Case Digests For Banking Laws

Case Digests in Banking Laws (Deldio, 2022)
1. Banco Filipino Savings and Mortgage Bank vs. Juanita B. Ybanez, G.R. No.
148163, December 6, 2004;
FACTS:
On March 7, 1978, respondents led by Juanita B. Ybanez, et. al obtained a loan

secured by Deed of Real Estate Mortgage over Transfer Certificate of Title (TCT) from
the petitioner bank Banco Filipino Savings and Mortgage Bank.
On December 24, 1982, the loan was again restructured, increasing the loan
obligation to Php 1,225,000.00 and the Real Estate Mortgage was again amended. The
respondents executed a promissory note for the sum of Php 1,225,000.00 payable in
fifteen years, with a stipulated interest of 21% per annum, and stipulating monthly
payments.
The respondents’ total payment from 1983 to 1988 amounted to Php

1,455,385.07. However, from the year 1989 onwards, the respondents did not pay any
single centavo. The petitioners aver that Banco Filipino had ceased operations and/or
was not allowed to continue business and had been placed under liquidation by the
Central Bank.
On January 15, 1990, the lawyer for the respondents wrote to Special Acting
Liquidator Renan Santos and requested that the plaintiff return the mortgaged property
of the respondents since it had sufficiently profited from the loan and that the interest
and penalty charges were excessive. The Banco Filipino denied the request.
Banco Filipino closed on January 1, 1985 and it re-opened for business on July
1, 1994. From the time it closed to its-reopening, the petitioner bank did not transact any
business with its customers.
On August 24, 1994, the respondents were served with a Notice of Extrajudicial
Sale of their property covered by TCT No. 69836 to satisfy their indebtedness allegedly
of Php 6,174,337.46 which includes the principal, interest, surcharges and 10%
attorney’s fees.
On September 19, 1994, respondents filed a suit for Injunction, Accounting and
Damages, alleging that there was no legal and factual basis for the foreclosure
proceedings since the loan had already been fully paid. A restraining order was issued
the following day by the lower court enjoining petitioners to cease and desist from
selling the property at a public auction.
The trial court ordered that Banco Filipino shall make a proper accounting of the
obligation of the respondents, at the time it was in operation from January 1, 1985 to
July 1, 1994 when it closed, reducing the interests and the surcharge (21 to 17% per
annum interests, eliminated 1% surcharge per month), and enjoining the foreclosure,
within a period of fifteen days (15) days from the time the judgment shall become final
and executory, unless the respondents still failed to pay.
1 | Alumno, Campo, Delgado, Franco, Ledonio, Mariano, Pangilinan, Pavia, Punzalan, & Sanchez
Issues:
Whether or not the Court of Appeals Committed an error in ruling that the plaintiffs-
borrowers (herein respondents) cannot be considered to have defaulted in their
payment since the defendant bank ceased operation from 1985 to 1991. What is the
effect of the temporary closure of Banco Filipino from January 1, 1985 to July 1, 1994
on the loan? Is the rate of interest set at 21% per annum legal? and (3) Is the 3%
monthly surcharge valid?
Held:
On the effect of temporary closure, the Supreme Court cited the case of Banco Filipino
Savings and Mortgage Bank v. Monetary Board, the validity of the closure and
receivership of Banco Filipino was put in issue. But the pendency of the case did not
diminish the authority of the designated liquidator to administer and continue the bank’s
transactions. The Court allowed the bank’s liquidator to continue receiving collectibles
and receivables or paying off creditor’s claims and other transactions pertaining to
normal operations of a bank. Among these transactions were the prosecution of suits
against debtors for collection and for foreclosure of mortgages. The bank was allowed
to collect interests on its loans while under liquidation, provided that the interests were
legal.
To answer the question of whether or not is the 21% interest rate usurious? No.
The Supreme Court said that it noted that at the time the parties entered into the said
loan agreement, the pertinent law, Act No. 2655, already provided that the rate of
interest for the forbearance of money when secured by a mortgage upon real estate
should not be more than 12% per annum or the maximum rate prescribed by the
Monetary Board and in force at the time the loan was granted.
On December 1, 1979, the Monetary Board of the Central Bank of the Philippines had
issued CBP Circular No. 705-79. on loan transactions with maturities of more than 730
days, it fixed the effective rate of interest at 21% per annum for both secured and
unsecured loans. Since the loan in question has fixed 15 years for its maturity, it fell
within the coverage of said CBP Circular. Thus, the Court agrees that the 21% interest
is not violative of the Usury Law as it stood at the time of the loan transaction.
As to the monthly surcharge, petitioner relies on CBP Circular No. 905-82] The
ceiling on interest rates prescribed by the Usury Law, according to petitioner, were
expressly removed.
Petitioner argues that the said circular had retroactive effect since it is merely
procedural in nature. Hence, according to petitioner, the imposition of 3% monthly
surcharge by the bank against the borrower is legal.
As to the CBP Circular No. 905-82, which was effective January 1, 1983, it did not
repeal nor in any way amend the Usury Law. The Circular simply suspended the
effectiveness of the Usury Law. Thus, the retroactive application of a CBP Circular
cannot, and should not, be presumed.
The loan was entered into on December 24, 1982, but CBP Circular No. 905-82 was
given force and effect only on January 1, 1983. Thus, CBP Circular No. 905-82 could
not be made applicable to the loan agreement in this case, and petitioner could not rely
on this Circular for its imposition of 3% monthly surcharge.
Petitioner also argues that the 3% monthly surcharge partakes of the nature of a
penalty clause. A penal clause is an accessory undertaking to assume greater liability in
case of breach and is attached to an obligation in order to secure its performance. The
penalty shall substitute the indemnity for damages and the payment of interests in case
of non-compliance. But if such a stipulation is found contrary to law for being usurious, it
can be nullified by the courts without affecting the principal obligation.
In the loan agreement between the parties in this case, the total interest and other
charges exceed the prescribed 21% ceiling. Hence, the imposition of the 3% monthly
surcharge, as the penal clause to the obligation, violated the limit imposed by the Usury
Law. Said surcharge of 3% monthly must be declared null and void. To recapitulate: the
respondents’ principal obligation to pay the monthly amortization of P22,426, validly
subsists. Only the 3% monthly surcharge is void. The monthly amortization of P22,426,
for 15 years, would amount to P4,036,680. To date, respondents have already paid the
amount of P1,455,385.07. Thus, only the outstanding balance of P2,581,294.93
remains due.
Respondents were given by the RTC 30 days from receipt of decision, within which to
pay their outstanding obligation. We now reiterate that a period of 30 days, from receipt
of this Decision, for respondents to pay the amount of P2,581,294.93 to the bank as full
payment of the outstanding balance on their loan obligation. Otherwise, the order of
injunction restraining petitioner from foreclosing the property shall be lifted.
2. First Philippine International Bank vs. Court of Appeals, G.R. No. 115849,
January 24, 1996;
FACTS:
The Bank has been under conservatorship since 1984. It is the owner of 6
parcels of land. The Bank had an agreement with Demetria to purchase the parcels of
land. The said agreement was made by Demetria with the Bank’s manager, Rivera.
Thereafter, they had a series of letters consisting of offers, counter-offers and
acceptance of the counter- offer by Demetria. Later however, the Bank, through its
conservator, Encarnacion, sought the repudiation of the agreement as it alleged that
Rivera was not authorized to enter into such an agreement. Hence there was no valid
contract of sale. Subsequently, Demetria sued the Bank. The RTC ruled in favor of
Demetria. The Bank filed an appeal with the Court of Appeals.
Meanwhile, Henry Co, who holds 80% shares of stocks with the said Bank, filed
a motion for intervention with the trial court which was denied since the trial has been
concluded already and the case is now pending appeal. Subsequently, Henry Co, filed a
separate civil case against Ejercito as successor-in-interest (assignee) of Demetria
seeking to have the purported contract of sale be declared unenforceable against the
Bank. Ejercito argued that the second case constitutes forum shopping since it was
barred by litis pendentia by virtue of the case then pending in the Court of Appeals. But
petitioners explain that there is no forum-shopping because in the “First Case” from
which this proceeding arose, the Bank was impeached as a defendant, whereas in the
“Second Case” it was the plaintiff.
The Bank also argued the following: (1) that there contract of sale was not yet
perfected since it lacks consent since the Bank did not make a counter-offer; (2) that the
contract is unenforceable since there is no note, memorandum or writing subscribed by
the Bank to evidence such contract; (3) that the conservator has the power to revoke or
overrule actions of the management or the board of directors of a bank under Section
28-A of Republic Act No. 265 hence the conservator can revoke the said contract
between the Bank and Demetria; and (4) that respondent Court's Decision as "fraught
with findings and conclusions which were not only contrary to the evidence on record
but have no bases at all" hence questions of fact must be reviewed by SC.
ISSUE:
Whether or not a derivative suit may lie involving the bank and its stockholders.
RULING:
No. An individual stockholder is permitted to institute a derivative suit on behalf of
the corporation wherein he holds stock in order to protect or vindicate corporate rights,
whenever the officials of the corporation refuse to sue, or are the ones, to be sued or
hold the control of the corporation. In such actions, the suing stockholder is regarded as
a nominal party with the corporation as the real party in interest.
In the face of the damaging admissions taken from the complaint in the second
case, petitioners, quite strangely, sought to deny that the second case was a derivative
suit, reasoning that it was brought not by the minority shareholders, but by Henry Co.
etal. who not only hold or control over 80% of the outstanding capital stock, but also
constitute the majority in the board of directors of petitioners bank. That being so, then
they really represent the bank, so whether they sued derivatively or directly, there is
undeniably an identity of interest/entity represented. Shareholders, whether suing as the
majority in direct actions or as the minority in a derivative suit, cannot be allowed to trifle
with court processes particularly where, as in this case, the corporation itself has not
been remiss in vigorously prosecuting or defending corporate causes and in using and
applying remedies available to it. To rule otherwise would be to encourage corporate
litigants to use their shareholders as fronts to circumvent the stringent rules against
forum shopping.
Rivera is a position of authority to accept offers to buy and negotiate the sale by
having the offer officially acted upon by the bank. The bank cannot turn around and say,
as it now does, that what Rivera states as the bank’s action on the matter is not in fact
so. It is a familiar doctrine, the doctrine of ostensible authority, that if a corporation on
knowingly permits one of its officers, or any other agent, to do acts within the scope of
apparent authority, and thus holds him out to the public as possessing power to do
those acts, the corporation will, as against any one who has in good faith dealt with the
corporation through such agent, he estopped from denying his authority.
DOCTRINE: (Doctrine of "apparent authority")

A bank is liable for wrongful acts of its officers done in the interest of the bank or
in the course of dealings of the officers in their representative capacity but not for acts
outside the scope of their authority. A bank holding out its officers and agents as worthy
of confidence will not be permitted to profit by the frauds they my thus be enabled to
perpetrate in the apparent scope of their employment; nor will it be permitted to shrink
its responsibility for such fraud even through no benefit may accrue to the bank
therefrom. Accordingly, a banking corporation is liable to innocent third persons where
the representation is made in the course of its business by an agent acting within the
general scope of its authority even though, in the particular case, the agent is secretly
abusing his authority and attempting to perpetrate fraud upon his principal or some
other person, for his own ultimate benefit.
3. BSP and Fonacier vs. Hon. Nina G. Antonio-Valenzuela, G.R. No. 184778,
October 2, 2009;
FACTS: The Supervision and Examination Department (SED) of BSP conducted

examinations of the books of several banks. SED Examiners provided them with copies
of Lists of Findings containing deficiencies discovered during the examinations. These
banks were then required to comment and to undertake the remedial measures stated
in the lists within 30 days from their receipt. The said remedial measures included the
infusion of additional capital. Though the banks claimed that they made the additional
capital infusions, petitioner Chuchi Fonacier, OIC of the SED sent separate letters to the
Board of Directors of each bank, informing them that the SED found that the banks
failed to carry out the required remedial measures. In response, the banks requested
that the basis for the capital infusion figures be disclosed since none of them had
received the Report of Examination (ROE).
One of the banks (RBPI) filed a complaint for nullification of the BSP ROE with the
application for a TRO and writ of preliminary injunction before the RTC against Fonacier
et al. on the allegation that the failure to furnish the bank with a copy of the ROE
violated its right to due process.
The RTC and CA ruled that the banks were entitled to the writs of preliminary injunction
prayed for. It held that as the banks are the subjects of examinations, and that the
principles of fairness and transparency dictate, the respondent banks are entitled to
copies of the ROE.
ISSUE:
W/N the respondents are entitled to be furnished copies of ROEs before it is submitted
to the Monetary Board.
HELD:
No. Saying that the New Central Bank Act which governs examinations of banking
institutions only provides that the ROE shall be submitted to the MB and that the bank
examined is not mentioned as a recipient of the ROE, the trial court’s ruling also violates
the “close now, hear later” doctrine.
The respondent banks cannot prevent their closure by the MB. Their remedy is to
determine whether the closure of the bank was attended by grave abuse of discretion.
Judicial review enters the picture only after the MB has taken action. The threat of the
imposition of sanctions, even that of closure does not violate their right to due process,
and cannot be the basis for a writ of preliminary injunction.
DOCTRINE: The close now hear later doctrine has already been justified as a measure
for the protection of public interest. Swift action is called for on the part of BSP when it
finds that a bank is in dire straits. Unless adequate and determined efforts are taken by
the government against distressed and mismanaged banks, public faith in the banking
system is certain to deteriorate to the prejudice of the national economy itself, not to
mention the losses suffered by the bank, depositors, creditors, and stockholders who all
deserve the protection of the government.
4. In Re: Petition for Assistance in the Liquidation of the Rural Bank of Bokod vs.
BIR
G.R. No. 158261, December 18, 2006
Facts
The Bangko Sentral ng Pilipinas, after finding the irregularities in the operation
and the insolvent condition of the Rural Bank of Bokod (Benguet), Inc. (RBBI) ordered
its Board of Directors to take substantial measures to rehabilitate the bank but the latter
failed to implement said measures. RBBI remained in insolvent financial condition and it
could no longer safely resume business with the depositors, creditors, and the general
public hence, the Monetary Board ordered the liquidation of the bank. The designated
BSP liquidator filed with the RTC a Petition for Assistance in the Liquidation of RBBI.
Subsequently, the receivership and liquidation was transferred to the Philippine
Deposit Insurance Corporation (PDIC).The PDIC filed a Motion for Approval of Project
of Distribution of the assets of RBBI without filing the final return of RBBI for the year its
operations were stopped. During the hearing, the Bureau of Internal Revenue (BIR)
manifested that PDIC should secure a tax clearance certificate from the BIR. The RTC
ordered the PDIC to first secure a tax clearance from the appropriate BIR Regional
Office and held in abeyance the approval of the Project of Distribution of the assets of
the RBBI by virtue thereof.
Issue/s
Whether or not a bank ordered closed and placed under receivership by the
Monetary Board of the BSP is required to secure tax clearance certificate from the BIR
before the project of distribution of the assets of the bank be approved by the court.
Held
No. The procedure for involuntary dissolution and liquidation of a corporation
under the Corporation Code is different from that of the banking corporation under the
New Central Bank Act.
The court held that Section 52 (C) of the Tax Code of 1997 and BIR-SEC
Regulations No. 1 could not be applied in this case because these provisions refer only
to a voluntary dissolution and/or liquidation of a corporation through its adoption of a
resolution or plan to that effect, or an involuntary dissolution of a corporation by order of
the SEC. They make no reference at all to a situation similar in this case where a
banking corporation is ordered closed and placed under receivership by the BSP and its
assets judicially liquidated. Section 52(C) of the Tax Code of 1997 and the BIR-SEC
Regulations No. 1 only regulate the relations exclusively as between the SEC and the
BIR, making a certificate of tax clearance a prior requirement before the SEC could
approve the dissolution of a corporation. In Spec. Proc. No. 91-SP-0060 pending before
the RTC, RBBI was placed under receivership and ordered liquidated by the BSP, not
the SEC; and the SEC is not even a party in the said case, although the BIR is. The
Court cannot find any basis to extend the SEC requirements for dissolution of a
corporation to the liquidation proceedings of RBBI before the RTC when the SEC is not
even involved therein.
A banking corporation is governed and regulated by a special law, which is the
New Central Bank Act which does not require the prior issuance of a tax clearance from
the BIR. Even if PDIC failed to file the final return of RBBI for the year its operations
were stopped, the BIR should have requested from the RTC an order for the PDIC to
submit the final return of RBBI not to secure a tax clearance.
Section 30 of the New Central Bank Act lays down the proceedings for
receivership and liquidation of a bank. The Court explained the procedure for
involuntary dissolution and liquidation of a banking corporation. It expounds that the
Monetary Board may summarily and without need for prior hearing, forbid the banking
corporation from doing business in the Philippines, for causes enumerated in afore-
mentioned section of the New Central Bank Act; and appoint the PDIC as receiver of
the bank. PDIC shall immediately gather and take charge of all the assets and liabilities
of the closed bank and administer the same for the benefit of its creditors. The same
provision states that the actions of the Monetary Board under the said Section or
Section 29 shall be final and executory, and may not be restrained or set aside by the
court except on a Petition for Certiorari filed by the stockholders of record of the bank
representing a majority of the capital stock. PDIC, as the appointed receiver, shall file ex
parte with the proper RTC, and without requirement of prior notice or any other action, a
petition for assistance in the liquidation of the bank. The bank is not given the option to
undertake its own liquidation.
An exit clearance is not necessary as a condition for the liquidation of a bank.
Both the Tax Code and BIR-SEC Regulations No. 1 refer to a voluntary dissolution
and/or liquidation of a corporation, or an involuntary dissolution of a corporation by order
of the SEC. They make no reference to a situation where the BSP places a banking
corporation under receivership and liquidates its assets.
5. Banco Filipino Savings and Mortgage Bank vs. The Monetary Board, Central
Bank of the Philippines, G.R. No. 70054, December 11, 1991;
Facts:
This refers to nine (9) consolidated cases concerning the legality of the closure and
receivership of petitioner Banco Filipino Savings and Mortgage Bank pursuant to the
order of respondent Monetary Board.
G.R No. 68878

The respondent-movant contends that the petitioner has no more personality to
continue prosecuting the instant case considering that petitioner bank was placed under
receivership by the Central Bank pursuant to the resolution of the Monetary Board.
G.R. Nos. 77255-58
Petitioners Top Management Programs Corporation and Pilar Development Corporation

obtained loans from Banco Filipino which was secured by real estate mortgage in their
various properties.
Monetary Board issued a resolution finding Banco Filipino insolvent and unable to do
business without loss to its creditors and depositors. It placed Banco Filipino under
receivership of Carlota Valenzuela, Deputy Governor of the Central Bank. Valenzuela
was designated as the liquidator and by virtue of her authority, she appointed Sycip,
Salazar, et al. to represent Banco Filipino in all litigations.
Subsequently, Top Management and Pilar Development failed to pay their loan on the
due date. Hence, the law firm of Sycip, Salazar, et al. acting as counsel for Banco
Filipino under authority of Valenzuela as liquidator, applied for extra-judicial foreclosure
of the mortgage over Top Management's properties. Thus, the Ex-Officio Sheriff of the
Regional Trial Court of Cavite issued a notice of extra-judicial foreclosure sale of the
properties. They filed a petition for prohibition which was dismissed by the appellate
court. Hence, this petition alleging that Valenzuela has no authority to proceed with the
foreclosure sale of petitioners' properties on the ground that the resolution of the issue
on the validity of the closure and liquidation of Banco Filipino is still pending with the
SC.
G.R. No. 78766
Petitioner El Grande Development Corporation was extended by Banco Filipino a credit

accommodation to finance its housing program. Hence, petitioner was granted a loan
secured by real estate mortgages on its various estates. Monetary Board forbade Banco
Filipino to do business, placed it under receivership and designated Deputy Governor
Carlota Valenzuela as receiver and liquidator.
When petitioner El Grande failed to pay its indebtedness to Banco Filipino, the latter
thru its liquidator, Carlota Valenzuela, initiated the foreclosure with the RTC. El Grande
filed a petition for prohibition with the CA but it was dismissed. Hence this petition for
review on certiorari alleging that the respondent court erred when it held that Valenzuela
was not legally precluded from foreclosing the mortgage over the properties of the
petitioner through counsel retained by her for the purpose.
G.R. No. 81303
Petitioner Pilar Development Corporation filed an action against Banco Filipino, the
Central Bank and Carlota Valenzuela for specific performance. It appears that the
former management of Banco Filipino appointed Quisumbing & Associates as counsel
for Banco Filipino. The said law firm filed an answer for Banco Filipino which confessed
judgment against Banco Filipino. Petitioner filed a second amended complaint. The
Central Bank and Carlota Valenzuela, thru the law firm Sycip, et al., filed an answer to
the complaint. Sycip, et al., moved that the answer filed by Quisumbing & Associates for
defendant Banco Filipino be expunged from the records which the trial court granted.
G.R. No. 81304
Petitioner BF Homes Incorporated filed an action with the trial court to compel the
Central Bank to restore petitioner's financing facility with Banco Filipino. Central Bank
filed a motion to dismiss the action. BF Homes in a supplemental complaint impleaded
as defendant Carlota Valenzuela. Petitioner filed a second supplemental complaint to
which respondents filed a motion to dismiss.
The trial court granted the motion to dismiss the supplemental complaint on the grounds
(1) that plaintiff has no contractual relation with the defendants, and (2) that the
Intermediate Appellate Court in a previous decision had stated that Banco Filipino has
been ordered closed 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 become moot.
G.R. No. 90473
Petitioner El Grande Development Corporation obtained a loan from Banco Filipino

secured by a mortgage over its five parcels of land. 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 ex-officio sheriff of the Regional Trial
Court of Cavite for the extrajudicial foreclosure of the mortgage constituted over
petitioner's properties.
Petitioner filed with the CA a petition for prohibition with prayer for writ of preliminary
injunction to enjoin the respondents from foreclosing the mortgage and to nullify the
notice of foreclosure which was dismissed.
G.R. No. 70054
Petitioner Bank had an approved emergency advance of P119.7 million under M.B.
Resolution No. 839. This was augmented with a P3 billion credit line under M.B.
Resolution No. 934 dated July 27, 1984.
On the same date, respondent Board issued a resolution placing petitioner bank under
conservatorship of Basilio Estanislao who was replaced by Gilberto Teodoro. The latter
submitted a report to respondent Board. Another report was submitted to the Monetary
Board by Ramon Tiaoqui. The Tiaoqui Report contained the conclusion and
recommendation forbidding the bank from engaging in banking. The Monetary Board
issued the assailed resolution ordering the closure of Banco Filipino and placing it under
receivership and liquidation and designating Carlota Valenzuela as receiver and
liquidator.
G.R. No. 78767
Banco Filipino filed a complaint with the trial court to annul the resolution of the
Monetary Board dated January 25, 1985, which ordered the closure of the bank and
placed it under receivership. The Central Bank and the receivers filed a motion to
dismiss the complaint on the ground that the receivers had not authorized anyone to file
the action.
While the motion to dismiss was pending resolution, petitioner Metropolis Development
Corporation filed a motion to intervene in the aforestated civil case as a stockholder and
creditor of Banco Filipino. The trial court denied the motion to dismiss and allowed the
motion for intervention.
Respondent appellate court rendered a decision annulling and setting aside the
questioned orders of the trial court, and ordering the dismissal of the complaint filed by
Banco Filipino with the trial court as well as the complaint in intervention of petitioner
Metropolis Development Corporation.
G.R. No. 78894
A complaint was filed with the trial court in the name of Banco Filipino to annul the
resolution of the Monetary Board dated January 25, 1985 which ordered the closure of
Banco Filipino and placed it under receivership. Central Bank and the receiver filed a
motion to dismiss the complaint on the ground that the receiver had not authorized
anyone to file the action. CA dismissed the complaint of Banco Filipino.
Thus, this petition for certiorari was filed with the petitioner contending that a bank which
has been closed and placed under receivership by the Central Bank under Section 29 of
RA 265 could file suit in court in its name to contest such acts of the Central Bank,
without the authorization of the CB-appointed receiver.
Issues:
1. Whether or not the liquidator by himself or through counsel has the authority
to resist or defend suits instituted against the bank and to bring actions for
foreclosure of mortgages executed by debtors in favor of the bank.
2. Whether or not the closure and receivership of petitioner bank which was
ordered by respondent Monetary Board is valid.
Held:
1. Section 29 of the Republic Act No. 265, as amended known as the Central
Bank Act, provides that when a bank is forbidden to do business in the
Philippines and placed under receivership, the person designated as receiver
shall immediately take charge of the bank's assets and liabilities, as
expeditiously as possible, collect and gather all the assets and administer the
same for the benefit of its creditors, and represent the bank personally or
through counsel as he may retain in all actions or proceedings for or against
the institution, exercising all the powers necessary for these purposes
including, but not limited to, bringing and foreclosing mortgages in the name
of the bank. If the Monetary Board shall later determine and confirm that
banking institution is insolvent or cannot resume business safety to
depositors, creditors and the general public, it shall, public interest requires,
order its liquidation and appoint a liquidator who shall take over and continue
the functions of receiver previously appointed by Monetary Board. The liquid
for may, in the name of the bank and with the assistance counsel as he may
retain, institute such actions as may necessary in the appropriate court to
collect and recover a counts and assets of such institution or defend any
action ft against the institution.
When the issue on the validity of the closure and receivership of Banco Filipino
bank was raised in G.R. No. 70054, pendency of the case did not diminish the
powers and authority of the designated liquidator to effectuate and carry on the a
ministration of the bank. In fact when We adopted a resolute on August 25, 1985
and issued a restraining order to respondents Monetary Board and Central Bank,
We enjoined me further acts of liquidation. Such acts of liquidation, as explained
in Sec. 29 of the Central Bank Act are those which constitute the conversion of
the assets of the banking institution to money or the sale, assignment or
disposition of the s to creditors and other parties for the purpose of paying debts
of such institution. We did not prohibit however acts a as receiving collectibles
and receivables or paying off credits claims and other transactions pertaining to
normal operate of a bank. There is no doubt that the prosecution of suits
collection and the foreclosure of mortgages against debtors the bank by the
liquidator are among the usual and ordinary transactions pertaining to the
administration of a bank. their did Our order in the same resolution dated August
25, 1985 for the designation by the Central Bank of a comptroller Banco Filipino
alter the powers and functions; of the liquid insofar as the management of the
assets of the bank is concerned. The mere duty of the comptroller is to supervise
counts and finances undertaken by the liquidator and to d mine the propriety of
the latter's expenditures incurred behalf of the bank. Notwithstanding this, the
liquidator is empowered under the law to continue the functions of receiver is

preserving and keeping intact the assets of the bank in substitution of its former
management, and to prevent the dissipation of its assets to the detriment of the
creditors of the bank. These powers and functions of the liquidator in directing
the operations of the bank in place of the former management or former officials
of the bank include the retaining of counsel of his choice in actions and
proceedings for purposes of administration.
Clearly, in G.R. Nos. 68878, 77255-58, 78766 and 90473, the liquidator by
himself or through counsel has the authority to bring actions for foreclosure of
mortgages executed by debtors in favor of the bank. In G.R. No. 81303, the
liquidator is likewise authorized to resist or defend suits instituted against the
bank by debtors and creditors of the bank and by other private persons. Similarly,
in G.R. No. 81304, due to the aforestated reasons, the Central Bank cannot be
compelled to fulfill financial transactions entered into by Banco Filipino when the
operations of the latter were suspended by reason of its closure. The Central
Bank possesses those powers and functions only as provided for in Sec. 29 of
the Central Bank Act.
2. Under Section 29 of Republic Act No. 265, as amended, also known as the
Central Bank Act, the Monetary Board may order the cessation of operations
of a bank in the Philippine and place it under receivership upon a finding of
insolvency or when its continuance in business would involve probable loss
its depositors or creditors. If the Monetary Board shall determine and confirm
within sixty (60) days that the bank is insolvent or can no longer resume
business with safety to its depositors, creditors and the general public, it shall,
if public interest will be served, order its liquidation.
Under Section 29 of the Central Bank Act, the following are the mandatory
requirements to be complied with before a bank found to be insolvent is ordered
closed and forbidden to do business in the Philippines: Firstly, an examination
shall be conducted by the head of the appropriate supervising or examining
department or his examiners or agents into the condition of the bank; secondly, it
shall be disclosed in the examination that the condition of the bank is one of
insolvency, or that its continuance in business would involve probable loss to its
depositors or creditors; thirdly, the department head concerned shall inform the
Monetary Board in writing, of the facts; and lastly, the Monetary Board shall find
the statements of the department head to be true.
Anent the first requisite, Tiaoqui based his report on an incomplete

examination of petitioner bank and outrightly concluded therein that the
latter's financial status was one of insolvency or illiquidity. It is evident that the
examination contemplated in Sec. 29 of the CB Act as a mandatory requirement
was not completely and fully complied with. Despite the existence of the partial
list of findings in the examination of the bank, there were still highly significant
items to be weighed and determined such as the matter of valuation reserves,
before these can be considered in the financial condition of the bank. It would be
a drastic move to conclude prematurely that a bank is insolvent if the basis for
such conclusion is lacking and insufficient, especially if doubt exists as to
whether such bases or findings faithfully represent the real financial status of the
bank.
The actuation of the Monetary Board in closing petitioner bank on January 25,
1985 barely four days after a conference with the latter on the examiners' partial
findings on its financial position is also violative of what was provided in the CB
Manual of Examination Procedures. Said manual provides that only after the
examination is concluded, should a pre-closing conference led by the examiner-
in-charge be held with the officers/representatives of the institution on the
findings/exception, and a copy of the summary of the findings/violations should
be furnished the institution examined so that corrective action may be taken by
them as soon as possible. It is hard to understand how a period of four days after
the conference could be a reasonable opportunity for a bank to undertake a
responsive and corrective action on the partial list of findings of the examiner-in-
charge.
In the celebrated case of Ang Tibay v. Court of Industrial Relations, this Court
laid down several cardinal primary rights which must be respected in a
proceeding before an administrative body.
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 bank, since its action is subject to judicial scrutiny as provided for
under the same law.
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 of insolvency.
Sec. 29 of the Central Bank Act provides that insolvency under the Act, shall be
understood to mean that "the realizable assets of a bank or a non-bank financial
intermediary performing quasi-banking functions as determined by the
Central Bank are insufficient to meet its liabilities. Stated in other words,
the insolvency of a bank occurs when the actual cash market value of its assets
is insufficient to pay its liabilities, not considering capital stock and surplus
which are not liabilities for such purpose. The Central Bank’s contention that
the solvency of a bank depends on unimpaired capital is misplaced.
6. Rural Bank of San Miguel, Inc. and Hilario Soriano vs. Monetary Board, BSP
and PDIC, G.R. No. 150886, February 16, 2007;
FACTS: Petitioner Rural Bank of San Miguel (RBSM for brevity) was prohibited from
doing banking business in the Philippines by respondent the Monetary Board (MB, for
brevity), the governing board of BSP through Resolution No. 105 dated 21 January
2000, which places petitioner under receivership and designating Philippine Deposit
Insurance Corporation (PDIC, for brevity) as receiver.
The basis of Resolution No. 105 was the comptrollership/monitoring report by Director
Domo-ong of the Department of Rural Banks Supervision and Examination Sector to the
respondent Monetary Board. Director Domo-ong’s report was then based on the
comptrollership reports of Ms. Cabais, the designated comptroller of the BSP, which
reflected the financial status of RBSM.
The report showed that RBSM: (a) is unable to pay its liabilities as they become due in
the ordinary course of business; (b) cannot continue in business without involving
probable losses to its depositors and creditors; (c) that the management of the bank had
been accordingly informed of the need to infuse additional capital to place the bank in a
solvent financial condition and was given adequate time within which to make the
required infusion and that no infusion of adequate fresh capital was made.
Thereafter, PDIC implemented the closure order and took over the management of
RBSM’s assets and affairs.
Petitioners filed a petition for certiorari and prohibition to nullify and set aside Resolution
No. 105 before the CA. Petitioner claims that respondents MB and BSP committed
grave abuse of discretion in issuing Resolution No. 105.
CA: Dismissed the petition. According to the CA, the decision of the MB to issue
Resolution No. 105 was aptly backed by substantial evidence.
Hence, the present case.
Petitioners argue that Resolution No. 105 was bereft of any basis considering that no
complete examination had been conducted before it was issued. Petitioners contended
that an examination is necessary and not mere report, otherwise the decision to close a
bank would be arbitrary.
Respondents for their part, argue that R.A. 7653 merely requires a report of the head of
the supervising or examining department; that the term report under Section 30 and the
word examination used in Section 29 of the Old Central Bank Act are not synonymous.
ISSUE: Whether Section 30 of RA 7653 of the New Central Bank Act requires a current
and complete examination of the bank before it can be closed and placed under
receivership.
HELD: No, only a report of the head of the supervising or examining department is
necessary as stated under the current law (R.A. 7653). Petitioners’ reliance on the
Banco Filipino case is misplaced. Worthy of note in this case is that the aforementioned
jurisprudence was decided under the old law (RA 265) which required examination
conducted by the head of the appropriate supervising or examining department or his
examiners or agents into the condition of the bank is necessary before the MB can
order its closure.
However, RA 265 was expressly repealed by RA 7653. Under RA 7653, only a report of
the head of the supervising or examining department is necessary. According to the SC,
where the words of a statute are clear, plain and free from ambiguity, it must be given
its literal meaning and applied without attempted interpretation.
The word “report” has a definite and unambiguous meaning which is clearly different
from “examination.” A report, as a noun, may be defined as “something that gives
information” or “a usually detailed account or statement.” Conversely, “examination”
refers to “a search, investigation or scrutiny.”
The clear import of Section 30 of RA 7653, is that it no longer requires an examination

before it can issue a closure order. The SC cannot make it a requirement in the
absence of a legal basis so much so it would result in judicial legislation.
In conclusion, MB and BSP complied with all the requirements of RA 7653 before
issuing their questioned resolution which prohibited RBSM from conducting its banking
business. By relying on a report before placing a bank under receivership, the MB and
BSP did not only follow the letter of the law, they were also faithful to its spirit, which
was to act expeditiously.
7. Spouses Cesar Larrobis, Jr. and Virginia Larrobis vs. Philippine Veterans Bank,
G.R.No. 135706;
Facts: In 1980, petitioner spouses-Larrobis (spouses) contracted a loan with

respondent secured by a real estate mortgage. In March 1985, respondent bank-
Philippine Veterans Bank (bank) went bankrupt and was placed under
receivership/liquidation. In August 1985, the bank, through Francisco Go, sent the
spouses a demand letter for accounts receivable in the total amount of P6,345.00 which
pertains to the insurance premiums advanced by respondent bank over the mortgaged
property of petitioners.
In 1995, more than 14 years from the time the loan became due and demandable,
respondent bank filed a petition for extrajudicial foreclosure of mortgage of petitioners’
property. It was sold the respondent as the loan bidder. Less than 1 year thereafter,
petitioners filed a complaint before the RTC to declare the extra-judicial foreclosure and
the subsequent sale thereof to respondent bank null and void. In the pre-trial
conference, the parties agreed to limit the issue to whether or not the period within
which the bank was placed under receivership and liquidation was a fortuitous event
which suspended the running of the 10-year prescriptive period in bringing actions.
The RTC dismissed the complaint ruling that the period by which the respondent was
placed under receivership was a fortuitous event which suspended the running of the
10-year prescriptive period in bringing actions. The RTC reasoned out that the
respondent was restrained from doing its business; hence, respondent was not
prohibited to foreclose the mortgaged property.
Issue: Whether or not the period within which the respondent bank was placed under
receivership and liquidation proceedings may be considered a fortuitous event which
interrupted the running of the prescriptive period in bringing actions?
Held: NO, the period within which the respondent bank was placed under receivership
and liquidation proceedings may NOT be considered a fortuitous event which
interrupted the running of the prescriptive period in bringing actions.
The SC held that though “foreclosure” falls within the contemplation of “doing business”,
it should not be considered included, however, in the acts prohibited whenever banks
are "prohibited from doing business" during receivership and liquidation proceedings.
This is consistent with the purpose of receivership proceedings, i.e., to receive
collectibles and preserve the assets of the bank in substitution of its former
management, and prevent the dissipation of its assets to the detriment of the creditors
of the bank.
When a bank is declared insolvent and placed under receivership, the Central Bank,
through the Monetary Board, determines whether to proceed with the liquidation or
reorganization of the financially distressed bank. A receiver, who concurrently
represents the bank, then takes control and possession of its assets for the benefit of
the bank’s creditors. In both receivership and liquidation proceedings, the bank retains
its juridical personality notwithstanding the closure of its business and may even be
sued as its corporate existence is assumed by the receiver or liquidator. The receiver or
liquidator meanwhile acts not only for the benefit of the bank, but for its creditors as
well.
Settled is the principle that a bank is bound by the acts, or failure to act of its receiver.
As we held in Philippine Veterans Bank vs. NLRC,a labor case which also involved
respondent bank, all the acts of the receiver and liquidator pertain to petitioner, both
having assumed petitioner’s corporate existence. Petitioner cannot disclaim liability by
arguing that the non-payment of MOLJNA’s just wages was committed by the
liquidators during the liquidation period. However, the bank may go after the receiver
who is liable to it for any culpable or negligent failure to collect the assets of such bank
and to safeguard its assets.
In the case at bar, it is not disputed that Philippine Veterans Bank was placed under
receivership by the Monetary Board of the Central Bank by virtue of Resolution No. 364
on April 25, 1985, pursuant to Section 29 of the Central Bank Act on insolvency of
banks. Moreover, the period within which the respondent bank was placed under
receivership and liquidation proceedings does not constitute a fortuitous event which
interrupted the prescriptive period in bringing actions.
Notes:
“Doing Business” - means a continuity of commercial dealings and arrangements and
contemplates to that extent, the performance of acts or words or the exercise of some of
the functions normally incident to and in progressive prosecution of the purpose and
object of its organization.
8. The Central Bank of the Philippines and Ramon Tiaoqui vs. CA and Triumph
Savings Bank, G.R. No. 76118, March 30, 1993;
FACTS: Based on the examination reports submitted by the Supervision and

Examination Sector of the petitioner Central Bank (CB, for brevity) that the financial
condition of private respondent Triumph Savings Bank (TSB, for brevity) is one of
insolvency and its continuance in business would involve probable loss to its depositors
and creditors, the Monetary Board issued Resolution No. 596 on 31 May 1985 ordering
the closure of TSB, forbidding it from doing business in the Philippines, placing it under
receivership and appointed petitioner Ramon Tiaoqui as receiver.
TSB filed a complaint with the RTC against petitioners CB and Tiaoqui to annul
Resolution No. 596 with prayer for injunction, challenging in the process the
constitutionality of Sec. 29 of R.A. 269, otherwise known as the Central Bank Act,
insofar as it authorizes the CB to take over a banking institution even if it is not charged
with violation of any law or regulation, much less found guilty thereof.
RTC: granted the TRO. Petitioners moved for the quashal of the TRO on the ground
that TSB failed to show convincing proof of arbitrariness and bad faith on the part of
petitioners; and that TSB failed to post the requisite bond in favor of CB. Later on, RTC
granted the motion to quash the restraining order and denied the application of TSB for
injunction.
Petitioners moved to dismiss the complaint filed by TSB as the complaint did not allege
ultimate facts showing that the issuance of Resolution 596 was plainly arbitrary and
made in bad faith, which are the only ground for the annulment of the Monetary Board
resolutions placing a bank under conservatorship and that TSB was without legal
capacity to sue except through its receiver. And TSB filed an urgent motion in the RTC
to direct petitioner Tiaoqui to restore TSB to its private management.
RTC: dismissed the motion to dismiss filed by petitioners and ordered petitioner Tiaoqui
to restore the management of TSB to its elected board of directors and officers.
Petitioners elevated the case to the CA. The CA upheld the RTC orders. The CA held,
among other things, that The charge of lack of due process in the complaint may be
taken as constitutive of allegations of arbitrariness and bad faith.This is not of course to
be taken as meaning that there must be previous hearing before the Monetary Board
may exercise its powers under Section 29 of its Charter.
Petitioners elevated the case to the SC via Rule 45 petition. They alleged that the CA
erred affirming that an insolvent bank that had been summarily closed by the Monetary
Board should be restored to its private management supposedly because such
summary closure was "arbitrary and in bad faith" and a denial of "due process"; in
holding that the "charge of lack of due process"for "want of prior hearing" in a complaint
to annul aMonetary Board receivership resolution under Sec.29 of R.A, 265 "may be
taken as .. . allegations of arbitrariness and bad faith"; and in holding that the owners
and former officers of an insolvent bank may still act or sue in the name and corporate
capacity of such bank, even after it had been ordered closed and placed under
receivership.
Respondents for their part relied on the Banco Filipino case where the SC held that the
CB violated the rule on administrative due process laid down in jurisprudence which
requires that prior notice and hearing be afforded to all parties in administrative
proceedings. Since MB Resolution No. 596 was adopted without TSB being previously
notified and heard, according to respondents, the same is void for want of due
process;consequently, the bank's management should be restored to its board of

directors and officers.
ISSUES: A. Whether absence of prior notice and hearing is constitutive of arbitrariness

and bad faith, as to annul the questioned resolution.
B. Whether it is only the receiver who has a right of action to question the resolution of
the CB, and not the stockholders of the corporation.
HELD: A. No. Under Sec. 29 of RA 265, does not contemplate prior notice and hearing
before a bank may be directed to stop operations and placed under receivership. Sec.
29 nor does the constitutional requirement of due process demand that the correctness
of the MB's resolution to stop operation and proceed to liquidation be first adjudged
before making the resolution effective. It is enough that a subsequent judicial review be
provided.
Even with the jurisprudence invoked by TSB, the SC held therein that RA 265 does not
require a previous hearing before the MB can implement its resolution closing a bank,
since its action is subject to judicial scrutiny as provided by law.
It may be emphasized that Sec. 29 does not altogether divest a bank or a non-bank
financial institution placed under receivership of the opportunity to be heard and present
evidence on arbitrariness and bad faith because within ten (10) days from the date the
receiver takes charge of the assets of the bank, resort to judicial review may be had by
filing an appropriate pleading with the court. The facts show that TSB did not avail of
this remedy.
The rationale of “close now and hear later” scheme, is grounded on practical and legal
considerations to prevent unwarranted dissipation of the bank’s assets and as a valid
exercise of police power to protect the depositors, creditors, stockholders and the
general public.
Sec. 29 of R.A. 265 is a sound legislation promulgated in accordance with the

Constitution in the exercise of police power of the state. Consequently, the absence of
notice and hearing is not a valid ground to annul a Monetary Boardresolution placing a
bank under receivership. The absence of prior notice and hearing cannot be deemed
acts of arbitrariness and bad faith. Thus, an MB resolution placing a bank under
receivership, or conservatorship for that matter, may only be annulled after a
determination has been made by the trial court that its issuance was tainted with
arbitrariness and bad faith. Until such determination is made, TSB shall continue to be
under receivership.
B. No. Under E.O. 289, any party in interest could institute court proceedings to
question a Monetary Board resolution placing a bank under receivership.
Here, since the instant case was filed by parties representing themselves to be officers
of TSB, the case before the trial court should take its natural course. However, after the
effectivity of E.O. 289, the procedure stated therein should be followed and observed.
9. Philippine Veterans Bank Employees Union vs. Honorable Benjamin Vega, G.R.
No. 105634, June 28, 2001;
FACTS: The Central Bank of the Philippines (Central Bank, for brevity) filed with Branch 39
of the Regional Trial Court of Manila a Petition for Assistance in the Liquidation of the
Philippine Veterans Bank. The Philippine Veterans Bank Employees Union-N.U.B.E., herein
petitioner, represented by petitioner Perfecto V. Fernandez, filed claims for accrued and
unpaid employee wages and benefits with said court.Partial payment of the sums due to the
employees were made. However, due to the piecemeal hearings on the benefits, many
remain unpaid.
The Congress enacted Republic Act No. 7169 providing for the rehabilitation of the
Philippine Veterans Bank. Petitioners filed with the labor tribunals their residual claims for
benefits and for reinstatement upon reopening of the bank. The Central Bank issued a
certificate of authority allowing the PVB to reopen. Despite the legislative mandate for
rehabilitation and reopening of PVB, respondent judge continued with the liquidation
proceedings of the bank.
ISSUE: Petitioners argue that with the passage of R.A. 7169, the liquidation court became
functus officio, and no longer had the authority to continue with liquidation proceedings.
RULING: The court finds for the petitioners. Republic Act No. 7169 entitled "An Act To
Rehabilitate The Philippine Veterans Bank Created Under Republic Act No. 3518, Providing
The Mechanisms Therefor, And For Other Purposes", provides in part for the reopening of
the Philippine Veterans Bank together with all its branches within the period of three (3)
years from the date of the reopening of the head office. The Monetary Board issued a
Certificate of Authority allowing PVB to reopen.
The Philippine Veterans Bank opened its doors to the public and started regular banking
operations. The enactment of Republic Act No. 7169, as well as the subsequent
developments has rendered the liquidation court functus officio. Consequently, respondent
judge has been stripped of the authority to issue orders involving acts of liquidation.
Liquidation, in corporation law, connotes a winding up or settling with creditors and

debtors. It is the winding up of a corporation so that assets are distributed to those entitled
to receive them. It is the process of reducing assets to cash, discharging liabilities and
dividing surplus or loss. On the opposite end of the spectrum is rehabilitation which
connotes a reopening or reorganization. Rehabilitation contemplates a continuance of
corporate life and activities in an effort to restore and reinstate the corporation to its former
position of successful operation and solvency. The concept of liquidation is diametrically
opposed or contrary to the concept of rehabilitation, such that both cannot be undertaken at
the same time.
Anent the claim of respondents Central Bank and Liquidator of PVB that R.A. No. 7169
became effective only on March 10, 1992 or fifteen (15) days after its publication in the
Official Gazette; the Court is of the view that both contentions are bereft of merit. Laws take
effect after fifteen (15) days following the completion of their publication in the Official
Gazette or in a newspaper of general circulation in the Philippines, the legislature has the
authority to provide for exceptions, as indicated in the clause "unless otherwise provided."
In the case at bar, Section 10 of R.A. No. 7169 provides: SECTION 10. Effectivity. — This
Act shall take effect upon its approval.
The instant petition is hereby GIVEN DUE COURSE and GRANTED.

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Case Digests in Banking Laws (Deldio, 2022)

On March 7, 1978, respondents led by Juanita B. Ybanez, et. al obtained a loan

The respondents’ total payment from 1983 to 1988 amounted to Php

DOCTRINE: (Doctrine of "apparent authority")

FACTS: The Supervision and Examination Department (SED) of BSP conducted

G.R No. 68878

G.R. Nos. 77255-58

Petitioners Top Management Programs Corporation and Pilar Development Corporation

G.R. No. 78766

Petitioner El Grande Development Corporation was extended by Banco Filipino a credit

G.R. No. 81303

G.R. No. 81304

G.R. No. 90473

Petitioner El Grande Development Corporation obtained a loan from Banco Filipino

G.R. No. 70054

G.R. No. 78767

G.R. No. 78894

liquidator is empowered under the law to continue the functions of receiver is

Anent the first requisite, Tiaoqui based his report on an incomplete

However, as to the requirement of notice and hearing, Sec. 29 of RA 265 does

Hence, the present case.

The clear import of Section 30 of RA 7653, is that it no longer requires an examination

Facts: In 1980, petitioner spouses-Larrobis (spouses) contracted a loan with

FACTS: Based on the examination reports submitted by the Supervision and

process;consequently, the bank's management should be restored to its board of

ISSUES: A. Whether absence of prior notice and hearing is constitutive of arbitrariness

Sec. 29 of R.A. 265 is a sound legislation promulgated in accordance with the

Liquidation, in corporation law, connotes a winding up or settling with creditors and

The instant petition is hereby GIVEN DUE COURSE and GRANTED.

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