised by the Monetary Board As to the concept of whether the bank is solvent or not, the respondents contend
pursuant to Rep. Act No. 265, known as the Central Bank Act. Consequently, the that under the Central Bank Manual of Examination Procedures, Central Bank
power and authority of the Monetary Board to close banks and liquidate them examiners must recommend valuation reserves, when warranted, to be set up or
thereafter when public interest so requires is an exercise of the police power of the deducted against the corresponding asset account to determine the bank's true
state. Police power, however, may not be done arbitratrily or unreasonably and condition or net worth. In the case of loan accounts, to which practically all the
could be set aside if it is either capricious, discriminatory, whimsical, arbitrary, questioned valuation reserves refer, the manual provides that:
unjust or is tantamount to a denial of due process and equal protection clauses of
the Constitution (Central Bank v. Court of Appeals, Nos. L-50031-32, July 27, 1. For doubtful loans, or loans the ultimate collection of which is doubtful and in
1981, 106 SCRA 143). which a substantial loss is probable but not yet definitely ascertainable as to
extent, valuation reserves of fifty per cent (50%) of the accounts should be
In the instant case, the basic standards of substantial due process were not recommended to be set up.
observed. Time and again, We have held in several cases, that the procedure of 2. For loans classified as loss, or loans regarded by the examiner as absolutely
administrative tribunals must satisfy the fundamentals of fair play and that their uncollectible or worthless, valuation reserves of one hundred percent (100%) of
judgment should express a well-supported conclusion. the accounts should be recommended to be set up (p. 8, Objections to Santiago
report).
In the celebrated case of Ang Tibay v. Court of Industrial Relations, 69 Phil. 635,
this Court laid down several cardinal primary rights which must be respected in a The foregoing criteria used by respondents in determining the financial condition of
proceeding before an administrative body. the bank is based on Section 5 of RA 337, known as the General Banking Act
which states:
However, as to the requirement of notice and hearing, Sec. 29 of RA 265 does not
require a previous hearing before the Monetary Board implements the closure of a Sec. 5. The following terms shall be held to be synonymous and interchangeable:
bank, since its action is subject to judicial scrutiny as provided for under the same

32
... f. Unimpaired Capital and Surplus, "Combined capital accounts," and "Net from banks, loans, discounts and advances, fixed assets and other property owned
worth," which terms shall mean for the purposes of this Act, the total of the or acquired and other miscellaneous assets. The amount of loans, discounts and
"unimpaired paid-in capital, surplus, and undivided profits net of such valuation advances to be stated in the statement of condition as provided for in the manual
reserves as may be required by the Central Bank." is computed after deducting valuation reserves when deemed necessary. On the
other hand, liabilities are composed of demand deposits, time and savings
There is no doubt that the Central Bank Act vests authority upon the Central Bank deposits, cashier's, manager's and certified checks, borrowings, due to head
and Monetary Board to take charge and administer the monetary and banking office, branches; and agencies, other liabilities and deferred credits (Manual of
system of the country and this authority includes the power to examine and Examination Procedure, p. 9). The amounts stated in the balance sheets or
determine the financial condition of banks for purposes provided for by law, such statements of condition including the computation of valuation reserves when
as for the purpose of closure on the ground of insolvency stated in Section 29 of justified, are based however, on the assumption that the bank or company will
the Central Bank Act. But express grants of power to public officers should be continue in business indefinitely, and therefore, the networth shown in the
subjected to a strict interpretation, and will be construed as conferring those statement is in no sense an indication of the amount that might be realized if the
powers which are expressly imposed or necessarily implied (Floyd Mechem, bank or company were to be liquidated immediately (Prentice Hall Encyclopedic
Treatise on the Law of Public Offices and Officers, p. 335). Dictionary of Business Finance, p. 48). Further, based on respondents'
submissions, the allowance for probable losses on loans and discounts represents
In this case, there can be no clearer explanation of the concept of insolvency than the amount set up against current operations to provide for possible losses arising
what the law itself states. Sec. 29 of the Central Bank Act provides that insolvency from non-collection of loans and advances, and this account is also referred to as
under the Act, shall be understood to mean that "the realizable assets of a bank or valuation reserve (p. 9, Objections to Santiago report). Clearly, the statement of
a non-bank financial intermediary performing quasi-banking functions as condition which contains a provision for recommended valuation reserves should
determined by the Central Bank are insufficient to meet its liabilities." not be used as the ultimate basis to determine the solvency of an institution for the
purpose of termination of its operations.
Hence, the contention of the Central Bank that a bank's true financial condition is
synonymous with the terms "unimpaired capital and surplus," "combined capital Respondents acknowledge that under the said CB manual, CB examiners must
accounts" and net worth after deducting valuation reserves from the capital, recommend valuation reserves, when warranted, to be set up against the
surplus and unretained earnings, citing Sec. 5 of RA 337 is misplaced. corresponding asset account (p. 8, Objections to Santiago report). Tiaoqui himself,
as author of the report recommending the closure of petitioner bank admits that the
Firstly, it is clear from the law that a solvent bank is one in which its assets exceed valuation reserves should still be discussed with the petitioner bank in compliance
its liabilities. It is a basic accounting principle that assets are composed of liabilities with standard examination procedure. Hence, for the Monetary Board to
and capital. The term "assets" includes capital and surplus" (Exley v. Harris, 267 p. unilaterally deduct an uncertain amount as valuation reserves from the assets of a
970, 973, 126 Kan., 302). On the other hand, the term "capital" includes common bank and to conclude therefrom without sufficient basis that the bank is insolvent,
and preferred stock, surplus reserves, surplus and undivided profits. (Manual of would be totally unjust and unfair.
Examination Procedures, Report of Examination on Department of Commercial
and Savings Banks, p. 3-C). If valuation reserves would be deducted from these The test of insolvency laid down in Section 29 of the Central Bank Act is measured
items, the result would merely be the networth or the unimpaired capital and by determining whether the realizable assets of a bank are leas than its liabilities.
surplus of the bank applying Sec. 5 of RA 337 but not the total financial condition Hence, a bank is solvent if the fair cash value of all its assets, realizable within a
of the bank. reasonable time by a reasonable prudent person, would equal or exceed its total
liabilities exclusive of stock liability; but if such fair cash value so realizable is not
Secondly, the statement of assets and liabilities is used in balance sheets. Banks sufficient to pay such liabilities within a reasonable time, the bank is insolvent.
use statements of condition to reflect the amounts, nature and changes in the (Gillian v. State, 194 N.E. 360, 363, 207 Ind. 661). Stated in other words, the
assets and liabilities. The Central Bank Manual of Examination Procedures insolvency of a bank occurs when the actual cash market value of its assets is
provides a format or checklist of a statement of condition to be used by examiners insufficient to pay its liabilities, not considering capital stock and surplus which are
as guide in the examination of banks. The format enumerates the items which will not liabilities for such purpose (Exley v. Harris, 267 p. 970, 973,126 Kan. 302;
compose the assets and liabilities of a bank. Assets include cash and those due Alexander v. Llewellyn, Mo. App., 70 S.W. 2n 115,117).

33
In arriving at the computation of realizable assets of petitioner bank, respondents the consolidated statement of condition of petitioner bank as of January 25, 1985
used its books which undoubtedly are not reflective of the actual cash or fair prepared by the Central Bank Authorized Deputy Receiver Artemio Cruz shows
market value of its assets. This is not the proper procedure contemplated in Sec. that total assets amounting to P4,981,522,996.22 even exceeds total liabilities
29 of the Central Bank Act. Even the CB Manual of Examination Procedures does amounting to P4,540,836,834.15. Based on the foregoing, there was no valid
not confine examination of a bank solely with the determination of the books of the reason for the Valenzuela, Aurellano and Tiaoqui report to finally recommend the
bank. The latter is part of auditing which should not be confused with examination. liquidation of petitioner bank instead of its rehabilitation.
Examination appraises the soundness of the institution's assets, the quality and
character of management and determines the institution's compliance with laws, We take note of the exhaustive study and findings of the Cosico report on the
rules and regulations. Audit is a detailed inspection of the institution's books, petitioner bank's having engaged in unsafe, unsound and fraudulent banking
accounts, vouchers, ledgers, etc. to determine the recording of all assets and practices by the granting of huge unsecured loans to several subsidiaries and
liabilities. Hence, examination concerns itself with review and appraisal, while audit related companies. We do not see, however, that this has any material bearing on
concerns itself with verification (CB Manual of Examination Procedures, General the validity of the closure. Section 34 of the RA 265, Central Bank Act empowers
Instructions, p. 5). This Court however, is not in the position to determine how the Monetary Board to take action under Section 29 of the Central Bank Act when
much cash or market value shall be assigned to each of the assets and liabilities of a bank "persists in carrying on its business in an unlawful or unsafe manner."
the bank to determine their total realizable value. The proper determination of There was no showing whatsoever that the bank had persisted in committing
these matters by using the actual cash value criteria belongs to the field of fact- unlawful banking practices and that the respondent Board had attempted to take
finding expertise of the Central Bank and the Monetary Board. Notwithstanding the effective action on the bank's alleged activities. During the period from July 27,
fact that the figures arrived at by the respondent Board as to assets and liabilities 1984 up to January 25, 1985, when petitioner bank was under conservatorship no
do not truly indicate their realizable value as they were merely based on book official of the bank was ever prosecuted, suspended or removed for any
value, We will however, take a look at the figures presented by the Tiaoqui Report participation in unsafe and unsound banking practices, and neither was the entire
in concluding insolvency as of July 31, 1984 and at the figures presented by the management of the bank replaced or substituted. In fact, in her testimony during
CB authorized deputy receiver and by the Valenzuela, Aurellano and Tiaoqui the second referral hearing, Carlota Valenzuela, CB Deputy Governor, testified
Report which recommended the liquidation of the bank by reason of insolvency as that the reason for petitioner bank's closure was not unsound, unsafe and
o January 25,1985. fraudulent banking practices but the alleged insolvency position of the bank (TSN,
August 3, 1990, p. 3316, Rollo, Vol. VIII).
The Tiaoqui report dated January 23, 1985, which was based on partial
examination findings on the bank's condition as of July 31, 1984, states that total Finally, another circumstance which point to the solvency of petitioner bank is the
liabilities of P5,282.1 million exceeds total assets of P4,947.2 million after granting by the Monetary Board in favor of the former a credit line in the amount of
deducting from the assets valuation reserves of P612.2 million. Since, as We have P3 billion along with the placing of petitioner bank under conservatorship by virtue
explained in our previous discussion that valuation reserves can not be legally of M.B. Resolution No. 955 dated July 27, 1984. This paved the way for the
deducted as there was no truthful and complete evaluation thereof as admitted by reopening of the bank on August 1, 1984 after a self-imposed bank holiday on July
the Tiaoqui report itself, then an adjustment of the figures win show that the 23, 1984.
liabilities of P5,282.1 million will not exceed the total assets which will amount to
P5,559.4 if the 612.2 million allotted to valuation reserves will not be deducted On emergency loans and advances, Section 90 of RA 265 provides two types of
from the assets. There can be no basis therefore for both the conclusion of emergency loans that can be granted by the Central Bank to a financially
insolvency and for the decision of the respondent Board to close petitioner bank distressed bank:
and place it under receivership.
Sec. 90. ... In periods of emergency or of imminent financial panic which directly
Concerning the financial position of the bank as of January 25, 1985, the date of threaten monetary and banking stability, the Central Bank may grant banking
the closure of the bank, the consolidated statement of condition thereof as of the institutions extraordinary advances secured by any assets which are defined as
aforesaid date shown in the Valenzuela, Aurellano and Tiaoqui report on the acceptable by by a concurrent vote of at least five members of the Monetary
receivership of petitioner bank, dated March 19, 1985, indicates that total liabilities Board. While such advances are outstanding, the debtor institution may not
of 4,540.84 million does not exceed the total assets of 4,981.53 million. Likewise,

34
expand the total volume of its loans or investments without the prior authorization A perusal of the foregoing "Whereas" clauses unmistakably show that the clear
of the Monetary Board. reason for the decision to grant the emergency loan to petitioner bank was that the
latter was suffering from financial distress and severe bank "run" as a result of
The Central Bank may, at its discretion, likewise grant advances to banking which it closed on July 23, 1984 and that the release of the said amount is in
institutions, even during normal periods, for the purpose of assisting a bank in a accordance with the Central Bank's full support to meet Banco Filipino's
precarious financial condition or under serious financial pressures brought about depositors' withdrawal requirements (Excerpts of minutes of meeting on MB Min.
by unforeseen events, or events which, though foreseeable, could not be No. 35, p. 25, Rollo, Vol. IX). Nothing therein shows that an extraordinary
prevented by the bank concerned. Provided, however, That the Monetary Board emergency situation exists affecting most banks, not only as regards petitioner
has ascertained that the bank is not insolvent and has clearly realizable assets to bank. This Court thereby finds that the grant of the said emergency loan was
secure the advances. Provided, further, That a concurrent vote of at least five intended from the beginning to fall under the second paragraph of Section 90 of
members of the Monetary Board is obtained. (Emphasis ours) the Central Bank Act, which could not have occurred if the petitioner bank was not
solvent. Where notwithstanding knowledge of the irregularities and unsafe banking
The first paragraph of the aforequoted provision contemplates a situation where practices allegedly committed by the petitioner bank, the Central Bank even
the whole banking community is confronted with financial and economic crisis granted financial support to the latter and placed it under conservatorship, such
giving rise to serious and widespread confusion among the public, which may actuation means that petitioner bank could still be saved from its financial distress
eventually threaten and gravely prejudice the stability of the banking system. Here, by adequate aid and management reform, which was required by Central Bank's
the emergency or financial confusion involves the whole banking community and duty to maintain the stability of the banking system and the preservation of public
not one bank or institution only. The second situation on the other hand, provides confidence in it (Ramos v. Central Bank, No. L-29352, October 4, 1971, 41 SCRA
for a situation where the Central Bank grants a loan to a bank with uncertain 565).
financial condition but not insolvent.
In view of the foregoing premises, We believe that the closure of the petitioner
As alleged by the respondents, the following are the reasons of the Central Bank in bank was arbitrary and committed with grave abuse of discretion. Granting in
approving the resolution granting the P3 billion loan to petitioner bank and the gratia argumenti that the closure was based on justified grounds to protect the
latter's reopening after a brief self-imposed banking holiday: public, the fact that petitioner bank was suffering from serious financial problems
should not automatically lead to its liquidation. Section 29 of the Central Bank
WHEREAS, the closure by Banco Filipino Savings and Mortgage Bank of its provides that a closed bank may be reorganized or otherwise placed in such a
Banking offices on its own initiative has worked serious hardships on its depositors condition that it may be permitted to resume business with safety to its depositors,
and has affected confidence levels in the banking system resulting in a feeling of creditors and the general public.
apprehension among depositors and unnecessary deposit withdrawals;
We are aware of the Central Bank's concern for the safety of Banco Filipino's
WHEREAS, the Central Bank is charged with the function of administering the depositors as well as its creditors including itself which had granted substantial
banking system; financial assistance up to the time of the latter's closure. But there are alternatives
to permanent closure and liquidation to safeguard those interests as well as those
WHEREAS, the reopening of Banco Filipino would require additional credit of the general public for the failure of Banco Filipino or any bank for that matter
resources from the Central Bank as well as an independent management may be viewed as an irreversible decline of the country's entire banking system
acceptable to the Central Bank; and ultimately, it may reflect on the Central Bank's own viability. For one thing, the
Central Bank and the Monetary Board should exercise strict supervision over
WHEREAS, it is the desire of the Central Bank to rapidly diffuse the uncertainty Banco Filipino. They should take all the necessary steps not violative of the laws
that presently exists; that will fully secure the repayment of the total financial assistance that the Central
Bank had already granted or would grant in the future.
... (M.B. Min. No. 35 dated July 27, 1984 cited in Respondents' Objections to
Santiago Report, p. 26; p. 3387, Rollo, Vol. IX; Emphasis ours). ACCORDINGLY, decision is hereby rendered as follows:

35
1. The motion for reconsideration in G.R. Nos. 68878 and 81303, and the petitions
in G.R. Nos. 77255-58, 78766, 81304 and 90473 are DENIED;

2. The petitions in G.R. No. 70054, 78767 and 78894 are GRANTED and the
assailed order of the Central Bank and the Monetary Board dated January 25,
1985 is hereby ANNULLED AND SET ASIDE. The Central Bank and the Monetary
Board are ordered to reorganize petitioner Banco Filipino Savings and Mortgage
Bank and allow the latter to resume business in the Philippines under the
comptrollership of both the Central Bank and the Monetary Board and under such
conditions as may be prescribed by the latter in connection with its reorganization
until such time that petitioner bank can continue in business with safety to its
creditors, depositors and the general public.

SO ORDERED.

36
G.R. No. 200678, June 04, 2018 Sentral informed Banco Filipino that it should first comply with certain conditions
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Petitioner, v. BANGKO imposed by Republic Act No. 7653 before financial assistance could be extended.
SENTRAL NG PILIPINAS AND THE MONETARY BOARD, Respondents. Banco Filipino was also required to submit a rehabilitation plan approved by
Bangko Sentral before emergency loans could be granted.
DECISION
In a letter11 dated April 14, 2004, Banco Filipino submitted its Long-Term
LEONEN, J.: Business Plan to Bangko Sentral. It also claimed that Bangko Sentral already
extended similar arrangements to other banks and that it was still awaiting the
A bank which has been ordered closed by the Bangko Sentral ng Pilipinas payment of P18,800,000,000.00 in damage claims, "the entitlement to which the
(Bangko Sentral) is placed under the receivership of the Philippine Deposit Supreme Court has already decided with finality."12
Insurance Corporation. As a consequence of the receivership, the closed bank
may sue and be sued only through its receiver, the Philippine Deposit Insurance In response, Bangko Sentral informed Banco Filipino that its business plan could
Corporation. Any action filed by the closed bank without its receiver may be not be acted upon since it was neither "confirmed nor approved by [Banco
dismissed. Filipino's Board of Directors]."13

This is a Petition for Review on Certiorari1 assailing the Court of Appeals July 28, On July 8, 2004, Banco Filipino filed a Petition for Revival of Judgment with the
2011 Decision2 and February 16, 2012 Resolution3 in CA-G.R. SP No. 116905, Regional Trial Court of Makati to compel Bangko Sentral to approve its business
which dismissed Civil Case No. 10-1042 and held that the trial court had no plan. The case was docketed as Civil Case No. 04-823 and was raffled to Branch
jurisdiction over Bangko Sentral and the Monetary Board. 62.14

On December 11, 1991, this Court promulgated Banco Filipino Savings & During the pendency of its Petition, Banco Filipino entered into discussions and
Mortgage Bank v. Monetary Board and Central Bank of the Philippines,4 which negotiations with Bangko Sentral, which resulted to seven (7) revisions in the
declared void the Monetary Board's order for closure and receivership of Banco business plan. Thus, Banco Filipino filed a Proposal for Settlement dated
Filipino Savings & Mortgage Bank (Banco Filipino). This Court also directed the September 21, 2007 before Branch 62, Regional Trial Court, Makati City to settle
Central Bank of the Philippines and the Monetary Board to reorganize Banco the issues between the parties.15
Filipino and to allow it to resume business under the comptrollership of both the
Central Bank and the Monetary Board.5 On April 8, 2009, Banco Filipino submitted its 8th Revised Business Plan to
Bangko Sentral for evaluation.16 In this business plan, Banco Filipino requested,
Banco Filipino subsequently filed several Complaints before the Regional Trial among others, a P25,000,000,000.00 income enhancement loan. Unable to come
Court, among them a claim for damages in the total amount of to an agreement, the parties constituted an Ad Hoc Committee composed of
P18,800,000,000.00.6 representatives from both parties to study and act on the proposals. The Ad Hoc
Committee produced an Alternative Business Plan, which was accepted by Banco
On June 14, 1993, Congress passed Republic Act No. 7653,7 providing for the Filipino, but was subject to the Monetary Board's approval.17
establishment and organization of Bangko Sentral as the new monetary authority.
In a letter18 dated December 4, 2009, Bangko Sentral informed Banco Filipino that
On November 6, 1993, pursuant to this Court's 1991 Banco Filipino Decision, the the Monetary Board issued Resolution No. 1668 granting its request for the
Monetary Board issued Resolution No. 427, which allowed Banco Filipino to P25,000,000,000.00 Financial Assistance and Regulatory Reliefs to form part of its
resume its business.8 Revised Business Plan and Alternative Business Plan. The approval was also
subject to certain terms and conditions, among which was the withdrawal or
In 2002, Banco Filipino suffered from heavy withdrawals, prompting it to seek the dismissal with prejudice to all pending cases filed by Banco Filipino against
help of Bangko Sentral. In a letter dated October 9, 2003, Banco Filipino asked for Bangko Sentral and its officials.19 The terms also included the execution of
financial assistance of more than P3,000,000,000.00 through emergency loans necessary quitclaims and commitments to be given by Banco Filipino's principal
and credit easement terms.9 In a letter10 dated November 21, 2003, Bangko

37
stockholders, Board of Directors, and duly authorized officers "not to revive or refile In a letter33 dated October 4, 2010, Bangko Sentral reiterated that its referral of
such similar cases in the future."20 the matter to CVC Law was due to the matter being incidental to the civil case
pending before the Regional Trial Court.
In a letter21 dated January 20, 2010, Banco Filipino requested reconsideration of
the terms and conditions of the P25,000,000,000.00 Financial Assistance and On October 20, 2010, Banco Filipino filed a Petition For Certiorari and Mandamus
Regulatory Reliefs package, noting that the salient features of the Alternative with prayer for issuance of a temporary restraining order and writ of preliminary
Business Plan were materially modified.22 However, in a letter23 dated April 8, injunction34 before Branch 66, Regional Trial Court, Makati City, docketed as Civil
2010, Banco Filipino informed Bangko Sentral that it was constrained to accept the Case No. 10-1042. It assailed the alleged "arbitrary, capricious and illegal acts"35
"unilaterally whittled down version of the [P25,000,000,000.00] Financial of Bangko Sentral and of the Monetary Board in coercing Banco Filipino to
Assistance Package and Regulatory Reliefs."24 It, however, asserted that it did not withdraw all its present suits in exchange of the approval of its Business Plan. In
agree with the condition to dismiss and withdraw its cases since this would require particular, Banco Filipino alleged that Bangko Sentral and the Monetary Board
a separate discussion.25 committed grave abuse of discretion in imposing an additional condition in
Resolution No. 1668 requiring it to withdraw its cases and waive all future cases
In a letter26 dated April 19, 2010, Bangko Sentral informed Banco Filipino that it since it was unconstitutional and contrary to public policy. It prayed that a writ of
was surprised by the latter's hesitation in accepting the terms and conditions, in mandamus be issued to compel Bangko Sentral and the Monetary Board to
particular, the withdrawal of the cases against it, since this condition had already approve and implement its business plan and release its Financial Assistance and
been discussed from the start of the negotiations between the parties.27 Regulatory Reliefs package.36

In a letter28 dated June 21, 2010, Banco Filipino informed Bangko Sentral that it The trial court issued a Notice of Hearing on the prayer for a temporary restraining
never accepted the condition of the withdrawal of the cases in prior negotiations order on the same day, setting the hearing on October 27, 2010.37
but was willing to discuss this condition as a separate and distinct matter.
On October 27, 2010, Bangko Sentral and the Monetary Board filed their Motion to
In a letter29 dated August 10, 2010, Bangko Sentral and the Monetary Board, Dismiss Ad Cautelam,38 assailing the Regional Trial Court's jurisdiction over the
through counsel CVC Law, informed Banco Filipino that its rejection of certain subject matter and over the persons of Bangko Sentral and the Monetary Board.
portions of Resolution No. 1668, particularly its refusal to withdraw all cases filed Banco Filipino, on the other hand, filed its Opposition39 to this Petition.
against Bangko Sentral, was deemed as a failure to reach a mutually acceptable
settlement. In its October 28, 2010 Order,40 the Regional Trial Court granted the request for
the issuance of a temporary restraining order against Bangko Sentral and the
In a letter30 dated August 13, 2010, Banco Filipino questioned the legality of Monetary Board. The dispositive portion of this Order read:
referring the matter to private counsel and stated that it had not been notified of the
action taken on the acceptance of its Business Plan. WHEREFORE, premises considered and pursuant to Rule 58 of the Revised
Rules of Court, Petitioner's prayer for a Temporary Restraining Order is hereby
In a letter31 dated September 13, 2010, CVC Law told Banco Filipino that the GRANTED. Respondent[s] Ban[gk]o Sentral ng Pilipinas and [t]he Monetary
matter was referred to it as an incident of Civil Case No. 04-823, which it was Board, as well as [their] representatives, agents, assigns and/or third person or
handling on behalf of Bangko Sentral. It also informed Banco Filipino that the entity acting for and [their] behalf are hereby enjoined from (a) employing acts
latter's rejection of the terms and conditions of Resolution No. 1668 made this inimical to the enforcement and implementation of the approv[ed] Business Plan,
Resolution legally unenforceable. (b) continuing and committing acts prejudicial to Petitioner's operations, (c)
withdrawing or threatening to withdraw the approval of the Business Plan
Banco Filipino sent letters32 dated September 22, 2010 and September 28, 2010, containing financial assistance, and package of regulatory reliefs, and (d)
questioning the legality of Bangko Sentral's referral to private counsel and otherwise enforcing other regulatory measures and abuses calculated to coerce
reiterating that the terms and conditions embodied in Resolution No. 1668 were Banco Filipino Savings and Mortgage Bank into agreeing to drop and/or withdraw
not meant to be a settlement of its P18,800,000,000.00 damage claim against its suits and damage claims against BSP and MB, and to waive future claims
Bangko Sentral. against Respondents or their official[s] and employees.

38
Further, the Court directs Sheriff Leodel N. Roxas to personally serve a copy of Application for Interim Relief53 in CA-G.R. SP No. 116627 seeking to include the
this Order to the herein Respondent Ban[gk]o Sentral ng Pilipinas and [t]he trial court's October 28, 2010 Order.
Monetary Board. Finally, let this case be set on November 11, 2010 and November
12, 2010 both at 2:00 in the afternoon for hearing on the prayer for issuance of a In its December 28, 2010 Resolution,54 the Court of Appeals granted55 Bangko
Writ of Preliminary Mandatory Injunction. Sentral and the Monetary Board's Urgent Motion to Admit Attached Amended
Petition in CA-G.R. SP No. 116905.
SO ORDERED.
Meanwhile, Banco Filipino filed its Opposition dated January 18, 2011 in CA-G.R.
On the same day or on October 28, 2010, summons was served on Bangko SP No. 116905.56
Sentral through a staff member of the Office of the Governor, as certified by the
Process Server's Return dated November 4, 2010. After oral arguments were held on February 7, 2011,57 the Court of Appeals
issued its February 14, 2011 Resolution58 in CA-G.R. SP No. 116905. It granted
On November 5, 2010, Bangko Sentral and the Monetary Board filed a Petition For the application for a writ of preliminary injunction and enjoined the trial court from
Certiorari with prayer for temporary restraining order and/or writ of preliminary conducting further proceedings in Civil Case No. 10-1042 pending a decision on
injunction43 with the Court of Appeals, assailing the Regional Trial Court's October the merits.
28, 2010 Order for having been issued without jurisdiction. The Petition was
docketed as CA-G.R. SP No. 116627. On February 16, 2011, Banco Filipino filed an Urgent Motion for Consolidation59 in
CA-G.R. SP No. 116905, requesting for the consolidation of the two (2) Petitions
On November 17, 2010, the trial court issued an Order denying the Bangko Sentral for Certiorari filed by Bangko Sentral and the Monetary Board before the Court of
and the Monetary Board's Motion to Dismiss Ad Cautelam, stating that the acts Appeals. On March 1, 2011, it also filed a Motion for Reconsideration60 of the
complained of pertained to Bangko Sentral 's regulatory functions, not its Court of Appeals February 14, 2011 Resolution.
adjudicatory functions. It likewise stated that as requested in the handwritten letter
dated October 21, 2010 by Bangko Sentral's general counsel requesting for an In its June 2, 2011 Resolution,61 the Court of Appeals in CA-G.R. SP No. 116905
advanced copy of Banco Filipino's Petition, it furnished Bangko Sentral a copy of denied Banco Filipino's Motion for Reconsideration, holding that special civil
the Petition. It also held that Bangko Sentral's subsequent participation in the actions against quasi-judicial agencies should be filed before the Court of Appeals,
preliminary hearing and its receipt of the summons on October 28, 2010 satisfied not before a trial court.62 The Court of Appeals also denied the Urgent Motion for
the requirements of procedural due process. Consolidation for the following reasons:

The trial court likewise found that litis pendencia and forum shopping were not 1) [I]t would cause not only further congestion of the already congested docket of
present in the case, that Bangko Sentral's verification and certification of non- the ponente of CA-G.R. SP No. 116627, but also in the delay in the disposition of
forum shopping were validly signed by the Executive Committee, and that Banco both cases; 2) the subject matters and issues raised in the instant petition are
Filipino's Petition did not fail to state a cause of action. different from those set forth in CA-G.R. SP No. 116627, hence, they can be the
subject of separate: petitions; and 3) Since a writ of preliminary injunction was
On November 25, 2010, Bangko Sentral and the Monetary Board filed another earlier issued, Section 2 (d), Rule VI of the 2009 IRCA requires that the instant
Petition for Certiorari with prayer for temporary restraining order and writ of petition remain with the undersigned ponente for decision on the merits with
preliminary injunction with the Court of Appeals, this time assailing the November dispatch.
17, 2010 Order. The case was docketed as CA-G.R. SP No. 116905. However, the
trial court issued a writ of preliminary injunction on November 18, 201051 so they On July 28, 2011, the Court of Appeals rendered its Decision64 in CA-G.R. SP No.
filed their Urgent Motion to Admit Attached Amended Petition52 with the Court of 116905 granting Bangko Sentral and the Monetary Board's Amended Petition.
Appeals to include the Issuance. According to the Court of Appeals, the trial court had no jurisdiction over the
Petition for Certiorari and Mandamus filed by Banco Filipino since special civil
In the meantime, or on November 23, 2010, Bangko Sentral and the Monetary actions against quasi-judicial agencies are only cognizable by the Court of
Board filed a Motion to Admit Attached Supplemental Petition for Certiorari with Appeals. It also found that the trial court gravely abused its discretion in acquiring

39
jurisdiction over Bangko Sentral and the Monetary Board by reason of their to file the case considering that Philippine Deposit Insurance Corporation was
voluntary appearance in the preliminary hearing since their counsel had made it under the control of herein respondent Monetary Board.
clear that the appearance was specifically to question the absence of a service of
summons.66 Petitioner asserts that the trial court had jurisdiction over special civil actions
against respondents, accordingly with Merchants Rural Bank of Talavera v.
The Court of Appeals likewise found that the delegation of authority from Banco Monetary Board, et al., a decision promulgated by the Court of Appeals in 2006.
Filipino's Board of Directors to the Executive Committee to sign pleadings on its
behalf validated the verification and certification of non-forum shopping signed only Petitioner likewise argues that the trial court acquired jurisdiction over respondents
by the Executive Vice Presidents.67 It also ruled that there was no litis pendencia considering that they were able to participate in the summary hearing. It points out
or forum shopping in the case docketed as Civil Case No. 10-1042 despite the that respondents questioned before the trial court the service of the petition on
pendency of Civil Case No. 04-823 since the causes of action and the reliefs October 21, 2010 but never actually questioned the service of summons on
prayed for were not the same.68 The dispositive portion of the Court of Appeals October 28, 2010 until it filed its petition with the Court of Appeals.80 It argues that
July 28, 2011 Decision read: respondents' private counsel was present during the raffle of the case on October
21, 2010 and even assisted respondents' general counsel in receiving copies of
WHEREFORE, the petition is GRANTED. The Order dated November 17, 2010 the petition that the latter requested, showing that respondents' due process was
issued by respondent Judge Joselito C. Villarosa of the Regional Trial Court never violated.81 It asserts that the Court of Appeals should have dismissed
(RTC), Branch 66, Makati City, in Civil Case No. 10-1042, is ANNULLED and SET outright respondents' Petition for Certiorari for "maliciously omitt[ing]" the
ASIDE. In lieu thereof, judgment is hereby rendered. DISMISSING Civil Case No. handwritten letter dated October 21, 2010 of their general counsel.82 It likewise
10-1042 on the ground of the RTC's lack of jurisdiction over the same. points out that respondents failed to file a motion for reconsideration before the
trial court before filing their petition for certiorari with the Court of Appeals.83
Accordingly, the writ of preliminary injunction issued by this Court on February 14,
2011, enjoining respondent Judge, private respondent and their representatives Respondents, on the other hand, counter that the Petition should be dismissed
from conducting further proceedings in Civil Case No. 10-1042, is hereby made outright for being filed without Philippine Deposit Insurance Corporation's authority.
PERMANENT. It asserts that petitioner was placed under receivership on March 17, 2011, and
thus, petitioner's Executive Committee would have had no authority to sign for or
SO ORDERED. on behalf of petitioner absent the authority of its receiver, Philippine Deposit
Insurance Corporation. They also point out that both the Philippine Deposit
Banco Filipino filed a Motion for Reconsideration, which was denied by the Court Insurance Corporation Charter and Republic Act No. 7653 categorically state that
of Appeals in its February 16, 2012 Resolution. Hence, it filed this Petition72 on the authority to file suits or retain counsels for closed banks is vested in the
April 10, 2012 against Bangko Sentral and the Monetary Board before this Court. receiver. Thus, the verification and certification of non-forum shopping signed by
petitioner's Executive Committee has no legal effect.
Petitioner claims that it had the authority to file this Petition since the Court of
Appeals promulgated its January 27, 2012 Decision in CA-G.R. SP No. 118599, Respondents likewise claim that the Court of Appeals did not err in finding that the
finding petitioner's closure and receivership to have been illegal. It argues that to trial court had no jurisdiction over respondents. It cited this Court's ruling in United
dismiss its Petition now pending before this Court for lack of authority from its Coconut Planters Bank v. E. Ganzon, Inc. and National Water Resources Board v.
receiver Philippine Deposit Insurance Corporation would be "an absurd and unjust A. L. Ang Network, where this Court categorically stated that special civil cases
situation." Petitioner admits, however, that this decision was eventually overturned filed against quasi-judicial agencies must be filed before the Court of Appeals.
on reconsideration in the Court of Appeals November 21, 2012 Amended Decision. They argue that there was no showing that Merchants Rural Bank of Talavera was
ever upheld by this Court. They contend that petitioner should be estopped from
Petitioner points out that there was nothing in the Philippine Deposit Insurance raising the issue of jurisdiction considering that during the pendency of this case,
Corporation Charter or in Republic Act No. 7653 that precludes its Board of or on March 21, 2011 and November 20, 2011, it filed two (2) separate petitions for
Directors from suing on its behalf. It adds that there was an obvious conflict of certiorari against respondent Monetary Board directly before the Court of Appeals.
interest in requiring it to seek Philippine Deposit Insurance Corporation's authority

40
Respondents maintain that the trial court did not acquire jurisdiction over them Under Republic Act No. 7653, when the Monetary Board finds a bank insolvent, it
since there was no valid service of summons. They argue that when they filed their may "summarily and without need for prior hearing forbid the institution from doing
Motion to Dismiss on October 27, 2010, they could not have validly argued the business in the Philippines and designate the Philippine Deposit Insurance
propriety of the summons on them on October 28, 2010. They likewise contend Corporation as receiver of the banking institution."
that their voluntary appearance in the summary hearing before the trial court was
not a submission to the trial court's jurisdiction since they consistently manifested Before the enactment of Republic Act No. 7653, an insolvent bank under
that their appearance would be special and limited to raise the issues of liquidation could not sue or be sued except through its liquidator. In Hernandez v.
jurisdiction. They also assert that the service of summons to a staff member of the Rural Bank of Lucena:
Office of the Governor General is not equivalent to the service of summons to the
Governor General, making the service of summons ineffective. [A]n insolvent bank, which was under the control of the finance commissioner for
liquidation, was without power or capacity to sue or be sued, prosecute or defend,
Respondents likewise claim that their filing of their Petition before the Court of or otherwise function except through the finance commissioner or liquidator.
Appeals without a prior motion for reconsideration was justified by certain
exceptional circumstances. They mention, among others, the trial court's lack of This Court in Manalo v. Court of Appeals reiterated this principle:
jurisdiction, the fact that the issues have already been raised and passed upon by
the trial court, the prejudice to government interest in delaying the case, and their A bank which had been ordered closed by the monetary board retains its juridical
denied due process because of the improper service of summons. They further personality which can sue and be sued through its liquidator. The only limitation
argue that the only significance of the October 21, 2010 handwritten letter was to being that the prosecution or defense of the action must be done through the
show that respondents were informed that a Petition was filed, and not that the trial liquidator. Otherwise, no suit for or against an insolvent entity would prosper.
court had. already acquired jurisdiction over their persons.
Under the old Central Bank Act, or Republic Act No. 265, as amended, the same
From the arguments of the parties, this Court is asked to resolve the following principle applies to the receiver appointed by the Central Bank. The law explicitly
issues: stated that a receiver shall "represent the [insolvent] bank personally or through
counsel as he [or she] may retain in all actions or proceedings for or against the
First, whether or not trial courts have jurisdiction to take cognizance of a petition institution." Section 29 of the old law states:
for certiorari against acts and omissions of the Monetary Board;
Section 29. Proceedings upon insolvency. — Whenever, upon examination by the
Second, whether or not respondents Bangko Sentral ng Pilipinas and the Monetary head of the appropriate supervising or examining department or his examiners or
Board should have filed a motion for reconsideration of the trial court's denial of agents into the condition of any bank or non-bank financial intermediary performing
their motion to dismiss before filing their petition for certiorari before the Court of quasi-banking functions, it shall be disclosed that the condition of the same is one
Appeals; and of insolvency, or that its continuance in business would involve probable loss to its
depositors or creditors, it shall be the duty of the department head concerned
Finally, whether or not the trial court validly acquired jurisdiction over respondents forthwith, in writing, to inform the Monetary Board of the facts. The Board may,
Bangko Sentral ng Pilipinas and the Monetary Board. upon finding the statements of the department head to be true, forbid the institution
to do business in the Philippines and designate an official of the Central Bank or a
However, before any of these issues can be addressed, this Court must first person of recognized competence in banking or finance, as receiver to
resolve the issue of whether or not petitioner Banco Filipino, as a closed bank immediately take charge of its assets and liabilities, as expeditiously as possible
under receivership, could file this Petition for Review without joining its statutory collect and gather all the assets and administer the same for the benefit of its
receiver, the Philippine Deposit Insurance Corporation, as a party to the case. creditors, and represent the bank personally or through counsel as he [or she] may
retain in all actions or proceedings for or against the institution, exercising all the
I powers necessary for these purposes including, but not limited to, bringing and
A closed bank under receivership can only sue or be sued through its receiver, the foreclosing mortgages in the name of the bank or non-bank financial intermediary
Philippine Deposit Insurance Corporation. performing quasi-banking functions.

41
In Republic Act No. 7653, this provision is substantially altered. Section 30 now The relationship between the Philippine Deposit Insurance Corporation and a
states, in part: closed bank is fiduciary in nature. Section 30 of Republic Act No. 7653 directs the
receiver of a closed bank to "immediately gather and take charge of all the assets
The receiver shall immediately gather and take charge of all the assets and and liabilities of the institution" and "administer the same for the benefit of its
liabilities of the institution, administer the same for the benefit of its creditors, and creditors."105
exercise the general powers of a receiver under the Revised Rules of Court but
shall not, with the exception of administrative expenditures, pay or commit any act The law likewise grants the receiver "the general powers of a receiver under the
that will involve the transfer or disposition of any asset of the institution: Provided, Revised Rules of Court."106 Under Rule 59, Section 6 of the Rules of Court, "a
That the receiver may deposit or place the funds of the institution in non- receiver shall have the power to bring and defend, in such capacity, actions in his
speculative investments. The receiver shall determine as soon as possible, but not [or her] own name."107 Thus, Republic Act No. 7653 provides that the receiver
later than ninety (90) days from take-over, whether the institution may be shall also "in the name of the institution, and with the assistance of counsel as [it]
rehabilitated or otherwise placed in such a condition so that it may be permitted to may retain, institute such actions as may be necessary to collect and recover
resume business with safety to its depositors and creditors and the general public: accounts and assets of, or defend any action against, the institution."108
Provided, That any determination for the resumption of business of the institution Considering that the receiver has the power to take charge of all the assets of the
shall be subject to prior approval of the Monetary Board. closed bank and to institute for or defend any action against it, only the receiver, in
its fiduciary capacity, may sue and be sued on behalf of the closed bank.
If the receiver determines that the institution cannot be rehabilitated or permitted to
resume business in accordance with the next preceding paragraph, the Monetary In Balayan Bay Rural Bank v. National Livelihood Development Corporation,109
Board shall notify in writing the board of directors of its findings and direct the this Court explained that a receiver of a closed bank is tasked with the duty to hold
receiver to proceed with the liquidation of the institution. The receiver shall: the assets and liabilities in trust for the benefit of the bank's creditors.

(1) file ex parte with the proper regional trial court, and without requirement of prior As fiduciary of the insolvent bank, Philippine Deposit Insurance Corporation
notice or any other action, a petition for assistance in the liquidation of the conserves and manages the assets of the bank to prevent the assets' dissipation.
institution pursuant to a liquidation plan adopted by the Philippine Deposit This includes the power to bring and defend any action that threatens to dissipate
Insurance Corporation for general application to all closed banks. In case of quasi- the closed bank's assets. Balayan Bay Rural Bank explained that Philippine
banks, the liquidation plan shall be adopted by the Monetary Board. Upon Deposit Insurance Corporation does so, not as the real party-in-interest, but as a
acquiring jurisdiction, the court shall, upon motion by the receiver after due notice, representative party, thus:
adjudicate disputed claims against the institution, assist the enforcement of
individual liabilities of the stockholders, directors and officers, and decide, on other As the fiduciary of the properties of a closed bank, the PDIC may prosecute or
issues as may be material to implement the liquidation plan adopted. The receiver defend the case by or against the said bank as a representative party while the
shall pay the cost of the proceedings from the assets of the institution. bank will remain as the real party in interest pursuant to Section 3, Rule 3 of the
Revised Rules of Court which provides:
(2) convert the assets of the institution to money, dispose of the same to creditors
and other parties, for the purpose of paying the debts of such institution in SEC. 3. Representatives as parties. — Where the action is allowed to be
accordance with the rules on concurrence and preference of credit under the Civil prosecuted or defended by a representative or someone acting in a fiduciary
Code of the Philippines and he may, in the name of the institution, and with the capacity, the beneficiary shall be included in the title of the case and shall be
assistance of counsel as he may retain, institute such actions as may be deemed to be the real party in interest. A representative may be a trustee of an
necessary to collect and recover accounts and assets of, or defend any action express trust, a guardian, an executor or administrator, or a party authorized by
against, the institution. The assets of an institution under receivership or liquidation law or these Rules. An agent acting in his own name and for the benefit of an
shall be deemed in custodia legis in the hands of the receiver and shall, from the undisclosed principal may sue or be sued without joining the principal except when
moment the institution was placed under such receivership or liquidation, be the contract involves things belonging to the principal.
exempt from any order of garnishment, levy, attachment, or execution. (Emphasis
supplied)

42
The inclusion of the PDIC as a representative party in the case is therefore Petitioner should have attempted to comply after the promulgation of the
grounded on its statutory role as the fiduciary of the closed bank which, under November 21, 2012 Amended Decision. Its substantial compliance would have
Section 30 of R.A. 7653 (New Central Bank Act), is authorized to conserve the cured the initial defect of its Petition.
latter's property for the benefit of its creditors.110 (Citation omitted)
Petitioner likewise claims that there was "an obvious conflict of interest"119 if it
For this reason, Republic Act No. 3591,111 or the Philippine Deposit Insurance was required to sue respondents only through Philippine Deposit Insurance
Corporation Charter, as amended,112 grants Philippine Deposit Insurance Corporation, considering that respondent Monetary Board appointed Philippine
Corporation the following powers as a receiver: Deposit Insurance Corporation as petitioner's receiver. This is a fact, however, that
petitioner failed to address when it filed its Petition, signifying that petitioner had no
(c) In addition to the powers of a receiver pursuant to existing laws, the intention of complying with the law when it filed its Petition or anytime after.
Corporation is empowered to:
It was speculative on petitioner's part to presume that it could file this Petition
(1) bring suits to enforce liabilities to or recoveries of the closed bank; without joining its receiver on the ground that Philippine Deposit Insurance
.... Corporation might not allow the suit. At the very least, petitioner should have
(6) hire or retain private counsels as may be necessary; shown that it attempted to seek Philippine Deposit Insurance Corporation's
.... authorization to file suit. It was possible that Philippine Deposit Insurance
(9) exercise such other powers as are inherent and necessary for the effective Corporation could have granted its permission to be joined in the suit. If it had
discharge of the duties of the Corporation as a receiver.113 refused to allow petitioner to file its suit, petitioner still had a remedy available to it.
Under Rule 3, Section 10 of the Rules of Court,120 petitioner could have made
Balayan Bay Rural Bank summarized, thus: Philippine Deposit Insurance Corporation an unwilling co-petitioner and be joined
as a respondent to this case.
[T]he legal personality of the petitioner bank is not ipso facto dissolved by
insolvency; it is not divested of its capacity to sue and be sued after it was ordered Petitioner's suit concerned its Business Plan, a matter that could have affected the
by the Monetary Board to cease operation. The law mandated, however, that the status of its insolvency. Philippine Deposit Insurance Corporation's participation
action should be brought through its statutory liquidator/receiver which in this case would have been necessary, as it had the duty to conserve petitioner's assets and
is the PDIC. The authority of the PDIC to represent the insolvent bank in legal to examine any possible liability that petitioner might undertake under the Business
actions emanates from the fiduciary relation created by statute which reposed Plan.
upon the receiver the task of preserving and conserving the properties of the
insolvent for the benefit of its creditors.114 Philippine Deposit Insurance Corporation also safeguards the interests of the
depositors in all legal proceedings. Most bank depositors are ordinary people who
Petitioner contends that it was not a closed bank at the time of the filing of this have entrusted their money to banks in the hopes of growing their savings. When
Petition on April 10, 2012 since the Court of Appeals January 27, 2012 Decision, banks become insolvent, depositors are secure in the knowledge that they can still
docketed as CA-G.R. SP No. 118599, found the closure to have been illegal.115 recoup some part of their savings through Philippine Deposit Insurance
Corporation.121 Thus, Philippine Deposit Insurance Corporation's participation in
This Court of Appeals Decision, however, was not yet final since the Monetary all suits involving the insolvent bank is necessary and imbued with the public
Board filed a timely motion for reconsideration.116 There is also nothing in its interest.
dispositive portion which states that it was immediately executory.117 Through its
November 21, 2012 Amended Decision, the Court of Appeals reversed its January In any case, petitioner's verification and certification of non-forum shopping was
27, 2012 Decision,118 confirming petitioner's status as a closed bank under signed by its Executive Vice Presidents Maxy S. Abad and Atty. Francisco A.
receivership. It was, therefore, erroneous for petitioner to presume that it was not a Rivera, as authorized by its Board of Directors.122 Under Section 10(b) of the
closed bank on April 10, 2012 when it filed its Petition with this Court considering Philippine Deposit Insurance Corporation Charter, as amended:
that there was no final declaration yet on the matter.

43
b. The Corporation as receiver shall control, manage and administer the affairs of to investigate facts, or ascertain the existence of facts, hold hearings, and draw
the closed bank. Effective immediately upon takeover as receiver of such bank, the conclusions from them, as a basis for their official action and to exercise discretion
powers, functions and duties, as well as all allowances, remunerations and of a judicial nature.
prerequisites of the directors, officers, and stockholders of such bank are
suspended, and the relevant provisions of the Articles of Incorporation and By-laws Undoubtedly, the BSP Monetary Board is a quasi-judicial agency exercising quasi-
of the closed bank are likewise deemed suspended.123 (Emphasis supplied) judicial powers or functions. As aptly observed by the Court of Appeals, the BSP
Monetary Board is an independent central monetary authority and a body
When petitioner was placed under receivership, the powers of its Board of corporate with fiscal and administrative autonomy, mandated to provide policy
Directors and its officers were suspended. Thus, its Board of Directors could not directions in the areas of money, banking and credit. It has power to issue
have validly authorized its Executive Vice Presidents to file the suit on its behalf. subpoena, to sue for contempt those refusing to obey the subpoena without
The Petition, not having been properly verified, is considered an unsigned justifiable reason, to administer oaths and compel presentation of books, records
pleading.124 A defect in the certification of non-forum shopping is likewise fatal to and others, needed in its examination, to impose fines and other sanctions and to
petitioner's cause.125 issue cease and desist order. Section 37 of Republic Act No. 7653, in particular,
explicitly provides that the BSP Monetary Board shall exercise its discretion in
Considering that the Petition was filed by signatories who were not validly determining whether administrative sanctions should be imposed on banks and
authorized to do so, the Petition does not produce any legal effect.126 Being an quasi-banks, which necessarily implies that the BSP Monetary Board must conduct
unauthorized pleading, this Court never validly acquired jurisdiction over the case. some form of investigation or hearing regarding the same. 130
The Petition, therefore, must be dismissed.
Bangko Sentral's Monetary Board is a quasi-judicial agency. Its decisions,
II resolutions, and orders are the decisions, resolutions, and orders of a quasi-
Even assuming that the Petition did not suffer from procedural infirmities, it must judicial agency. Any action filed against the Monetary Board is an action against a
still be denied for lack of merit. quasi-judicial agency.

Unless otherwise provided for by law and the Rules of Court, petitions for certiorari This does not mean, however, that Bangko Sentral only exercises quasi-judicial
against a quasi-judicial agency are cognizable only by the Court of Appeals. The functions. As an administrative agency, it likewise exercises "powers and/or
Regional Trial Court had no jurisdiction over the Petition for Certiorari filed by functions which may be characterized as administrative, investigatory, regulatory,
petitioner against respondents. quasi-legislative, or quasi-judicial, or a mix of these five, as may be conferred by
the Constitution or by statute."131
Pursuant to Article XII, Section 20 of the Constitution,127 Congress constituted
Bangko Sentral128 as an independent central monetary authority. As an In this case, the issue between the parties was whether the trial court had
administrative agency, it is vested with quasi-judicial powers, which it exercises jurisdiction over petitions for certiorari against Bangko Sentral and the Monetary
through the Monetary Board. In United Coconut Planters Bank v. E. Ganzon, Board. Rule 65, Section 4 of the Rules of Court provides:
Inc.:129
Section 4. Where and when petition to be filed. — The petition shall be filed not
A quasi-judicial agency or body is an organ of government other than a court and later than sixty (60) days from notice of the judgment, order or resolution. In case a
other than a legislature, which affects the rights of private parties through either motion for reconsideration or new trial is timely filed, whether such motion is
adjudication or rule-making. The very definition of an administrative agency required or not, the sixty (60) day period shall be counted from notice of the denial
includes its being vested with quasi-judicial powers. The ever increasing variety of of said motion.
powers and functions given to administrative agencies recognizes the need for the
active intervention of administrative agencies in matters calling for technical The petition shall be filed in the Supreme Court or, if it relates to the acts or
knowledge and speed in countless controversies which cannot possibly be omissions of a lower court or of a corporation, board, officer or person, in the
handled by regular courts. A "quasi-judicial function" is a term which applies to the Regional Trial Court exercising jurisdiction over the territorial area as defined by
action, discretion, etc., of public administrative officers or bodies, who are required the Supreme Court. It may also be filed in the Court of Appeals whether or not the

44
same is in aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of It must be remembered that, normally, when an interlocutory order is sought to be
its appellate jurisdiction. If it involves the acts or omissions of a quasi-judicial reviewed or annulled by means of any of the extra legal remedies of prohibition or
agency, unless otherwise provided by law or these Rules, the petition shall be filed certiorari, it is required that a motion for reconsideration of the question[ed] order
in and cognizable only by the Court of Appeals. (Emphasis supplied) must first be filed, such being considered a speedy and adequate remedy at law
which must first be resorted to as a condition precedent for filing of any of such
The Rules of Court categorically provide that petitions for certiorari involving acts proceedings (Secs. 1 and 2, Rule 65, Rules of Court).138
or omissions of a quasi-judicial agency "shall be filed in and cognizable only by the
Court of Appeals." In contrast, Rule 41, Section 1(c) of the Revised Rules of Court now provides:

As previously discussed, respondent Bangko Sentral exercises a myriad of Section 1. Subject of appeal. — An appeal may be taken from a judgment or final
functions, including those that may not be necessarily exercised by a quasi-judicial order that completely disposes of the case, or of a particular matter therein when
agency. It is settled, however, that it exercises its quasi judicial functions through declared by these Rules to be appealable.
respondent Monetary Board. Any petition for certiorari against an act or omission
of Bangko Sentral, when it acts through the Monetary Board, must be filed with the No appeal may be taken from:
Court of Appeals. Thus, this Court in Vivas v. Monetary Board and Philippine ....
Deposit Insurance Corporation held that the proper remedy to question a (c) An interlocutory order;
resolution of the Monetary Board is through a petition for certiorari filed with the ....
Court of Appeals.
In all the above instances where the judgment or final order is not appealable, the
The Court of Appeals, therefore, did not err in dismissing the case before the aggrieved party may file an appropriate special civil action under Rule 65.
Regional Trial Court since the trial court did not have jurisdiction over the Petition
for Certiorari filed by petitioner against respondents. It would appear that the Revised Rules of Court allow a direct filing of a petition for
certiorari of an interlocutory order without need of a motion for reconsideration.
This Court cannot subscribe to petitioner's contention that a Court of Appeals However, in Estate of Salvador Serra Serra v. Primitivo Hernaez,139 a case
decision already provided for an exception to Rule 65. A Court of Appeals decided after the Rules of Court were revised in 1997:
decision, no matter how persuasive or well written, does not function as stare
decisis. Neither can a Court of Appeals decision amend the Rules of Court. As it The settled rule is that a motion for reconsideration is a sine qua non condition for
stands, Rule 65 and jurisprudence hold that petitions for certiorari against the the filing of a petition for certiorari. The purpose is to grant an opportunity to public
Monetary Board must be filed with the Court of Appeals. respondent to correct any actual or perceived error attributed to it by the re-
examination of the legal and factual circumstances of the case.140
III
While this Petition is considered dismissed, this Court takes the opportunity to This rule evolved from several labor cases of this Court. Estate of Salvador Serra
address other lingering procedural issues raised by the parties in their pleadings. Serra cited Interorient Maritime Enterprises v. National Labor Relations
Commission141 as basis for this rule, which in turn, cited Palomado v. National
Petitioner assails respondents' failure to file a motion for reconsideration of the trial Labor Relations Commission142 and Pure Foods Corporation v. National Labor
court's denial of its motion to dismiss before filing a petition for certiorari with the Relations Commission.143 This Court, in formulating the rule in Palomado,
Court of Appeals.1 declared:

Rule 65, Section 1 of the Rules of Court requires that there be "no appeal, or any The unquestioned rule in this jurisdiction is that certiorari will lie only if there is no
plain, speedy, and adequate remedy in the ordinary course of law" available before appeal or any other plain, speedy and adequate remedy in the ordinary course of
a petition for certiorari can be filed. An order denying a motion to dismiss is merely law against the acts of public respondent. In the instant case, the plain and
an interlocutory order of the court as it does not finally dispose of a case.136 In BA adequate remedy expressly provided by [Sec. 9, Rule X, New Rules of the
Finance Corporation v. Pineda,137 a case citing the 1964 Rules of Court: National Labor Relations Commission] was a motion for reconsideration of the

45
assailed decision, based on palpable or patent errors, to be made under oath and In this instance, the trial court had no jurisdiction over the petition filed by petitioner
filed within ten (10) calendar days from receipt of the questioned decision.144 against respondents, an issue which respondents properly asserted before the
Court of Appeals when they filed their Petition for Certiorari.148 They were, thus,
Pure Foods Corporation, on the other hand, stated: excused from filing the requisite motion for reconsideration.

In the present case, the plain and adequate remedy expressly provided by law was Considering that there is sufficient basis to dismiss this Petition outright, this Court
a motion for reconsideration of the assailed decision and the resolution thereof, finds it unnecessary to address the other issues raised.
which was not only expected to be but would actually have provided adequate and
more speedy remedy than the present petition for certiorari. This remedy was In sum, this Court holds that petitioner did not have the legal capacity to file this
actually sought to be availed of by petitioner when it filed a motion for Petition absent any authorization from its statutory receiver, Philippine Deposit
reconsideration albeit beyond the 10-day reglementary period. For all intents and Insurance Corporation. Even assuming that the Petition could be given due
purposes, petitioner cannot now be heard to say that there was no plain, speedy course, it would still be denied. The Court of Appeals did not err in dismissing the
and adequate remedy available to it and that it must, therefore, be allowed to seek action pending between the parties before the trial court since special civil actions
relief by certiorari. This contention is not only untenable but would even place a against quasi-judicial agencies must be filed with the Court of Appeals.
premium on a party's negligence or indifference in availing of procedural remedies
afforded by law.145 WHEREFORE, the Petition is DISMISSED on the ground of petitioner's lack of
capacity to sue.
In labor cases, it was necessary to first file a motion for reconsideration before
resorting to a petition for certiorari since the National Labor Relations SO ORDERED.
Commission's rules of procedure provided for this remedy. The same rule has
since applied to civil cases through Estate of Salvador Serra Serra, regardless of
the absence of a provision in the Rules of Court requiring a motion for
reconsideration even for interlocutory orders.

Thus, the general rule, in all cases; "is that a motion for reconsideration is a sine
qua non condition for the filing of a petition for certiorari."146 There are, however,
recognized exceptions to this rule, namely:

(a) where the order is a patent nullity, as where the Court a quo had no jurisdiction;
(b) where the questions raised in the certiorari proceeding have been duly raised
and passed upon by the lower court, or are the same as those raised and passed
upon in the lower court; (c) where there is an urgent necessity for the resolution of
the question and any further delay would prejudice the interests of the Government
or of the petitioner or the subject matter of the action is perishable; (d) where,
under the circumstances, a motion for reconsideration would be useless; (e) where
petitioner was deprived of due process and there is extreme urgency for relief; (f)
where, in a criminal case, relief from an order of arrest is urgent and the granting of
such relief by the trial court is improbable; (g) where the proceedings in the lower
court are a nullity for lack of due process; (h) where the proceedings [were] ex
parte or in which the petitioner had no opportunity to object; and (i) where the issue
raised is one purely of law or where public interest is involved.147 (Citations
omitted)

46
G.R. No. 230037, March 19, 2018 credited to the personal account of Garan, hence, they could not be construed as
SPOUSES KISHORE LADHO CHUGANI AND PRISHA KISHORE CHUGANI, ET valid liabilities of RBMI.7
AL., Petitioners, v. PHILIPPINE DEPOSIT INSURANCE CORPORATION,
Respondent. Petitioners filed a request for reconsideration of PDIC's denial of their claim. PDIC
however rejected the same in its Letter8 dated May 22, 2013.
DECISION
Hence, petitioners filed a Petition for Certiorari under Rule 65 of the Rules of Court
TIJAM, J.: with the Regional Trial Court (RTC).

Before Us is a Petition for Review on Certiorari filed by the petitioners assailing the On December 27, 2013, the RTC issued a Consolidated Order9 dismissing the
Decision1 dated June 29, 2016 of the Court of Appeals (CA) in CA-G.R. SP No. Petition for Certiorari filed by the petitioners, to wit:
141770 dismissing the appeal of the petitioners and affirming the Consolidated
Order2 dated December 27, 2013 of the Regional Trial Court (RTC), Branch 62 of WHEREFORE, the instant petitions docketed as SCA Nos. 13-763, 13-764, 13-
Makati City in SCA Nos. 13-763, 13-764, 13-765, 13-801, 13-802, 13-803, 13-807, 765, 13-801, 13-802, 13-803, 13-807, 13-1049, and 13-1050 are all DISMISSED
13-1049, and 13-1050, which dismissed the Petition for Certiorari for lack of for lack of jurisdiction
jurisdiction.
SO ORDERED.
The factual antecedents of the case are as follows:
Aggrieved, the petitioners appealed the RTC's Decision to the CA.
Petitioners, upon the invitation of Raymundo Garan (Garan), the President of Rural
Bank of Mawab (Davao), Inc., (RBMI), signified their intention to open Time The CA in its Decision10 dated June 29, 2016, denied the appeal of the
Deposits with RBMI.3 petitioners, thus:

RBMI then sent to petitioners, through courier, the Time Deposit Specimen WHEREFORE, premises considered, the appeal is hereby DISMISSED, and the
Signature Cards and Personal Information Sheet with the instruction that Consolidated Order dated December 27, 2013 of the Regional Trial Court of
petitioners send them back, through mail, to RBMI.4 Makati City, Branch 62 in SCA Nos. 13-763, 13-764, 13-765, 13-801, 13-802, 13-
803, 13-807, 13-1049, and 13-1050 is AFFIRMED.
Petitioners then opened Time Deposit Accounts with RBMI through inter-branch
deposits to the accounts of RBMI maintained in Metrobank and China Bank- SO ORDERED.11
Tagum, Davao Branches. Thereafter, Certificates of Time Deposits (CTDs) and
Official Receipts were issued to petitioners.5 Petitioners now come before Us raising the issues of 1) Whether the CA is correct
in ruling that the RTC has no jurisdiction over the Petitions for Certiorari filed by the
Sometime in September 2011, petitioners came to know that the Monetary Board petitioners; and 2) Whether the PDIC committed grave abuse of discretion in
of the Bangko Sentral ng Pilipinas placed RBMI under receivership and thereafter denying petitioners claim for deposit insurance.
closed the latter. Petitioners, then filed claims for insurance of their time deposits.6
The petition has no merit.
Respondent Philippine Deposit Insurance Corporation (PDIC) denied the claims on
the following grounds: 1.) based on bank records submitted by RBMI, petitioners' The PDIC was created by Republic Act (R.A.) No. 359112 on June 22, 1963 as an
deposit accounts are not part of RBMI's outstanding deposit liabilities; 2.) the time insurer of deposits in all banks entitled to the benefits of insurance under the PDIC
deposits of petitioners are fraudulent and their CTDs were not duly issued by Charter to promote and safeguard the interests of the depositing public by way of
RBMI, but were mere replicas of unissued CTD's in the inventory submitted by providing permanent and continuing insurance coverage of all insured deposits.13
RBMI to PDIC; and 3.) the amounts purportedly deposited by the petitioners were

47
Based on its charter, the PDIC has the duty to grant or deny claims for deposit As held in the case of Monetary Board, et. al., v. Philippine Veterans Bank,15 this
insurance. Specifically, under Section 4(f) of R.A. No. 3591, as amended by R.A. Court defined a quasi-judicial agency, to wit:
No. 9576,14 provides that:
A quasi-judicial agency or body is an organ of government other than a court and
"(f) The term "deposit" means the unpaid balance of money or its equivalent other than a legislature, which affects the rights of private parties through either
received by a bank in the usual course of business and for which it has given or is adjudication or rule-making. The very definition of an administrative agency
obliged to give credit to a commercial, checking, savings, time or thrift account, or includes its being vested with quasi-judicial powers. The ever increasing variety of
issued in accordance with Bangko Sentral rules and regulations and other powers and functions given to administrative agencies recognizes the need for the
applicable laws, together with such other obligations of a bank, which, consistent active intervention of administrative agencies in matters calling for technical
with banking usage and practices, the Board of Directors shall determine and knowledge and speed in countless controversies which cannot possibly be
prescribe by regulations to be deposit liabilities of the bank: Provided, That any handled by regular courts. A "quasi-judicial function" is a term which applies to the
obligation of a bank which is payable at the office of the bank located outside of action, discretion, etc. of public administrative officers or bodies, who are required
the Philippines shall not be a deposit for any of the purposes of this Act or included to investigate facts, or ascertain the existence of facts, hold hearings, and draw
as part of the total deposits or of insured deposits: Provided, further, That, subject conclusions from them, as a basis for their official action and to exercise discretion
to the approval of the Board of Directors, any insured bank which is incorporated of a judicial nature.16
under the laws of the Philippines which maintains a branch outside the Philippines
may elect to include for insurance its deposit obligations payable only at such In the instant case, the PDIC has the power to prepare and issue rules and
branch. regulations to effectively discharge its responsibilities.17 The power of the PDIC as
to whether it will deny or grant the claim for deposit insurance based on its rules
The corporation shall not pay deposit insurance for the following accounts or and regulations partakes of a quasi-judicial function. Also, the fact that decisions of
transactions, whether denominated, documented, recorded or booked as deposit the PDIC as to deposit insurance shall be final and executory, such that it can only
by the bank: be set aside by a petition for certiorari evinces the intention of the Congress to
make PDIC as a quasi-judicial agency.
"(1) investment products such as bonds and securities, trust accounts, and other
similar instruments; Consistent with Section 4,18 Rule 65, the CA has the jurisdiction to rule on the
"(2) Deposit accounts or transactions which are unfunded, or that are fictitious or alleged grave abuse of discretion of the PDIC. Therefore, the CA is correct when it
fraudulent; held that the RTC has no jurisdiction over the Petitions for Certiorari filed by the
"(3) Deposits accounts or transactions constituting, and/or emanating from, unsage petitioners questioning the PDIC's denial of their claim for deposit insurance.
and unsound banking practice/s, as determined by the Corporation, in consultation Nevertheless, any question as to where the petition for certiorari should be filed to
with the BSP, after due notice and hearing, and publication of a cease and desist question PDIC's decision on claims for deposit insurance has been put to rest by
order issued by the Corporation against such deposit accounts or transactions; R.A. No. 10846.19 Section 7 therein provides:
and
"(4) Deposits that are determined to be the proceeds of an unlawful activity as xxxx
defined under republic act 9160, as amended.
"The actions of the Corporation taken under Section 5(g) shall be final and
"The actions of the Corporation taken under this section shall be final and executory, and may only be restrained or set aside by the Court of Appeals, upon
executory, and may not be restrained or set aside by the court, except on appropriate petition for certiorari on the ground that the action was taken in excess
appropriate petition for certiorari on the ground that the action was taken in excess of jurisdiction or with such grave abuse of discretion as to amount to a lack or
of jurisdiction or with such grave abuse of discretion as to amount to a lack or excess of jurisdiction. The petition for certiorari may only be filed within thirty (30)
excess of jurisdiction. The petition for certiorari may only be filed within thirty (30) days from notice of denial of claim for deposit insurance. (Emphasis ours)
days from notice of denial of claim for deposit insurance."
As it now stands, the remedy to question the decisions of the PDIC is through a
Petition for Certiorari under Rule 65 and filed before the CA.

48
Nevertheless, even if We treat the appeal filed by the petitioners to the CA as a insurance as the same were validly grounded on the facts, law and regulations
Petition for Certiorari, the same is still without merit. issued by the PDIC.

Grave abuse of discretion is the capricious and whimsical exercise of the judgment WHEREFORE, the petition is DENIED. The Decision dated June 29, 2016 of the
of a court, tribunal or quasi-judicial agency that is equivalent to lack of jurisdiction. Court of Appeals in CA-G.R. SP No. 141770 is hereby AFFIRMED.
It must be so grave such that the power was exercised in an arbitrary or despotic
manner by reason of passion or personal hostility.20 SO ORDERED.

In this case, it cannot be said that PDIC committed grave abuse of discretion in
denying petitioners claim for deposit insurance.

Section 4(f) of R.A. No. 3591, as amended by R.A. No. 9576 states that deposit
means the unpaid balance of money or its equivalent received by a bank in the
usual course of business and for which it has given or is obliged to give credit to a
commercial, checking, savings, time or thrift account, or issued in accordance with
Bangko Sentral rules and regulations and other applicable laws, together with such
other obligations of a bank, which, consistent with banking usage and practices.

Section 2(d) of PDIC Regulatory Issuance No. 2011-0221 states that for deposit to
be considered as legitimate, it should be 1) received by a bank as a deposit in the
usual course of business; 2) recorded in the books of the bank as such; 3) opened
in accordance with established forms and requirements of the BSP and/or the
PDIC.

Further, in Phil. Deposit Insurance Corp. v. CA,22 this Court held that in order for
the claim for deposit insurance with the PDIC may prosper, it is necessary that the
corresponding deposit must be placed in the insured bank.

Here, upon investigation by the PDIC, it was discovered that 1) the money
allegedly placed by the petitioners in RBMI was in fact credited to the personal
account of Garan, hence, they could not be construed as valid liabilities of RBMI to
petitioners; 2) based on bank records and the certified list of the bank's
outstanding deposit liabilities, the alleged deposits of petitioners are not part of
RBMI's outstanding liabilities; and 3) the CTDs are not validly issued by RBMI, but
were mere replicas of the unissued and unused CTDs still included in the inventory
of RBMI. Further, the act of petitioners in opening Time Deposits and thereafter
depositing several amounts of money through inter-branch deposits with
Metrobank and China Bank for the account of RBMI can hardly be considered as
in the ordinary course of business.

Considering the above disquisitions, it is sufficiently established that the PDIC, did
not commit any grave abuse of discretion in denying petitioners' claim for deposit

49
G.R. No. 234401, December 05, 2019 Consideration." PDIC emphasized that petitioner was not even a relative within the
CONNIE L. SERVO,PETITIONER VS. PHILIPPINE DEPOSIT INSURANCE second degree of consanguinity or affinity of Gutierrez.
CORPORATION, RESPONDENT.
Petitioner consequently filed the action below, imputing grave abuse of discretion
DECISION on PDIC for denying her claim for deposit insurance, albeit she submitted the
necessary documents in support. of her claim. Assuming the documents were
LAZARO-JAVIER, J.: incomplete, she was not given the chance to submit additional documents
nor called to a clarificatory meeting, as provided in Sections 4(b) and 4(c) of
This Petition for Review on Certiorari assails the Resolution dated September 22, Regulatory Issuance No. 2011-03,
2017, of the Court of Appeals in CA-G.R. SP No. 152398 dismissing petitioner
Connie L. Servo’s action for certiorari on ground of lack of jurisdiction On the other hand, PDIC riposted that the Regional Trial Court (RTC) has no
jurisdiction over the subject matter of the petition as the same fell exclusively within
Antecedents its quasi-judicial jurisdiction. It emphasized that there was no grave abuse of
discretion amounting to lack or excess of jurisdiction when after evaluation and
By Affidavit dated August 22, 2014, petitioner filed a claim for deposit insurance analysis of available bank documents, it arrived at the conclusion that petitioner
with respondent Philippine Deposit Insurance Corporation (PDIC). She essentially was not entitled to deposit insurance. 4
alleged that sometimes in October 2011, she lent Teresita Guiterrez Five Hundred
Thousand Pesos (P500,000.00) for the repair of the latter’s bus units. On January The Trial Court's Ruling
19, 2012, petitioner met with Guiterrez at the Rural Bank of San Jose Del Monte to By Decision5 dated July 27, 2017, the trial court sustained PDIC's argument and
receive the latter’s loan payment. For this purpose, petitioner opened a time dismissed the case on ground of lack of jurisdiction, viz:
deposit account with the bank under Special Savings Deposit (SSD) Account WHEREFORE, in view of the foregoing circumstances, judgment is
No. 001 03-00904-1. Per her agreement with Gutierrez, the latter's name was rendered in favor of Philippine Deposit Insurance Corporation. For lack of
used as the account holder since she was a preferred bank client.1 jurisdiction, the instant case is ordered DISMISSED without prejudice. Fittingly,
the court holds its hands tightly in not passing upon the other issue.
A few years later, however, the bank was closed down. Consequently, petitioner
filed with PDIC her claim for deposit insurance, together with certain SO ORDERED.6 (Emphasis in the original)
documents. The trial court recognized that since PDIC is a quasi-judicial agency which
performed the assailed quasi-judicial action, the case should have been brought
She claimed to have verbally informed Eliza Dela Peña, one of the bank tellers, up to the Court of Appeals.7
that the Five Hundred Thousand Pesos (P500,00.00) deposited in SSD Account
No. 001 03-00904-1 was held in trust for her by Gutierrez. She also categorically The trial court cited Section 5(g) of Republic Act (RA) 3591 (PDIC Charter), as
stated that she was the exclusive owner of SSD Account No. 001 03-00904-1.2 amended by RA 10846, providing that actions of PDIC shall be final and executory,
and may only be re trained or set aside by the Court of Appeals through a petition
By letter dated August 27, 2014, PDIC, through its Claims Deposit Department, for certiorari.8
denied petitioner's claim for deposit insurance, citing as ground the absence of any
bank records/ documents indicating that petitioner, not Gutierrez, owned the Proceedings before the Court of Appeals
account. In her subsequent special civil action for certiorari before the Court of Appeals,
petitioner argued that PDIC was not among the quasi-judicial bodies enumerated
On October 30, 2014, petitioner filed a Request for Reconsideration (RFR). Under under Section 1, Rule 43 of the Rules of Court whose decisions and rulings are
letter3 dated July 16, 2015, PDIC denied petitioner's RFR, this time citing as appealable via a petition for review with the Court of Appeals. Also, the mere fact
ground petitioner's alleged failure to submit documents showing that the that PDIC performs quasi-judicial functions does not make it co-equal with the
"break-up and transfer of Legitimate Deposit to the transferee is for a Valid RTCs. Too, considering that the rulings of the Department of Finance are
appealable to the Court of Tax Appeals, the latter having the same rank as the

50
Court of Appeals, it cannot be said that the rulings of PDIC, an instrumentality raised in cases falling within its original and appellate jurisdiction, including the
operating under the Department of Finance, are appealable to the Court of power to grant and conduct new trials or Appeals must be continuous and must be
Appeals alone.9 She also implored the Court of Appeals to treat her petition as a completed within three (3) months, unless extended by the Chief Justice. (as
petition for certiorari against PDIC's denial of her claim in the interest of amended by R.A. No. 7902) (emphasis supplied)
substantial justice. 10 .
Verily, the Court of Appeals here erred when it dismissed petitioner's special civil
The Court of Appeals' Ruling action for certiorari on ground that since the case involves a pure question of law,
By Resolution dated September 22, 2017, the Court of Appeals dismissed the same falls within this Court's exclusive jurisdiction.
the petition for lack of jurisdiction. It ruled that the jurisdictional issue involved,
being a pure legal question, should have been filed with this Court pursuant to For one, Section 9 of BP 129 vests concurrent jurisdiction in the regional trial
Rule 45 of the Revised Rules of Court. courts, the Court of Appeals, and the Supreme Court over special civil actions and
auxiliary writs and processes. The law does not distinguish whether the issues
The Present Petition involved are pure factual or legal issues or mixed issues of fact and law for the
Petitioner now prays that the aforesaid resolution be reversed and set aside, and purpose of determining which of the courts should take cognizance of the case.
the main case be remanded to the proper court for resolution on the merits.
For another, the jurisdiction of the Court of Appeals to issue
Issue extraordinary writs, such as a petition for certiorari vis-a- vis the hierarchy of
The Court of Appeals erred in dismissing the petition for certiorari on ground of courts, was eloquently enunciated in Gios - Samar, Inc., etc. v. Department of
lack of jurisdiction? Transportation and Communications, et al.,13 viz:

Ruling In 1981, this Court's original jurisdiction over extraordinary writs became
Under Section 9 of Batas Pambansa Bilang 129 (BP 129), the Court of Appeals concurrent with the CA, pursuant to Batas Pambansa Bilang 129 (BP 129) or the
has jurisdiction over petitions for certiorari, viz : Judiciary Reorganization Act of 1980. BP 129 repealed RA No. 296 and granted
Section 9. Jurisdiction.- The Court of Appeals shall exercise: the CA with "[o]riginal jurisdiction to issue writs of mandamus, prohibition,
1. Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas certiorari, habeas corpus, and quo warranto, and auxiliary writs or processes,
corpus, and quo warranto, and auxiliary writs or processes, whether or not in aid of whether or not in aid of its appellate jurisdiction." x x x
its appellate jurisdiction;
XXX XXX XXX
2. Exclusive original jurisdiction over actions for annulment of judgements of This so-called "policy" was reaffirmed two years later in People v. Cuaresma,
Regional Trial Courts; and which involved a petition for certiorari challenging the quashal by the City
Fiscal of an Information for defamation on the ground of prescription. In
3. Exclusive appellate jurisdiction over all final judgements, resolutions, orders or dismissing the petition, this Court reminded litigants to refrain from directly
awards of Regional Trial Courts and quasi- judicial agencies, instrumentalities, filing petitions for extraordinary writs before the Court, unless there were special
boards or commission, including the Securities and Exchange Commission, and important reasons therefor. We then introduced the concept of "hierarchy of
the Social Security Commission, the Employees Compensation Commission .and courts," to wit:
t:he Civil Service Commission, Except those falling within the appellate jurisdiction x x x This Court's original jurisdiction to issue writs of certiorari (as well
of the Supreme Court in accordance with the Constitution, the Labor Code of the as prohibition, mandamu, quo warranto, habeas corpus and injunction) is not
Philippines under Presidential Decree No. 442, as amended, the provisions of this exclusive. It is shared by this Court with Regional Trial Courts (formerly Courts
Act, and of subparagraph (1) of the third paragraph and subparagraph 4 of the of First Instance), which may issue the writ, enforceable in any part of their
fourth paragraph of Section 17 of the Judiciary Act of 1948. respective regions. It is also shared by this Court, and by the
Regional Trial Court, with the Court of Appeals (formerly, Intermediate
The Court of Appeals shall have the power to try cases and conduct hearings, Appellate Court), although prior to the effectivity of Batas Pambansa Bilang 129
receive evidence and perform any and all acts necessary to resolve factual issues on August 14, 1981, the latter's competence to issue the extraordinary writs

51
was restricted to hose "in aid of its appellate jurisdiction." This concurrence of the grant of exclusive original jurisdiction to PDIC on matters involving bank
jurisdiction is not, however, to be taken as according to parties seeking any of the deposits and insurance; and the remedy granted to the claimants in case of an
writs an absolute, unrestrained freedom of choice of the court to which application adverse PDIC ruling.
therefore will be dire ted. There is after all a hierarchy of courts. That
hierarchy is determinative of the venue of appeals, and should a so serve On this score, Section 5(g) of RA 3591, as amended by RA 10846, provides that
as a general determinant of the appropriate for for petitions for the the actions of PDIC on matters relating to insured deposits and deposit liabilities
extraordinary writs. A becoming regard for that judicial hierarchy most may only be assailed before the Court of Appeals via a Petition for Certiorari
certainly indicates that petitions for the issuance of extraordinary writs under Rule 65 of the Revised Rules of Court, viz:
against first level ("inferior") courts should be filed with the Regional Trial
Court, and those against the latter, with the Court of Appeals. A direct invocation SECTION 7. Section 4 of the same ct is accordingly renumbered as Section 5,
of the Supreme Court's original jurisdiction to issue these writs should be allowed and is hereby amended to read as follows:
only when there are special and important reasons therefor, clearly and specifically DEFINITION OF TERMS
set out in the petition. This is established poiicy. x x x (Citations omitted; emphasis
supplied SEC. 5. As used in this Act-
(g) XXX XXX XXX XXX
Too, Saint Mary Crusade to Alleviate Poverty of Brethren
Foundation, Inc. v. Judge Riel14 ordained: The actions of the Corporation taken under Section 5(g) shall be final and
executory, and may only be restrained or set aside by the Court of Appeals,
Fourthly, the filing of the instant special civil action directly in this Court is in upon appropriate petition for certiorari on the ground that the action was taken in
disregard of the doctrine of hierarchy of courts. Although the Court has concurrent excess of jurisdiction or with such grave abuse of discretion as to amount to a lack
jurisdiction with the Court of Appeals in issuing the writ of certiorari, direct resort is or excess of jurisdiction. The petition for certiorari may only be filed within thirty(30)
allowed only when there are special, [extraordinary] or compelling reasons that days from notice of denial of claim for deposit insurance. (Emphasis supplied)
justify the same. The Court enforces the observance of the hierarchy of courts In Peter L. So v. Philippine Deposit Insurance Corp., 15 the Court pronounced
in order to free itself from unnecessary, frivolous and impertinent cases and thus that the Court of Appeals is vested with jurisdiction over matters relating to the
afford time for it to deal with the more fundamental and more essential tasks that dispositions of PDIC, viz:
the Constitution has assigned to . it. There being no special, important or We proceed to determine where such petition for certiorari
compelling reason, the petitioner thereby violated the observance of the hierarchy should be filed. In this matter, We cite the very provision invoked by the
of courts, warranting the dismissal of the petition for certiorari. (Citations omitted) petitioner, i.e., Section 4, Rule 65 of the Rules, as amended by A.M. No. 07-7-
There is no compelling reason for the Court of Appeals here not to adhere to and 12-SC:
observe the hierarchy of courts.
Sec. 4. When and where to file the petition. -The petition shall be / filed not later
In any event, although the Court of Appeals erred in dismissing the case, we will than sixty (60) days from notice of the judgment, order or resolution. In case a
no longer remand the case to the Court of Appeals to avert any further delay in motion for reconsideration or new trial is timely filed, whether such motion is
its resolution. The . Court, therefore, deems it prudent to resolve once and for required or not, the petition shall be filed not later than sixty (60) days counted
all, here and now, the issue of .jurisdiction involving PDIC. from the notice of the denial of the motion.

Petitioner asserts that the amendatory provisions under RA 10846 should not If the petition relates to an act or an omission of a municipal trial court or of a
be applied to her case considering that her claim was denied on July 16,2015 or corporation, a board, an officer or a person, it shall be filed with the Regional
prior to the effectivity of RA 10846 on June 11, 2016. Trial Court exercising jurisdiction over the territorial area as defined by the
Supreme Court. It may also be filed with the Court of Appeals or with the
In truth, however, when petitioner initiated the action for certiorari before the trial Sandiganbayan, whether or not the same is in aid of the court's appellate
court on August 19; 2016, RA 10846 was already effective Verily, petitioner jurisdiction. If the petition involves an act or an omission of a quasi-judicial
should have complied with the procedures laid down thereunder, among them,

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agency, unless otherwise provided by law or these rules, the petition shall be Notably, petitioner's RFR was denied on July 16, 2015. She filed her petition for
filed with and be cognizable only by the Court of Appeals. x x x certiorari with the Court of Appeals only on September 7, 2017 or more than two
(2) years from PDIC's denial of her claim. When the case was brought before the
Clearly, a petition for certiorari, questioning the PDIC's denial of a deposit Court of Appeals, there was nothing more for it to act on since the assailed trial
insurance claim should be filed before the CA, not the RTC. This further finds court's ruling had already lapsed into finality.
support in Section 22 of the PDIC's Charter, as amended, which states that
Section 22. No court, except the Court of Appeals, shall issue any temporary ACCORDINGLY, the petition is DENIED.
restraining order, preliminary injunction or preliminary mandatory injunction
against the Corporation for any action under this Act. x x x. SO ORDERED.

This prohibition shall apply in all cases, disputes or controversies instituted by a

private party, the insured bank, or any shareholder of the insured bank. x x x.

XXX XXX XXX

Finally, the new amendment in PDIC's Charter under RA 10846, specifically

Section 5(g) thereof, confirms such conclusion, viz:

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

As it stands, the controversy as to which court has jurisdiction over a petition for
certiorari filed to question the PDIC's action is already settled. Therefore, We find
no reversible error from the findings and conclusion of the court a quo. (Emphasis
supplied)
Finally, petitioner argues that the Court of Appeals should have treated her petition
for certiorari as an original action against the assailed PDIC dispositions. She has,
in fact, allegedly included in her petition an alternative prayer, thus:
In the alternative, petitioner respectfully prays that the instant petition be treated as
a petition for certiorari from the PDIC's denial of petitioner's claim for deposit
insurance and that said x x x petition be granted by ordering PDIC to pay
petitioner the insured amount of P500,000.00 under Special Savings Deposit
Account No. 001 03:..00904-1.16
The argument must fail. The Court of Appeals could not have granted petitioner's
prayer to consider her petition to have been filed in accordance with the PDIC
rules simply because the petition was filed beyond the thirty (30)-day reglementary
period prescribed under RA 10846.

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