G.R. Nos.

154470-71

September 24, 2012

BANK OF COMMERCE, Petitioner,

vs.
PLANTERS DEVELOPMENT BANK and BANGKO SENTRAL NG PILIPINAS, Respondent.
x-----------------------x
G.R. Nos. 154589-90
BANGKO SENTRAL NG PILIPINAS, Petitioner,
vs.
PLANTERS DEVELOPMENT BANK, Respondent.
DECISION
BRION, J.:
Before the Court are two consolidated petitions for review on certiorari under Rule 45,1 on pure questions of law, filed by the petitioners Bank of
Commerce (BOC) and the BangkoSentralngPilipinas (BSP). They assail the January 10, 2002 and July 23, 2002 Orders (assailed orders) of the
Regional Trial Court (RTC) of Makati City, Branch 143, in Civil Case Nos. 94-3233 and 94-3254. These orders dismissed (i) the petition filed by the
Planters Development Bank (PDB), (ii) the "counterclaim" filed by the BOC, and (iii) the counter-complaint/cross-claim for interpleader filed bythe BSP;
and denied the BOCs and the BSPs motions for reconsideration.
THE ANTECEDENTS
The Central Bank bills
I. First set of CB bills
The Rizal Commercial Banking Corporation (RCBC) was the registered owner of seven Central Bank (CB) bills with a total face value of P 70 million,
issued on January 2, 1994 and would mature on January 2, 1995.2 As evidenced by a "Detached Assignment" dated April 8, 1994,3 the RCBC sold these
CB bills to the BOC.4 As evidenced by another "Detached Assignment"5 of even date, the BOC, in turn, sold these CB bills to the PDB.6 The BOC
delivered the Detached Assignments to the PDB.7
On April 15, 1994 (April 15 transaction), the PDB, in turn, sold to the BOC Treasury Bills worth P 70 million, with maturity date of June 29, 1994, as
evidenced by a Trading Order8 and a Confirmation of Sale.9 However, instead of delivering the Treasury Bills, the PDB delivered the seven CB bills to the
BOC, as evidenced by a PDB Security Delivery Receipt, bearing a "note: ** substitution in lieu of 06-29-94" referring to the Treasury
Bills.10Nevertheless, the PDB retained possession of the Detached Assignments. It is basically the nature of this April 15 transaction that the PDB and
the BOC cannot agree on.
The transfer of the first set of seven CB bills
i. CB bill nos. 45351-53
On April 20, 1994, according to the BOC, it "sold back"11 to the PDB three of the seven CB bills. In turn, the PDB transferred these three CB bills to
Bancapital Development Corporation (Bancap). On April 25, 1994, the BOC bought the three CB bills from Bancap so, ultimately, the BOC reacquired
these three CB bills,12 particularly described as follows:
Serial No.:

2BB XM 045351
2BB XM 045352
2BB XM 045353

Quantity:

Three (3)

Denomination:

Php 10 million

Total Face Value:

Php 30 million

ii. CB bill nos. 45347-50

On April 20, 1994, the BOC sold the remaining four (4) CB bills to Capital One Equities Corporation 13 which transferred them to All-Asia Capital and Trust
Corporation (All Asia). On September 30, 1994, All Asia further transferred the four CB bills back to the RCBC. 14
On November 16, 1994, the RCBC sold back to All Asia one of these 4 CB bills. When the BSP refused to release the amount of this CB bill on maturity,
the BOC purchased from All Asia this lone CB bill,15 particularly described as follows:16

Serial No.:

2BB XM 045348

Quantity:

One (1)

Denomination:

Php 10 million

Total Face Value:

Php 10 million

As the registered owner of the remaining three CB bills, the RCBC sold them to IVI Capital and Insular Savings Bank. Again, when the BSP refused to
release the amount of this CB bill on maturity, the RCBC paid back its transferees, reacquired these three CB bills and sold them to the BOC
ultimately, the BOC acquired these three CB bills.
All in all, the BOC acquired the first set of seven CB bills.
II. Second set of CB bills
On April 19, 1994, the RCBC, as registered owner, (i) sold two CB bills with a total face value of P 20 million to the PDB and (ii) delivered to the PDB the
corresponding Detached Assignment.17 The two CB bills were particularly described as follows:
Serial No.:

BB XM 045373
BB XM 045374

Issue date:

January 3, 1994

Maturity date:

January 2, 1995

Denomination:

Php 10 million

Total Face value:

Php 20 million

On even date, the PDB delivered to Bancap the two CB bills18 (April 19 transaction). In turn, Bancap sold the CB bills to Al-Amanah Islamic Investment
Bank of the Philippines, which in turn sold it to the BOC.19
PDBs move against the transfer of
the first and second sets of CB bills
On June 30, 1994, upon learning of the transfers involving the CB bills, the PDB informed 20 the Officer-in-Charge of the BSPs Government Securities
Department,21 LagrimasNuqui, of the PDBs claim over these CB bills, based on the Detached Assignments in its possession. The PDB requested the
BSP22 to record its claim in the BSPs books, explaining that its non-possession of the CB bills is "on account of imperfect negotiations thereof and/or
subsequent setoff or transfer."23
Nuqui denied the request, invoking Section 8 of CB Circular No. 28 (Regulations Governing Open Market Operations, Stabilization of the Securities
Market, Issue, Servicing and Redemption of the Public Debt)24 which requires the presentation of the bond before a registered bond may be transferred
on the books of the BSP.25
In a July 25, 1994 letter, the PDB clarified to Nuqui that it was not "asking for the transfer of the CB Bills. rather it intends to put the BSP on formal
notice that whoever is in possession of said bills is not a holder in due course," and, therefore the BSP should not make payment upon the presentation
of the CB bills on maturity.26 Nuqui responded that the BSP was "not in a position at that point in time to determine who is and who is not the holder in
due course since it is not privy to all acts and time involving the transfers or negotiation" of the CB bills. Nuqui added that the BSPs action shall be
governed by CB Circular No. 28, as amended.27
On November 17, 1994, the PDB also asked BSP Deputy Governor Edgardo Zialcita that (i) a notation in the BSPs books be made against the transfer,
exchange, or payment of the bonds and the payment of interest thereon; and (ii) the presenter of the bonds upon maturity be required to submit proof as
a holder in due course (of the first set of CB bills). The PDB relied on Section 10 (d) 4 of CB Circular No. 28. 28 This provision reads:
(4) Assignments effected by fraud Where the assignment of a registered bond is secured by fraudulent representations, the Central Bank can grant no
relief if the assignment has been honored without notice of fraud. Otherwise, the Central Bank, upon receipt of notice that the assignment is claimed to
have been secured by fraudulent representations, or payment of the bond the payment of interest thereon, and when the bond is presented, will call
upon the owner and the person presenting the bond to substantiate their respective claims.If it then appears that the person presenting the bond stands
in the position of bonafide holder for value, the Central Bank, after giving the owner an opportunity to assert his claim, will pass the bond for transfer,
exchange or payments, as the case may be, without further question.
In a December 29, 1994 letter, Nuqui again denied the request, reiterating the BSPs previous stand.
In light of these BSP responses and the impending maturity of the CB bills, the PDB filed 29 with the RTC two separate petitions for Mandamus,
Prohibition and Injunction with prayer for Preliminary Injunction and Temporary Restraining Order, docketed as Civil Case No. 94-3233 (covering the first
set of CB bills) and Civil Case 94-3254 (covering the second set of CB bills) against Nuqui, the BSP and the RCBC. 30

The PDB essentially claims that in both the April 15 transaction (involving the first set of CB bills) and the April 19 transaction (involving the second set of
CB bills), there was no intent on its part to transfer title of the CB bills, as shown by its non-issuance of a detached assignment in favor of the BOC and
Bancap, respectively. The PDB particularly alleges that it merely "warehoused"31 the first set of CB bills with the BOC, as security collateral.
On December 28, 1994, the RTC temporarily enjoined Nuqui and the BSP from paying the face value of the CB bills on maturity.32 On January 10, 1995,
the PDB filed an Amended Petition, additionally impleading the BOC and All Asia.33 In a January 13, 1995 Order, the cases were consolidated.34 On
January 17, 1995, the RTC granted the PDBs application for a writ of preliminary prohibitory injunction. 35 In both petitions, the PDB identically prayed:
WHEREFORE, it is respectfully prayed x xx that, after due notice and hearing, the Writs of Mandamus, Prohibition and Injunction, be issued; (i)
commanding the BSP and Nuqui, or whoever may take her place (a) to record forthwith in the books of BSP the claim of x xx PDB on the [two sets of] CB Bills in accordance with Section 10 (d) (4) of revised C.B.
Circular No. 28; and
(b) also pursuant thereto, when the bills are presented on maturity date for payment, to call (i) x xx PDB, (ii) x xx RCBC x xx, (iii) x xx BOC x xx, and (iv)
x xx ALL-ASIA x xx; or whoever will present the [first and second sets of] CB Bills for payment, to submit proof as to who stands as the holder in due
course of said bills, and, thereafter, act accordingly;
and (ii) ordering the BSP and Nuqui to pay jointly and severally to x xx PDB the following:
(a) the sum of P 100,000.00, as and for exemplary damages;
(b) the sum of at least P 500,000.00, or such amount as shall be proved at the trial, as and for attorneys fees;
(c) the legal rate of interest from the filing of this Petition until full payment of the sums mentioned in this Petition; and
(d) the costs of suit.36
After the petitions were filed, the BOC acquired/reacquired all the nine CB bills the first and second sets of CB bills (collectively, subject CB bills).
Defenses of the BSP and of the BOC37
The BOC filed its Answer, praying for the dismissal of the petition. It argued that the PDB has no cause of action against it since the PDB is no longer the
owner of the CB bills. Contrary to the PDBs "warehousing theory," 38 the BOC asserted that the (i) April 15 transaction and the (ii) April 19 transaction
covering both sets of CB bills - were valid contracts of sale, followed by a transfer of title (i) to the BOC (in the April 15 transaction) upon the PDBs
delivery of the 1st set of CB bills in substitution of the Treasury Bills the PDB originally intended to sell, and (ii) to Bancap (in the April 19 transaction)
upon the PDBs delivery of the 2nd set of CB bills to Bancap, likewise by way of substitution.
The BOC adds that Section 10 (d) 4 of CB Circular No. 28 cannot apply to the PDBs case because (i) the PDB is not in possession of the CB bills and
(ii) the BOC acquired these bills from the PDB, as to the 1st set of CB bills, and from Bancap, as to the 2nd set of CB bills, in good faith and for value.
The BOC also asserted a compulsory counterclaim for damages and attorneys fees.
On the other hand, the BSP countered that the PDB cannot invoke Section 10 (d) 4 of CB Circular No. 28 because this section applies only to an
"owner" and a "person presenting the bond," of which the PDB is neither. The PDB has not presented to the BSP any assignment of the subject CB bills,
duly recorded in the BSPs books, in its favor to clothe it with the status of an "owner."39 According to the BSP
Section 10 d. (4) applies only to a registered bond which is assigned. And the issuance of CB Bills x xx are required to be recorded/registered in BSPs
books. In this regard, Section 4 a. (1) of CB Circular 28 provides that registered bonds "may be transferred only by an assignment thereon duly executed
by the registered owner or his duly authorized representative x xx and duly recorded on the books of the Central Bank."
x xxx
The alleged assignment of subject CB Bills in PDBs favor is not recorded/registered in BSPs books. 40(underscoring supplied)
Consequently, when Nuqui and the BSP refused the PDBs request (to record its claim), they were merely performing their duties in accordance with CB
Circular No. 28.
Alternatively, the BSP asked that an interpleader suit be allowed between and among the claimants to the subject CB bills on the position that while it is
able and willing to pay the subject CB bills face value, it is duty bound to ensure that payment is made to the rightful owner. The BSP prayed that
judgment be rendered:
a. Ordering the dismissal of the PDBs petition for lack of merit;
b. Determining which between/among [PDB] and the other claimants is/are lawfully entitled to the ownership of the subject CB bills and the
proceeds thereof;

c. x xx;
d. Ordering PDB to pay BSP and Nuqui such actual/compensatory and exemplary damages as the RTC may deem warranted; and
e. Ordering PDB to pay Nuqui moral damages and to pay the costs of the suit. 41
Subsequent events
The PDB agreed with the BSPs alternative response for an interpleader
4. PDB agrees that the various claimants should now interplead and substantiate their respective claims on the subject CB bills. However, the total face
value of the subject CB bills should be deposited in escrow with a private bank to be disposed of only upon order of the RTC. 42
Accordingly, on June 9, 199543 and August 4, 1995,44 the BOC and the PDB entered into two separate Escrow Agreements.45 The first agreement
covered the first set of CB bills, while the second agreement covered the second set of CB bills. The parties agreed to jointly collect from the BSP the
maturity proceeds of these CB bills and to deposit said amount in escrow, "pending final determination by Court judgment, or amicable settlement as to
who shall be eventually entitled thereto."46 The BOC and the PDB filed a Joint Motion,47 submitting these Escrow Agreements for court approval. The
RTC gave its approval to the parties Joint Motion.48 Accordingly, the BSP released the maturity proceeds of the CB bills by crediting the Demand
Deposit Account of the PDB and of the BOC with 50% each of the maturity proceeds of the amount in escrow.49
In view of the BOCs acquisition of all the CB bills, All Asia50 moved to be dropped as a respondent (with the PDBs conformity51), which the RTC
granted.52 The RCBC subsequently followed suit.53
In light of the developments, on May 4, 1998, the RTC required the parties to manifest their intention regarding the case and to inform the court of any
amicable settlement; "otherwise, th[e] case shall be dismissed for lack of interest." 54 Complying with the RTCs order, the BOC moved (i) that the case be
set for pre-trial and (ii) for further proceeding to resolve the remaining issues between the BOC and the PDB, particularly on "who has a better right over
the subject CB bills."55 The PDB joined the BOC in its motion.56
On September 28, 2000, the RTC granted the BSPs motion to interplead and, accordingly, required the BOC to amend its Answer and for the conflicting
claimants to comment thereon.57 In October 2000, the BOC filed its Amended Consolidated Answer with Compulsory Counterclaim, reiterating its earlier
arguments asserting ownership over the subject CB bills.58
In the alternative, the BOC added that even assuming that there was no effective transfer of the nine CB bills ultimately to the BOC, the PDB remains
obligated to deliver to the BOC, as buyer in the April 15 transaction and ultimate successor-in-interest of the buyer (Bancap) in the April 19 transaction,
either the original subjects of the sales or the value thereof, plus whatever income that may have been earned during the pendency of the case. 59
That BOC prayed:
1. To declare BOC as the rightful owner of the nine (9) CB bills and as the party entitled to the proceeds thereof as well as all income earned
pursuant to the two (2) Escrow Agreements entered into by BOC and PDB.
2. In the alternative, ordering PDB to deliver the original subject of the sales transactions or the value thereof and whatever income earned by
way of interest at prevailing rate.
Without any opposition or objection from the PDB, on February 23, 2001, the RTC admitted 60 the BOCs Amended Consolidated Answer with
Compulsory Counterclaims.
In May 2001, the PDB filed an Omnibus Motion,61 questioning the RTCs jurisdiction over the BOCs "additional counterclaims." The PDB argues that its
petitions pray for the BSP (not the RTC) to determine who among the conflicting claimants to the CB bills stands in the position of the bona fide holder
for value. The RTC cannot entertain the BOCs counterclaim, regardless of its nature, because it is the BSP which has jurisdiction to determine who is
entitled to receive the proceeds of the CB bills.
The BOC opposed62 the PDBs Omnibus Motion. The PDB filed its Reply.63
In a January 10, 2002 Order, the RTC dismissed the PDBs petition, the BOCs counterclaim and the BSPs counter-complaint/cross-claim for
interpleader, holding that under CB Circular No. 28, it has no jurisdiction (i) over the BOCs "counterclaims" and (ii) to resolve the issue of ownership of
the CB bills.64 With the denial of their separate motions for Reconsideration,65 the BOC and the BSP separately filed the present petitions for review on
certiorari.66
THE BOCS and THE BSPS PETITIONS
The BOC argues that the present cases do not fall within the limited provision of Section 10 (d) 4 of CB Circular No. 28, which contemplates only of three
situations: first, where the fraudulent assignment is not coupled with a notice to the BSP, it can grant no relief; second, where the fraudulent assignment
is coupled with a notice of fraud to the BSP, it will make a notation against the assignment and require the owner and the holder to substantiate their
claims; and third, where the case does not fall on either of the first two situations, the BSP will have to await action on the assignment pending
settlement of the case, whether by agreement or by court order.

The PDBs case cannot fall under the first two situations. With particular regard to the second situation, CB Circular No. 28 requires that the conflict must
be between an "owner" and a "holder," for the BSP to exercise its limited jurisdiction to resolve conflicting claims; and the word "owner" here refers to the
registered owner giving notice of the fraud to the BSP. The PDB, however, is not the registered owner nor is it in possession (holder) of the CB
bills.67 Consequently, the PDBs case can only falls under the third situation which leaves the RTC, as a court of general jurisdiction, with the authority to
resolve the issue of ownership of a registered bond (the CB bills) not falling in either of the first two situations.
The BOC asserts that the policy consideration supportive of its interpretation of CB Circular No. 28 is to have a reliable system to protect the registered
owner; should he file a notice with the BSP about a fraudulent assignment of certain CB bills, the BSP simply has to look at its books to determine who is
the owner of the CB bills fraudulently assigned. Since it is only the registered owner who complied with the BSPs requirement of recording an
assignment in the BSPs books, then "the protective mantle of administrative proceedings" should necessarily benefit him only, without extending the
same benefit to those who chose to ignore the Circulars requirement, like the PDB. 68
Assuming arguendo that the PDBs case falls under the second situation i.e., the BSP has jurisdiction to resolve the issue of ownership of the CB bills
the more recent CB Circular No. 769-80 (Rules and Regulations Governing Central Bank Certificates of Indebtedness) already superseded CB
Circular No. 28, and, in particular, effectively amended Section 10 (d) 4 of CB Circular No. 28. The pertinent provisions of CB Circular No. 769-80 read:
Assignment Affected by Fraud. Any assignment for transfer of ownership of registered certificate obtained through fraudulent representation if honored
by the Central Bank or any of its authorized service agencies shall not make the Central Bank or agency liable therefore unless it has previous formal
notice of the fraud. The Central Bank, upon notice under oath that the assignment was secured through fraudulent means, shall immediately issue and
circularize a "stop order" against the transfer, exchange, redemption of the Certificate including the payment of interest coupons. The Central Bank or
service agency concerned shall continue to withhold action on the certificate until such time that the conflicting claims have been finally settled either by
amicable settlement between the parties or by order of the Court.
Unlike CB Circular No. 28, CB Circular No. 769-80 limited the BSPs authority to the mere issuance and circularization of a "stop order" against the
transfer, exchange and redemption upon sworn notice of a fraudulent assignment. Under this Circular, the BSP shall only continue to withhold action
until the dispute is ended by an amicable settlement or by judicial determination. Given the more passive stance of the BSP the very agency tasked to
enforce the circulars involved - under CB Circular No. 769-80, the RTCs dismissal of the BOCs counterclaims is palpably erroneous.
Lastly, since Nuquis office (Government Securities Department) had already been abolished, 69 it can no longer adjudicate the dispute under the second
situation covered by CB Circular No. 28. The abolition of Nuquis office is not only consistent with the BSPs Charter but, more importantly, with CB
Circular No. 769-80, which removed the BSPs adjudicative authority over fraudulent assignments.
THE PDBS COMMENT
The PDB claims that jurisdiction is determined by the allegations in the complaint/petition and not by the defenses set up in the answer.70 In filing the
petition with the RTC, the PDB merely seeks to compel the BSP to determine, pursuant to CB Circular No. 28, the party legally entitled to the proceeds
of the subject CB bills, which, as the PDB alleged, have been transferred through fraudulent representations an allegation which properly recognized
the BSPs jurisdiction to resolve conflicting claims of ownership over the CB bills.
The PDB adds that under the doctrine of primary jurisdiction, courts should refrain from determining a controversy involving a question whose resolution
demands the exercise of sound administrative discretion. In the present case, the BSPs special knowledge and experience in resolving disputes on
securities, whose assignment and trading are governed by the BSPs rules, should be upheld.
The PDB counters that the BOCs tri-fold interpretation of Section 10 (d) 4 of CB Circular No. 28 sanctions split jurisdiction which is not favored;but even
this tri-fold interpretation which, in the second situation, limits the meaning of the "owner" to the registered owner is flawed. Section 10 (d) 4 aims to
protect not just the registered owner but anyone who has been deprived of his bond by fraudulent representation in order to deter fraud in the secondary
trading of government securities.
The PDB asserts that the existence of CB Circular No. 769-80 or the abolition of Nuquis office does not result in depriving the BSP of its jurisdiction:
first, CB Circular No. 769-80 expressly provides that CB Circular No. 28 shall have suppletory application to CB Circular No. 769-80; and second, the
BSP can always designate an office to resolve the PDBs claim over the CB bills.
Lastly, the PDB argues that even assuming that the RTC has jurisdiction to resolve the issue of ownership of the CB bills, the RTC has not acquired
jurisdiction over the BOCs so-called "compulsory" counterclaims (which in truth is merely "permissive") because of the BOCs failure to pay the
appropriate docket fees. These counterclaims should, therefore, be dismissed and expunged from the record.
THE COURTS RULING
We grant the petitions.
At the outset, we note that the parties have not raised the validity of either CB Circular No. 28 or CB Circular No. 769-80 as an issue. What the parties
largely contest is the applicable circular in case of an allegedly fraudulently assigned CB bill. The applicable circular, in turn, is determinative of the
proper remedy available to the PDB and/or the BOC as claimants to the proceeds of the subject CB bills.
Indisputably, at the time the PDB supposedly invoked the jurisdiction of the BSP in 1994 (by requesting for the annotation of its claim over the subject
CB bills in the BSPs books), CB Circular No. 769-80 has long been in effect. Therefore, the parties respective interpretations of the provision of Section
10 (d) 4 of CB Circular No. 28 do not have any significance unless it is first established that that Circular governs the resolution of their conflicting claims
of ownership. This conclusion is important, given the supposed repeal or modification of Section 10 (d) 4 of CB Circular No. 28 by the following
provisions of CB Circular No. 769-80:

ARTICLE XI
SUPPLEMENTAL RULES
Section 1. Central Bank Circular No. 28 The provisions of Central Bank Circular No. 28 shall have suppletory application to matters not specially
covered by these Rules.
ARTICLE XII
EFFECTIVITY
Effectivity The rules and regulations herein prescribed shall take effect upon approval by the Monetary Board, Central Bank of the Philippines, and all
circulars, memoranda, or office orders inconsistent herewith are revoked or modified accordingly. (Emphases added)
We agree with the PDB that in view of CB Circular No. 28s suppletory application, an attempt to harmonize the apparently conflicting provisions is a
prerequisite before one may possibly conclude that an amendment or a repeal exists.71 Interestingly, however, even the PDB itself failed to submit an
interpretation based on its own position of harmonization.
The repealing clause of CB Circular No. 769-80 obviously did not expressly repeal CB Circular No. 28; in fact, it even provided for the suppletory
application of CB Circular No. 28 on "matters not specially covered by" CB Circular No. 769-80. While no express repeal exists, the intent of CB Circular
No. 769-80 to operate as an implied repeal,72 or at least to amend earlier CB circulars, is supported by its text "revoking" or "modif[ying" "all circulars"
which are inconsistent with its terms.
At the outset, we stress that none of the parties disputes that the subject CB bills fall within the category of a certificate or evidence of indebtedness and
that these were issued by the Central Bank, now the BSP. Thus, even without resorting to statutory construction aids, matters involving the subject CB
bills should necessarily be governed by CB Circular No. 769-80. Even granting, however, that reliance on CB Circular No. 769-80 alone is not enough,
we find that CB Circular No. 769-80 impliedly repeals CB Circular No. 28.
An implied repeal transpires when a substantial conflict exists between the new and the prior laws. In the absence of an express repeal, a subsequent
law cannot be construed as repealing a prior law unless an irreconcilable inconsistency and repugnancy exist in the terms of the new and the old
laws.73 Repeal by implication is not favored, unless manifestly intended by the legislature, or unless it is convincingly and unambiguously demonstrated,
that the laws or orders are clearly repugnant and patently inconsistent with one another so that they cannot co-exist; the legislature is presumed to know
the existing law and would express a repeal if one is intended.74
There are two instances of implied repeal. One takes place when the provisions in the two acts on the same subject matter are irreconcilably
contradictory, in which case, the later act, to the extent of the conflict, constitutes an implied repeal of the earlier one. The other occurs when the later act
covers the whole subject of the earlier one and is clearly intended as a substitute; thus, it will operate to repeal the earlier law.75
A general reading of the two circulars shows that the second instance of implied repeal is present in this case. CB Circular No. 28, entitled "Regulations
Governing Open Market Operations, Stabilization of Securities Market, Issue, Servicing and Redemption of Public Debt," is a regulation governing the
servicing and redemption of public debt, including the issue, inscription, registration, transfer, payment and replacement of bonds and securities
representing the public debt.76 On the other hand, CB Circular No. 769-80, entitled "Rules and Regulations Governing Central Bank Certificate of
Indebtedness," is the governing regulation on matters77 (i) involving certificate of indebtedness78 issued by the Central Bank itself and (ii) which are
similarly covered by CB Circular No. 28.
The CB Monetary Board issued CB Circular No. 28 to regulate the servicing and redemption of public debt, pursuant to Section 124 (now Section 119 of
Republic Act R.A. No. 7653) of the old Central Bank law79 which provides that "the servicing and redemption of the public debt shall also be effected
through the BangkoSentral." However, even as R.A. No. 7653 continued to recognize this role by the BSP, the law required a phase-out of all fiscal
agency functions by the BSP, including Section 119 of R.A. No. 7653.
In other words, even if CB Circular No. 28 applies broadly to both government-issued bonds and securities and Central Bank-issued evidence of
indebtedness, given the present state of law, CB Circular No. 28 and CB Circular No. 769-80 now operate on the same subject Central Bank-issued
evidence of indebtedness. Under Section 1, Article XI of CB Circular No. 769-80, the continued relevance and application of CB Circular No. 28 would
depend on the need to supplement any deficiency or silence in CB Circular No. 769-80 on a particular matter.
In the present case, both CB Circular No. 28 and CB Circular No. 769-80 provide the BSP with a course of action in case of an allegedly fraudulently
assigned certificate of indebtedness. Under CB Circular No. 28, in case of fraudulent assignments, the BSP would have to "call upon the owner and the
person presenting the bond to substantiate their respective claims" and, from there, determine who has a better right over the registered bond. On the
other hand, under CB Circular No. 769-80, the BSP shall merely "issue and circularize a stop order against the transfer, exchange, redemption of the
[registered] certificate" without any adjudicative function (which is the precise root of the present controversy). As the two circulars stand, the patent
irreconcilability of these two provisions does not require elaboration. Section 5, Article V of CB Circular No. 769-80 inescapably repealed Section 10 (d) 4
of CB Circular No. 28.
The issue of BSPs jurisdiction, lay hidden
On that note, the Court could have written finis to the present controversy by simply sustaining the BSPs hands-off approach to the PDBs problem
under CB Circular No. 769-80. However, the jurisdictional provision of CB Circular No. 769-80 itself, in relation to CB Circular No. 28, on the matter of
fraudulent assignment, has given rise to a question of jurisdiction - the core question of law involved in these petitions - which the Court cannot just treat
sub-silencio.

Broadly speaking, jurisdiction is the legal power or authority to hear and determine a cause.80 In the exercise of judicial or quasi-judicial power, it refers to
the authority of a court to hear and decide a case.81 In the context of these petitions, we hark back to the basic principles governing the question of
jurisdiction over the subject matter.
First, jurisdiction over the subject matter is determined only by the Constitution and by law.82 As a matter of substantive law, procedural rules alone can
confer no jurisdiction to courts or administrative agencies.83 In fact, an administrative agency, acting in its quasi-judicial capacity, is a tribunal of limited
jurisdiction and, as such, could wield only such powers that are specifically granted to it by the enabling statutes. In contrast, an RTC is a court of
general jurisdiction, i.e., it has jurisdiction over cases whose subject matter does not fall within the exclusive original jurisdiction of any court, tribunal or
body exercising judicial or quasi-judicial functions.84
Second, jurisdiction over the subject matter is determined not by the pleas set up by the defendant in his answer 85but by the allegations in the
complaint,86 irrespective of whether the plaintiff is entitled to favorable judgment on the basis of his assertions.87 The reason is that the complaint is
supposed to contain a concise statement of the ultimate facts constituting the plaintiff's causes of action. 88
Third, jurisdiction is determined by the law in force at the time of the filing of the complaint. 89
Parenthetically, the Court observes that none of the parties ever raised the issue of whether the BSP can simply disown its jurisdiction, assuming it has,
by the simple expedient of promulgating a new circular (specially applicable to a certificate of indebtedness issued by the BSP itself), inconsistent with
an old circular, assertive of its limited jurisdiction over ownership issues arising from fraudulent assignments of a certificate of indebtedness. The PDB, in
particular, relied solely and heavily on CB Circular No. 28.
In light of the above principles pointing to jurisdiction as a matter of substantive law, the provisions of the law itself that gave CB Circular 769-80 its life
and jurisdiction must be examined.
The Philippine Central Bank
On January 3, 1949, Congress created the Central Bank of the Philippines (Central Bank) as a corporate body with the primary objective of (i)
maintaining the internal and external monetary stability in the Philippines; and (ii) preserving the international value and the convertibility of the peso. 90 In
line with these broad objectives, the Central Bank was empowered to issue rules and regulations "necessary for the effective discharge of the
responsibilities and exercise of the powers assigned to the Monetary Board and to the Central Bank." 91Specifically, the Central Bank is authorized to
organize (other) departments for the efficient conduct of its business and whose powers and duties "shall be determined by the Monetary Board, within
the authority granted to the Board and the Central Bank"92 under its original charter.
With the 1973 Constitution, the then Central Bank was constitutionally made as the countrys central monetary authority until such time that
Congress93 shall have established a central bank. The 1987 Constitution continued to recognize this function of the then Central Bank until Congress,
pursuant to the Constitution, created a new central monetary authority which later came to be known as the BangkoSentralngPilipinas.
Under the New Central Bank Act (R.A. No. 7653),94 the BSP is given the responsibility of providing policy directions in the areas of money, banking and
credit; it is given, too, the primary objective of maintaining price stability, conducive to a balanced and sustainable growth of the economy, and of
promoting and maintaining monetary stability and convertibility of the peso.95
The Constitution expressly grants the BSP, as the countrys central monetary authority, the power of supervision over the operation of banks, while
leaving with Congress the authority to define the BSPs regulatory powers over the operations of finance companies and other institutions performing
similar functions. Under R.A. No. 7653, the BSPs powers and functions include (i) supervision over the operation of banks; (ii) regulation of operations
of finance companies and non-bank financial institutions performing quasi banking functions; (iii) sole power and authority to issue currency within the
Philippine territory; (iv) engaging in foreign exchange transactions; (v) making rediscounts, discounts, loans and advances to banking and other financial
institutions to influence the volume of credit consistent with the objective of achieving price stability; (vi) engaging in open market operations; and (vii)
acting as banker and financial advisor of the government.1wphi1
On the BSPs power of supervision over the operation of banks, Section 4 of R.A. No. 8791 (The General Banking Law of 2000) elaborates as follows:
CHAPTER II
AUTHORITY OF THE BANGKO SENTRAL
SECTION 4.Supervisory Powers. The operations and activities of banks shall be subject to supervision of the BangkoSentral. "Supervision" shall
include the following:
4.1. The issuance of rules of conduct or the establishment of standards of operation for uniform application to all institutions or functions
covered, taking into consideration the distinctive character of the operations of institutions and the substantive similarities of specific functions
to which such rules, modes or standards are to be applied;
4.2. The conduct of examination to determine compliance with laws and regulations if the circumstances so warrant as determined by the
Monetary Board;
4.3. Overseeing to ascertain that laws and regulations are complied with;
4.4. Regular investigation which shall not be oftener than once a year from the last date of examination to determine whether an institution is
conducting its business on a safe or sound basis: Provided, That the deficiencies/irregularities found by or discovered by an audit shall be
immediately addressed;

4.5. Inquiring into the solvency and liquidity of the institution (2-D); or
4.6. Enforcing prompt corrective action. (n)
The BangkoSentral shall also have supervision over the operations of and exercise regulatory powers over quasi-banks, trust entities and other financial
institutions which under special laws are subject to BangkoSentral supervision. (2-Ca)
For the purposes of this Act, "quasi-banks" shall refer to entities engaged in the borrowing of funds through the issuance, endorsement or assignment
with recourse or acceptance of deposit substitutes as defined in Section 95 of Republic Act No. 7653 (hereafter the "New Central Bank Act") for
purposes of relending or purchasing of receivables and other obligations. [emphasis ours]
While this provision empowers the BSP to oversee the operations and activities of banks to "ascertain that laws and regulations are complied with," the
existence of the BSPs jurisdiction in the present dispute cannot rely on this provision. The fact remains that the BSP already made known to the PDB its
unfavorable position on the latters claim of fraudulent assignment due to the latters own failure to comply 96 with existing regulations:
In this connection, Section 10 (b) 2 also requires that a "Detached assignment will be recognized or accepted only upon previous notice to the Central
Bank x xx." In fact, in a memo dated September 23, 1991 xxx then CB Governor Jose L. Cuisia advised all banks (including PDB) xxx as follows:
In view recurring incidents ostensibly disregarding certain provisions of CB circular No. 28 (as amended) covering assignments of registered bonds, all
banks and all concerned are enjoined to observe strictly the pertinent provisions of said CB Circular as hereunder quoted:
x xxx
Under Section 10.b. (2)
x xx Detached assignment will be recognized or accepted only upon previous notice to the Central Bank and its use is authorized only under the
following circumstances:
(a) xxx
(b) xxx
(c) assignments of treasury notes and certificates of indebtedness in registered form which are not provided at the back thereof with
assignment form.
(d) Assignment of securities which have changed ownership several times.
(e) xxx
Non-compliance herewith will constitute a basis for non-action or withholding of action on redemption/payment of interest coupons/transfer transactions
or denominational exchange that may be directly affected thereby. [Boldfacing supplied]
Again, the books of the BSP do not show that the supposed assignment of subject CB Bills was ever recorded in the BSPs books. [Boldfacing supplied]
However, the PDB faults the BSP for not recording the assignment of the CB bills in the PDBs favor despite the fact that the PDB already requested the
BSP to record its assignment in the BSPs books as early as June 30, 1994.97
The PDBs claim is not accurate. What the PDB requested the BSP on that date was not the recording of the assignment of the CB bills in its favor but
the annotation of its claim over the CB bills at the time when (i) it was no longer in possession of the CB bills, having been transferred from one entity to
another and (ii) all it has are the detached assignments, which the PDB has not shown to be compliant with Section 10 (b) 2 above-quoted. Obviously,
the PDB cannot insist that the BSP take cognizance of its plaint when the basis of the BSPs refusal under existing regulation, which the PDB is bound to
observe, is the PDBs own failure to comply therewith.
True, the BSP exercises supervisory powers (and regulatory powers) over banks (and quasi banks). The issue presented before the Court, however,
does not concern the BSPs supervisory power over banks as this power is understood under the General Banking Law. In fact, there is nothing in the
PDBs petition (even including the letters it sent to the BSP) that would support the BSPs jurisdiction outside of CB Circular No. 28, under its power of
supervision, over conflicting claims to the proceeds of the CB bills.
BSP has quasi-judicial powers over a
class of cases which does not include
the adjudication of ownership of the
CB bills in question
In United Coconut Planters Bank v. E. Ganzon, Inc.,98 the Court considered the BSP as an administrative agency,99 exercising quasi-judicial functions
through its Monetary Board. It held:

A quasi-judicial agency or body is an organ of government other than a court and other than a legislature, which affects the rights of private parties
through either adjudication or rule-making. The very definition of an administrative agency includes its being vested with quasi-judicial powers. The ever
increasing variety of powers and functions given to administrative agencies recognizes the need for the active intervention of administrative agencies in
matters calling for technical knowledge and speed in countless controversies which cannot possibly be handled by regular courts. A "quasi-judicial
function" is a term which applies to the action, discretion, etc., of public administrative officers or bodies, who are required to investigate facts, or
ascertain the existence of facts, hold hearings, and draw conclusions from them, as a basis for their official action and to exercise discretion of a judicial
nature.
Undoubtedly, the BSP Monetary Board is a quasi-judicial agency exercising quasi-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 corporate with fiscal and administrative autonomy,
mandated to provide policy directions in the areas of money, banking and credit. It has power to issue subpoena, to sue for contempt those refusing to
obey the subpoena without justifiable reason, to administer oaths and compel presentation of books, records and others, needed in its examination, to
impose fines and other sanctions and to 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 determining whether administrative sanctions should be imposed on banks and quasi-banks, which
necessarily implies that the BSP Monetary Board must conduct some form of investigation or hearing regarding the same. [citations omitted]
The BSP is not simply a corporate entity but qualifies as an administrative agency created, pursuant to constitutional mandate, 100 to carry out a particular
governmental function.101 To be able to perform its role as central monetary authority, the Constitution granted it fiscal and administrative autonomy. In
general, administrative agencies exercise powers and/or functions which may be characterized as administrative, investigatory, regulatory, quasilegislative, or quasi-judicial, or a mix of these five, as may be conferred by the Constitution or by statute. 102
While the very nature of an administrative agency and the raison d'tre for its creation 103 and proliferation dictate a grant of quasi-judicial power to it, the
matters over which it may exercise this power must find sufficient anchorage on its enabling law, either by express provision or by necessary implication.
Once found, the quasi-judicial power partakes of the nature of a limited and special jurisdiction, that is, to hear and determine a class of cases within its
peculiar competence and expertise. In other words, the provisions of the enabling statute are the yardsticks by which the Court would measure the
quantum of quasi-judicial powers an administrative agency may exercise, as defined in the enabling act of such agency.104
Scattered provisions in R.A. No. 7653 and R.A. No. 8791, inter alia, exist, conferring jurisdiction on the BSP on certain matters. 105 For instance, under
the situations contemplated under Section 36, par. 2106 (where a bank or quasi bank persists in carrying on its business in an unlawful or unsafe manner)
and Section 37107 (where the bank or its officers willfully violate the banks charter or by-laws, or the rules and regulations issued by the Monetary Board)
of R.A. No. 7653, the BSP may place an entity under receivership and/or liquidation or impose administrative sanctions upon the entity or its officers or
directors.
Among its several functions under R.A. No. 7653, the BSP is authorized to engage in open market operations and thereby "issue, place, buy and sell
freely negotiable evidences of indebtedness of the BangkoSentral" in the following manner.
SEC. 90.Principles of Open Market Operations. The open market purchases and sales of securities by the BangkoSentral shall be made exclusively in
accordance with its primary objective of achieving price stability.
x xxx
SEC. 92.Issue and Negotiation of BangkoSentral Obligations. In order to provide the BangkoSentral with effective instruments for open market
operations, the BangkoSentral may, subject to such rules and regulations as the Monetary Board may prescribe and in accordance with the principles
stated in Section 90 of this Act, issue, place, buy and sell freely negotiable evidences of indebtedness of the BangkoSentral: Provided, That issuance of
such certificates of indebtedness shall be made only in cases of extraordinary movement in price levels. Said evidences of indebtedness may be issued
directly against the international reserve of the BangkoSentral or against the securities which it has acquired under the provisions of Section 91 of this
Act, or may be issued without relation to specific types of assets of the BangkoSentral.
The Monetary Board shall determine the interest rates, maturities and other characteristics of said obligations of the BangkoSentral, and may, if it deems
it advisable, denominate the obligations in gold or foreign currencies.
Subject to the principles stated in Section 90 of this Act, the evidences of indebtedness of the BangkoSentral to which this section refers may be
acquired by the BangkoSentral before their maturity, either through purchases in the open market or through redemptions at par and by lot if the
BangkoSentral has reserved the right to make such redemptions. The evidences of indebtedness acquired or redeemed by the BangkoSentral shall not
be included among its assets, and shall be immediately retired and cancelled.108 (italics supplied; emphases ours)
The primary objective of the BSP is to maintain price stability.109 The BSP has a number of monetary policy instruments at its disposal to promote price
stability. To increase or reduce liquidity in the financial system, the BSP uses open market operations, among others. 110 Open market operation is a
monetary tool where the BSP publicly buys or sells government securities111 from (or to) banks and financial institutions in order to expand or contract the
supply of money. By controlling the money supply, the BSP is able to exert some influence on the prices of goods and services and achieve its inflation
objectives.112
Once the issue and/or sale of a security is made, the BSP would necessarily make a determination, in accordance with its own rules, of the entity
entitled to receive the proceeds of the security upon its maturity. This determination by the BSP is an exercise of its administrative powers 113 under the
law as an incident to its power to prescribe rules and regulations governing open market operations to achieve the "primary objective of achieving price
stability."114 As a matter of necessity, too, the same rules and regulations facilitate transaction with the BSP by providing for an orderly manner of, among
others, issuing, transferring, exchanging and paying securities representing public debt.
Significantly, when competing claims of ownership over the proceeds of the securities it has issued are brought before it, the law has not given the BSP
the quasi-judicial power to resolve these competing claims as part of its power to engage in open market operations. Nothing in the BSPs charter
confers on the BSP the jurisdiction or authority to determine this kind of claims, arising out of a subsequent transfer or assignment of evidence of

indebtedness a matter that appropriately falls within the competence of courts of general jurisdiction. That the statute withholds this power from the
BSP is only consistent with the fundamental reasons for the creation of a Philippine central bank, that is, to lay down stable monetary policy and exercise
bank supervisory functions. Thus, the BSPs assumption of jurisdiction over competing claims cannot find even a stretched-out justification under its
corporate powers "to do and perform any and all things that may be necessary or proper to carry out the purposes" of R.A. No. 7653. 115
To reiterate, open market operation is a monetary policy instrument that the BSP employs, among others, to regulate the supply of money in the
economy to influence the timing, cost and availability of money and credit, as well as other financial factors, for the purpose of stabilizing the price
level.116 What the law grants the BSP is a continuing role to shape and carry out the countrys monetary policy not the authority to adjudicate competing
claims of ownership over the securities it has issued since this authority would not fall under the BSPs purposes under its charter.
While R.A. No. 7653117 empowers the BSP to conduct administrative hearings and render judgment for or against an entity under its supervisory and
regulatory powers and even authorizes the BSP Governor to "render decisions, or rulings x xx on matters regarding application or enforcement of laws
pertaining to institutions supervised by the BSP and laws pertaining to quasi-banks, as well as regulations, policies or instructions issued by the
Monetary Board," it is precisely the text of the BSPs own regulation (whose validity is not here raised as an issue) that points to the BSPs limited role in
case of an allegedly fraudulent assignment to simply (i) issuing and circularizing a "stop order" against the transfer, exchange, redemption of the
certificate of indebtedness, including the payment of interest coupons, and (ii) withholding action on the certificate.
A similar conclusion can be drawn from the BSPs administrative adjudicatory power in cases of "willful failure or refusal to comply with, or violation of,
any banking law or any order, instruction or regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor." 118 The noncompliance with the pertinent requirements under CB Circular No. 28, as amended, deprives a party from any right to demand payment from the BSP.
In other words, the grant of quasi-judicial authority to the BSP cannot possibly extend to situations which do not call for the exercise by the BSP of its
supervisory or regulatory functions over entities within its jurisdiction.119
The fact alone that the parties involved are banking institutions does not necessarily call for the exercise by the BSP of its quasi-judicial powers under
the law.120
The doctrine of primary jurisdiction
argues against BSPs purported
authority to adjudicate ownership
issues over the disputed CB bills
Given the preceding discussions, even the PDBs invocation of the doctrine of primary jurisdiction is misplaced.
In the exercise of its plenary legislative power, Congress may create administrative agencies endowed with quasi-legislative and quasi-judicial powers.
Necessarily, Congress likewise defines the limits of an agencys jurisdiction in the same manner as it defines the jurisdiction of courts. 121 As a result, it
may happen that either a court or an administrative agency has exclusive jurisdiction over a specific matter or both have concurrent jurisdiction on the
same. It may happen, too, that courts and agencies may willingly relinquish adjudicatory power that is rightfully theirs in favor of the other. One of the
instances when a court may properly defer to the adjudicatory authority of an agency is the applicability of the doctrine of primary jurisdiction. 122
As early as 1954, the Court applied the doctrine of primary jurisdiction under the following terms:
6. In the fifties, the Court taking cognizance of the move to vest jurisdiction in administrative commissions and boards the power to resolve specialized
disputes xxx ruled that Congress in requiring the Industrial Court's intervention in the resolution of labor-management controversies xxx meant such
jurisdiction to be exclusive, although it did not so expressly state in the law. The Court held that under the "sense-making and expeditious doctrine of
primary jurisdiction ... the courts cannot or will not determine a controversy involving a question which is within the jurisdiction of an administrative
tribunal, where the question demands the exercise of sound administrative discretion requiring the special knowledge, experience, and services of the
administrative tribunal to determine technical and intricate matters of fact, and a uniformity of ruling is essential to comply with the purposes of the
regulatory statute administered."123 (emphasis ours)
In Industrial Enterprises, Inc. v. Court of Appeals,124 the Court ruled that while an action for rescission of a contract between coal developers appears to
be an action cognizable by regular courts, the trial court remains to be without jurisdiction to entertain the suit since the contract sought to be rescinded
is "inextricably tied up with the right to develop coal-bearing lands and the determination of whether or not the reversion of the coal operating contract
over the subject coal blocks to [the plaintiff] would be in line with the countrys national program and objective on coal-development and over-all coalsupply-demand balance." It then applied the doctrine of primary jurisdiction
In recent years, it has been the jurisprudential trend to apply the doctrine of primary jurisdiction in many cases involving matters that demand the special
competence of administrative agencies. It may occur that the Court has jurisdiction to take cognizance of a particular case, which means that the matter
involved is also judicial in character. However, if the case is such that its determination requires the expertise, specialized skills and knowledge of the
proper administrative bodies because technical matters or intricate questions of facts are involved, then relief must first be obtained in an administrative
proceeding before a remedy will be supplied by the courts even though the matter is within the proper jurisdiction of a court. This is the doctrine of
primary jurisdiction. It applies "where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the
resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body."
Clearly, the doctrine of primary jurisdiction finds application in this case since the question of what coal areas should be exploited and developed and
which entity should be granted coal operating contracts over said areas involves a technical determination by the Bureau of Energy Development as the
administrative agency in possession of the specialized expertise to act on the matter. The Trial Court does not have the competence to decide matters
concerning activities relative to the exploration, exploitation, development and extraction of mineral resources like coal. These issues preclude an initial
judicial determination. [emphases ours]

The absence of any express or implied statutory power to adjudicate conflicting claims of ownership or entitlement to the proceeds of its certificates of
indebtedness finds complement in the similar absence of any technical matter that would call for the BSPs special expertise or competence. 125 In fact,
what the PDBs petitions bear out is essentially the nature of the transaction it had with the subsequent transferees of the subject CB bills (BOC and
Bancap) and not any matter more appropriate for special determination by the BSP or any administrative agency.
In a similar vein, it is well-settled that the interpretation given to a rule or regulation by those charged with its execution is entitled to the greatest weight
by the courts construing such rule or regulation.126 While there are exceptions127 to this rule, the PDB has not convinced us that a departure is warranted
in this case. Given the non-applicability of the doctrine of primary jurisdiction, the BSPs own position, in light of Circular No. 769-80, deserves respect
from the Court.
Ordinarily, cases involving the application of doctrine of primary jurisdiction are initiated by an action invoking the jurisdiction of a court or administrative
agency to resolve the substantive legal conflict between the parties. In this sense, the present case is quite unique since the courts jurisdiction was,
originally, invoked to compel an administrative agency (the BSP) to resolve the legal conflict of ownership over the CB bills - instead of obtaining a
judicial determination of the same dispute.
The remedy of interpleader
Based on the unique factual premise of the present case, the RTC acted correctly in initially assuming jurisdiction over the PDBs petition for mandamus,
prohibition and injunction.128 While the RTC agreed (albeit erroneously) with the PDBs view (that the BSP has jurisdiction), it, however, dismissed not
only the BOCs/the BSPs counterclaims but the PDBs petition itself as well, on the ground that it lacks jurisdiction.
This is plain error.
Not only the parties themselves, but more so the courts, are bound by the rule on non-waiver of jurisdiction. 129believes that jurisdiction over the BOCs
counterclaims and the BSPs counterclaim/crossclaim for interpleader calls for the application of the doctrine of primary jurisdiction, the allowance of the
PDBs petition even becomes imperative because courts may raise the issue of primary jurisdiction sua sponte. 130
Of the three possible options available to the RTC, the adoption of either of these two would lead the trial court into serious legal error: first, if it granted
the PDBs petition, its decision would have to be set aside on appeal because the BSP has no jurisdiction as previously discussed; and second when it
dismissed the PDBs petitions and the BOCs counterclaims on the ground that it lacks jurisdiction, the trial court seriously erred because precisely, the
resolution of the conflicting claims over the CB bills falls within its general jurisdiction.
Without emasculating its jurisdiction, the RTC could have properly dismissed the PDBs petition but on the ground that mandamus does not lie against
the BSP; but even this correct alternative is no longer plausible since the BSP, as a respondent below, already properly brought before the RTC the
remaining conflicting claims over the subject CB bills by way of a counterclaim/crossclaim for interpleader. Section 1, Rule 62 of the Rules of Court
provides when an interpleader is proper:
SECTION 1. When interpleader proper. Whenever conflicting claims upon the same subject matter are or may be made against a person who claims
no interest whatever in the subject matter, or an interest which in whole or in part is not disputed by the claimants, he may bring an action against the
conflicting claimants to compel them to interplead and litigate their several claims among themselves.
The remedy of an action of interpleader131 is designed to protect a person against double vexation in respect of a single liability.7 It requires, as an
indispensable requisite, that conflicting claims upon the same subject matter are or may be made against the stakeholder (the possessor of the subject
matter) who claims no interest whatever in the subject matter or an interest which in whole or in part is not disputed by the claimants. 132
Through this remedy, the stakeholder can join all competing claimants in a single proceeding to determine conflicting claims without exposing the
stakeholder to the possibility of having to pay more than once on a single liability.133
When the court orders that the claimants litigate among themselves, in reality a new action arises, 134 where the claims of the interpleaders themselves
are brought to the fore, the stakeholder as plaintiff is relegated merely to the role of initiating the suit. In short, the remedy of interpleader, when proper,
merely provides an avenue for the conflicting claims on the same subject matter to be threshed out in an action. Section 2 of Rule 62 provides:
SEC. 2.Order. Upon the filing of the complaint, the court shall issue an order requiring the conflicting claimants to interplead with one another. If the
interests of justice so require, the court may direct in such order that the subject matter be paid or delivered to the court.
This is precisely what the RTC did by granting the BSPs motion to interplead. The PDB itself "agreed that the various claimants should now interplead."
Thus, the PDB and the BOC subsequently entered into two separate escrow agreements, covering the CB bills, and submitted them to the RTC for
approval.
In granting the BSPs motion, the RTC acted on the correct premise that it has jurisdiction to resolve the parties conflicting claims over the CB bills consistent with the rules and the parties conduct - and accordingly required the BOC to amend its answer and for the PDB to comment thereon.
Suddenly, however, the PDB made an about-face and questioned the jurisdiction of the RTC. Swayed by the PDBs argument, the RTC dismissed even
the PDBs petition - which means that it did not actually compel the BSP to resolve the BOCs and the PDBs claims.
Without the motion to interplead and the order granting it, the RTC could only dismiss the PDBs petition since it is the RTC which has jurisdiction to
resolve the parties conflicting claims not the BSP. Given that the motion to interplead has been actually filed, the RTC could not have really granted
the relief originally sought in the PDBs petition since the RTCs order granting the BSPs motion to interplead - to which the PDB in fact acquiesced into effectively resulted in the dismissal of the PDBs petition. This is not altered by the fact that the PDB additionally prayed in its petition for damages,

attorneys fees and costs of suit "against the public respondents" because the grant of the order to interplead effectively sustained the propriety of the
BSPs resort to this procedural device.
Interpleader
1. as a special civil action
What is quite unique in this case is that the BSP did not initiate the interpleader suit through an original complaint but through its Answer. This
circumstance becomes understandable if it is considered that insofar as the BSP is concerned, the PDB does not possess any right to have its claim
recorded in the BSPs books; consequently, the PDB cannot properly be considered even as a potential claimant to the proceeds of the CB bills upon
maturity. Thus, the interpleader was only an alternative position, made only in the BSPs Answer.135
The remedy of interpleader, as a special civil action, is primarily governed by the specific provisions in Rule 62 of the Rules of Court and secondarily by
the provisions applicable to ordinary civil actions.136 Indeed, Rule 62 does not expressly authorize the filing of a complaint-in-interpleader as part of,
although separate and independent from, the answer. Similarly, Section 5, Rule 6, in relation to Section 1, Rule 9 of the Rules of Court 137 does not
include a complaint-in-interpleader as a claim,138 a form of defense,139 or as an objection that a defendant may be allowed to put up in his answer or in a
motion to dismiss. This does not mean, however, that the BSPs "counter-complaint/cross-claim for interpleader" runs counter to general procedures.
Apart from a pleading,140 the rules141 allow a party to seek an affirmative relief from the court through the procedural device of a motion. While captioned
"Answer with counter complaint/cross-claim for interpleader," the RTC understood this as in the nature of a motion, 142 seeking relief which essentially
consists in an order for the conflicting claimants to litigate with each other so that "payment is made to the rightful or legitimate owner" 143 of the subject
CB bills.
The rules define a "civil action" as "one by which a party sues another for the enforcement or protection of a right, or the prevention or redress of a
wrong." Interpleader may be considered as a stakeholders remedy to prevent a wrong, that is, from making payment to one not entitled to it, thereby
rendering itself vulnerable to lawsuit/s from those legally entitled to payment.
Interpleader is a civil action made special by the existence of particular rules to govern the uniqueness of its application and operation. Under Section 2,
Rule 6 of the Rules of Court, governing ordinary civil actions, a partys claim is asserted "in a complaint, counterclaim, cross-claim, third (fourth, etc.)party complaint, or complaint-in-intervention." In an interpleader suit, however, a claim is not required to be contained in any of these pleadings but in the
answer-(of the conflicting claimants)-in-interpleader. This claim is different from the counter-claim (or cross-claim, third party-complaint) which is
separately allowed under Section 5, par. 2 of Rule 62.
2. the payment of docket fees covering BOCs counterclaim
The PDB argues that, even assuming that the RTC has jurisdiction over the issue of ownership of the CB bills, the BOCs failure to pay the appropriate
docket fees prevents the RTC from acquiring jurisdiction over the BOCs "counterclaims."
We disagree with the PDB.
To reiterate and recall, the order granting the "PDBs motion to interplead," already resulted in the dismissal of the PDBs petition. The same order
required the BOC to amend its answer and for the conflicting claimants to comment, presumably to conform to the nature of an answer-in interpleader.
Perhaps, by reason of the BOCs denomination of its claim as a "compulsory counterclaim" and the PDBs failure to fully appreciate the RTCs order
granting the "BSPs motion for interpleader" (with the PDBs conformity), the PDB mistakenly treated the BOCs claim as a "permissive counterclaim"
which necessitates the payment of docket fees.
As the preceding discussions would show, however, the BOCs "claim" - i.e., its assertion of ownership over the CB bills is in reality just that, a "claim"
against the stakeholder and not as a "counterclaim,"144 whether compulsory145 or permissive. It is only the BOCs alternative prayer (for the PDB to
deliver to the BOC, as the buyer in the April 15 transaction and the ultimate successor-in-interest of the buyer in the April 19 transaction, either the
original subjects of the sales or the value thereof plus whatever income that may have been earned pendente lite) and its prayer for damages that are
obviously compulsory counterclaims against the PDB and, therefore, does not require payment of docket fees.146
The PDB takes a contrary position through its insistence that a compulsory counterclaim should be one where the presence of third parties, of whom the
court cannot acquire jurisdiction, is not required. It reasons out that since the RCBC and All Asia (the intervening holders of the CB bills) have already
been dropped from the case, then the BOCs counterclaim must only be permissive in nature and the BOC should have paid the correct docket fees.
We see no reason to belabor this claim. Even if we gloss over the PDBs own conformity to the dropping of these entities as parties, the BOC correctly
argues that a remedy is provided under the Rules. Section 12, Rule 6 of the Rules of Court reads:
SEC. 12.Bringing new parties. When the presence of parties other than those to the original action is required for the granting of complete relief in the
determination of a counterclaim or cross-claim, the court shall order them to be brought in as defendants, if jurisdiction over them can be obtained.
Even then, the strict characterization of the BOCs counterclaim is no longer material in disposing of the PDBs argument based on non-payment of
docket fees.
When an action is filed in court, the complaint must be accompanied by the payment of the requisite docket and filing fees by the party seeking
affirmative relief from the court. It is the filing of the complaint or appropriate initiatory pleading, accompanied by the payment of the prescribed docket
fee, that vests a trial court with jurisdiction over the claim or the nature of the action.147 However, the non-payment of the docket fee at the time of filing

does not automatically cause the dismissal of the case, so long as the fee is paid within the applicable prescriptive or reglementary period, especially
when the claimant demonstrates a willingness to abide by the rules prescribing such payment.148
In the present case, considering the lack of a clear guideline on the payment of docket fee by the claimants in an interpleader suit, compounded by the
unusual manner in which the interpleader suit was initiated and the circumstances surrounding it, we surely cannot deduce from the BOCs mere failure
to specify in its prayer the total amount of the CB bills it lays claim to (or the value of the subjects of the sales in the April 15 and April 19 transactions, in
its alternative prayer) an intention to defraud the government that would warrant the dismissal of its claim. 149
At any rate, regardless of the nature of the BOCs "counterclaims," for purposes of payment of filing fees, both the BOC and the PDB, properly as
defendants-in-interpleader, must be assessed the payment of the correct docket fee arising from their respective claims. The seminal case of Sun
Insurance Office, Ltd. v. Judge Asuncion150provides us guidance in the payment of docket fees, to wit:
1. x xx Where the filing of the initiatory pleading is not accompanied by payment of the docket fee, the court may allow payment of the fee
within a reasonable time but in no case beyond the applicable prescriptive or reglementary period.
2. The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which shall not be considered filed until and
unless the filing fee prescribed therefor is paid. The court may also allow payment of said fee within a reasonable time but also in no case
beyond its applicable prescriptive or reglementary period. [underscoring ours]
This must be the rule considering that Section 7, Rule 62 of which reads:
SEC. 7.Docket and other lawful fees, costs and litigation expenses as liens. The docket and other lawful fees paid by the party who filed a complaint
under this Rule, as well as the costs and litigation expenses, shall constitute a lien or charge upon the subject matter of the action, unless the court shall
order otherwise.
only pertain to the docket and lawful fees to be paid by the one who initiated the interpleader suit, and who, under the Rules, actually "claims no interest
whatever in the subject matter." By constituting a lien on the subject matter of the action, Section 7 in effect only aims to actually compensate the
complainant-in-interpleader, who happens to be the stakeholder unfortunate enough to get caught in a legal crossfire between two or more conflicting
claimants, for the faultless trouble it found itself into. Since the defendants-in-interpleader are actually the ones who make a claim - only that it was
extraordinarily done through the procedural device of interpleader - then to them devolves the duty to pay the docket fees prescribed under Rule 141 of
the Rules of Court, as amended.151
The importance of paying the correct amount of docket fee cannot be overemphasized:
The matter of payment of docket fees is not a mere triviality. These fees are necessary to defray court expenses in the handling of cases. Consequently,
in order to avoid tremendous losses to the judiciary, and to the government as well, the payment of docket fees cannot be made dependent on the
outcome of the case, except when the claimant is a pauper-litigant. 152
WHEREFORE, premises considered the consolidated PETITIONS are GRANTED. The Planters Development Bank is hereby REQUIRED to file with
the Regional Trial Court its comment or answer-in-interpleader to Bank of Commerces Amended Consolidated Answer with Compulsory Counterclaim,
as previously ordered by the Regional Trial Court. The Regional Trial Court of Makati City, Branch 143, is hereby ORDERED to assess the docket fees
due from Planters Development Bank and Bank of Commerce and order their payment, and to resolve with DELIBERATE DISPATCH the parties
conflicting claims of ownership over the proceeds of the Central Bank bills.
The Clerk of Court of the Regional Trial Court of Makati City, Branch 143, or his duly authorized representative is hereby ORDERED to assess and
collect the appropriate amount of docket fees separately due the Bank of Commerce and Planters Development Bank as conflicting claimants in
BangkoSentralngPilipinas interpleader suit, in accordance with this decision.
SO ORDERED.

PHILIPPINE DEPOSIT
INSURANCE CORPORATION
(PDIC),

G.R. No. 176438

Present:
Petitioner,

- versus -

PHILIPPINE COUNTRYSIDE
RURAL BANK, INC., RURAL
BANK OF CARMEN (CEBU),
INC., BANK OF EAST ASIA(MINGLANILLA, CEBU), INC.,
and PILIPINO RURAL BANK (CEBU), INC.,
Respondents.

CARPIO, J., Chairperson,

NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.

Promulgated:
January 24, 2011

x ----------------------------------------------------------------------------------------x
DECISION
MENDOZA, J.:

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 18, 2006 Decision of the Court of Appeals-Cebu (CA-Cebu), which granted the petition for injunction filed by respondents Philippine
Countryside Rural Bank, Inc. (PCRBI), Rural Bank of Carmen (Cebu), Inc. (RBCI), Bank of East Asia (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 reads:
WHEREFORE, in view of all the foregoing premises, the petition for injunction is hereby GRANTED. The respondent
PDIC is restrained from further conducting investigations or examination on petitioners-banks without the requisite approval from the
Monetary Board.
SO ORDERED.[1]
In a resolution dated January 25, 2007, the CA-Cebu denied petitioners motion for reconsideration for lack of merit. [2]
THE FACTS
On March 9, 2005, the Board of Directors of the PDIC (PDIC Board) adopted Resolution No. 2005-03-032[3] approving the conduct of an
investigation, in accordance with Section 9(b-1) of Republic Act (R.A.) No. 3591, as amended, on the basis of the Reports of Examination of the
BangkoSentralngPilipinas (BSP) on ten (10) banks, four (4) of which are respondents in this petition for review. The said resolution also created a
Special Investigation Team to conduct the said investigation, with the authority to administer oaths, to examine, take and preserve testimony of any
person relating to the subject of the investigation, and to examine pertinent bank records.
On May 25, 2005, the PDIC Board adopted another resolution, Resolution No. 2005-05-056, [4] approving the conduct of an investigation on
PCRBI based on a Complaint-Affidavit filed by a corporate depositor, the Philippine School of Entrepreneurship and Management (PSEMI) through its
president, Jacinto L. Jamero.
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 Investigation[5] to the President or The Highest Ranking Officer of PCRBI.
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.
[6]

According to PDIC, in the course of its investigation, PCRBI was found to have granted loans to certain individuals, which were settled by way
of dacion of properties. These properties, however, had already been previously foreclosed and consolidated under the names of PRBI, BEAI and
RBCI.[7]
On June 15, 2005, PDIC issued similar notices of investigation to PRBI [8] and BEAI.[9]

The notices stated that the investigation was to be conducted pursuant to Section 9 (b-1) of the PDIC Charter and upon authority of PDIC Board
Resolution No. 2005-03-032 authorizing the twelve (12) named representatives of PDIC to conduct the investigation. [10]
The investigation was sought because the Banks were found to be among the ten (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, that the Legacy Banks were commonly owned and/or
controlled by Legacy Plans Inc. (now Legacy Consolidated Plans, Inc.), and CelsoGancaycodelos Angles, Jr. and his family.[11]
The notice of investigation was served on PRBI the next day, June 16, 2005.[12]
On June 25, 2005, a separate notice of investigation [13] was served on RBCI. The latter provided the PDIC Investigation Team with certified copies
of the loan documents they had requested, until its president received an order directing him not to allow the investigation. [14]
Subsequently, PRBI and BEAI refused entry to their bank premises and access to their records and documents by the PDIC Investigation Team,
upon advice of their respective counsels.[15]
On June 16 and 17, 2005, Atty. Victoria G. Noel (Atty. Noel) of the Tiongson&Antenor Cruz Law Office sent letters to the PDIC [16] informing it of her
legal advice to PCRBI and BEAI not to submit to PDIC investigation on the ground that its investigatory power pursuant to Section 9(b-1) of R.A. No.
3591, as amended (An Act Establishing The Philippine Deposit Insurance Corporation, Defining Its Powers And Duties And For Other Purposes), cannot
be differentiated from the examination powers accorded to PDIC under Section 8, paragraph 8 of the same law, under which, prior approval from the
Monetary Board is required.
On June 17, 2005, PDIC General Counsel Romeo M. Mendoza sent a reply to Atty. Noel stating that PDICs investigation power, as distinguished
from the examination power of the PDIC under Section 8 of the same law, does not need prior approval of the Monetary Board. [17] PDIC then urged
PRBI and BEAI not to impede the conduct of PDICs investigation as the same constitutes a violation of the PDIC Charter for which PRBI and BEAI
may be held criminally and/or administratively liable.[18]
On June 27 and 28, 2005, the Banks, through counsel, sought further clarification from PDIC on its source of authority to conduct the impending
investigations and requested that PDIC refrain from proceeding with the investigations.[19]
Simultaneously, the Banks wrote to the Monetary Board requesting a clarification on the parameters of PDICs power of investigation/examination
over the Banks and for an issuance of a directive to PDIC not to pursue the investigations pending the requested clarification. [20]
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] PRBI and BEAI replied that letters of clarification had been sent to PDIC and the Monetary Board. [22] Pending action on such
requests, PDIC was requested to refrain from proceeding with the investigation.[23]
Notwithstanding, on July 11, 2005, the Banks received a letter, dated July 8, 2005, from the PDIC General Counsel reiterating its position that prior
Monetary Board approval was not a pre-requisite to PDICs exercise of its investigative power.[24]
Not in conformity, on July 28, 2005, the Banks filed a Petition for Declaratory Relief with a Prayer for the Issuance of a TRO and/or Writ of
Preliminary Injunction (RTC Petition) before the Regional Trial Court of Makati (RTC-Makati) which was docketed as Civil Case No. 05-697.[25]
In the RTC Petition, the Banks prayed for a judgment interpreting Section 9(b-1) of the PDIC Charter, as amended, to require prior Monetary
Board approval before PDIC could exercise its investigation/examination power over the Banks.[26]
PDIC filed a motion to dismiss alleging that the RTC had no jurisdiction over the said petition since a breach had already been committed by the
Banks when they received the notices of investigation, and because PDIC need not secure prior Monetary Board approval since examination and
investigation are two different terms.[27]
Later, the Banks withdrew their application for a temporary restraining order (TRO) reasoning that lower courts cannot issue injunctions against
PDIC. Thus, the Banks instituted a petition for injunction with application for TRO and/or Preliminary Injunction(CA-Manila petition) before the Court of
Appeals-Manila (CA-Manila). The case was docketed as CA-G.R. SP No. 91038.[28]
Even before the CA-Manila could rule on the application for a TRO and/or writ of 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 the trial court. [29]

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
appeal[31] which they later withdrew on February 28, 2006.[32]
In view of the dismissal of the RTC-Makati petition, the CA-Manila dismissed the petition for injunction for being moot and academic. In its
Decision, dated February 1, 2006,[33] the CA-Manila wrote:
What remained for the petitioners to do was to litigate over the breach or violation by ordinary action, as the circumstances
ensuing from the breach or violation warrant. The ordinary action may either be in the same case, if the RTC permitted 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 file another action in the proper court (e.g. including the Court of Appeals, should injunction be
among the reliefs to be sought) upon some cause of action that has arisen from the breach or violation. [34]

Thereafter, on March 14, 2006, the Banks filed their Petition for Injunction with Prayer for Preliminary Injunction [35] (CA-Cebu Petition) with the
CA-Cebu (CA-Cebu).
On March 15, 2006, the CA-Cebu issued a resolution granting the Banks application for a TRO. This enjoined the PDIC, its representatives
or agents or any other persons or agency assisting them or acting for and in their behalf from conducting examinations/investigations on the Banks head
and branch offices without securing the requisite approval from the Monetary Board of BSP.[36]
During the pendency of the CA-Cebu petition, PDIC filed with this Court a Petition for Certiorari, Prohibition and Mandamus with Prayer for
Issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction under Rule 65 docketed as G.R. No. 173370. [37] It alleged that the CACebu committed grave abuse of discretion amounting to lack or excess of jurisdiction in taking cognizance of the Banks petition, and in issuing a TRO
and a writ of preliminary injunction.[38]
On July 31, 2006, this Court issued a resolution dismissing the petition for certiorari in G.R. No. 173370. The Resolution reads:
Considering the allegations, issues and arguments adduced in the petition for certiorari, prohibition and mandamus with
prayer for preliminary injunction and/or restraining order dated 19 July 2006, the Court resolves to DISMISS the petition for failure to
sufficiently show that the questioned resolution of the Court of Appeals is tainted with grave abuse of discretion. Moreover, the
petition failed to conform with Rule 65 and other related provisions of the 1997 Rules of Civil Procedure, as amended, governing
petitions for certiorari, prohibition and mandamus filed with the Supreme Court, since petitioner failed to submit a verified statement
of material date of receipt of the assailed resolution dated 16 May 2006 in accordance with Section 4, Rule 65 in relation to the
second paragraph of Section 3, Rule 46. In any event, the petition is premature since no motion for reconsideration of the
questioned resolution of the Court of Appeals was filed prior 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]

On September 18, 2006, after both parties had submitted their respective memoranda, the CA-Cebu rendered a decision granting the writ of
preliminary injuction,[40] pertinent portions of which read:
[A]fter undergoing a series of amendments, the controlling law with respect to PDICs power to conduct examination of
banks is-prior approval of the Monetary Board is a condition sine qua non for PDIC to exercise its power of examination. To rule
otherwise would disregard the amendatory law of the PDICs charter.
The Court is not also swayed by the contention of respondent that what it seeks to conduct is an investigation and not an
examination of petitioners transactions, hence prior approval of the Monetary Board is a mere surplusage.
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 line differentiating one from the other. Blacks Law Dictionary defines the word
investigate as to examine and inquire into with care and accuracy; to find out by careful inquisition; examination and the word
examination as an investigation. In Collins Dictionary of Banking and Finance, the word investigation is defined as an
examination to find out what is wrong.
In the case of Anti-Graft League of the Philippines, Inc. vs. Hon. Ortega, et al., [41] the Supreme Court using Ballentines Law
Dictionary defines an investigation as 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 really nothing to distinguish between these two (2) terms as
to support the PDIC view differentiating Section 9 (b-1) from paragraph 8, Section 8 of the PDIC Charter.
In the realm of the PDIC rules, specifically under Section 3 of PDIC Regulatory Issuance No. 2205-02 [42] investigation is
defined as: Investigation shall refer to fact-finding examination, study, inquiry, for determining whether the allegations in a complaint
or findings in a final report of examination may properly be the subject of an administrative, criminal or civil action.

From the foregoing definition alone, it can be easily deduced that investigation and examination are synonymous
terms. Simply stated, investigation encompasses a fact-finding examination. Thus, it is inconsistent with the rules if respondent
PDIC be (sic) allowed to conduct an investigation without the approval of the Monetary Board.
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 investigation needs to be conducted by the PDIC is obviously to ensure that there is no
overlapping of efforts, duplication of functions and more importantly to provide a check and balance to the otherwise unrestricted
power of respondent PDIC to conduct investigations on banks insured by it.
With the foregoing premises, this Court rules that a prior approval from the Monetary Board is necessary before
respondent PDIC can proceed with its investigations on petitioners-banks.[43]
PDIC moved for reconsideration but it was denied in a resolution dated January 25, 2007.[44]
Hence, this petition.
THE ISSUES
I.
WHETHER RESPONDENT BANKS VIOLATED THE RULE AGAINST FORUM SHOPPING WHEN THEY FILED THE PETITION
FOR INJUNCTION BEFORE THE COURT OF APPEALS-CEBU.
II.
WHETHER THE PRONOUNCEMENT OF THE REGIONAL TRIAL COURT OF MAKATI IN THE PETITION FOR DECLARATORY
RELIEF CONSTITUTES RES JUDICATA TO THE PETITION FOR INJUNCTION IN THE COURT OF APPEALS-CEBU.
III.
WHETHER PETITIONER WAS DEPRIVED OF ITS OPPORTUNITY TO BE HEARD WHEN THE COURT OF APPEALS-CEBU
ISSUED THE WRIT OF INJUNCTION.
IV.
WHETHER THE ISSUES RAISED BY PETITIONERS ARE THE SAME ISSUES RAISED IN G.R. NO. 173370 WHICH WAS
EARLIER DISMISSED BY THIS COURT.
V.
WHETHER THE COURT OF APPEALS ERRED IN FINDING THAT PRIOR APPROVAL OF THE MONETARY BOARD OF THE
BANGKO SENTRAL NG PILIPINAS IS NECESSARY BEFORE THE PDIC MAY CONDUCT AN INVESTIGATION OF
RESPONDENT BANKS.
THE COURTS RULING

I - Whether respondent banks violated the rule against forum shopping when they filed the petition for injunction before the
Court of Appeals-Cebu.
II - Whether the pronouncement of the Regional Trial Court of Makati in the petition for declaratory relief constitutes res judicata
to the petition for injunction in the Court of Appeals-Cebu.
In the recent case of Sameer Oversees Placement Agency, Inc. v. Mildred R. Santos,[45] the Court discussed the matter of forum shopping:
Forum shopping is defined as an act of a party, against whom an adverse judgment or order has been rendered in one forum, of seeking and
possibly getting a favorable opinion in another forum, other than by appeal or special civil action forcertiorari. It may also be the institution of two or
more actions or proceedings 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 litispendentiaare present, namely: (a) there is identity of parties, or at least 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 facts; and (c) the identity
of the two preceding particulars is such that any judgment rendered in the pending case, regardless of which party is successful, would amount to res
judicata in the other. It is expressly prohibited by this Court because it trifles with and abuses court processes, degradesthe administration of justice,
and congests court dockets. A willful and deliberate violation of the rule against forum shopping is a ground for summary dismissal of the case, and may
also constitute direct contempt.[46]

Juxtaposing the RTC-Makati, CA-Manila and CA-Cebu petitions, what must be determined here, is whether the elements of litispendentia are
present between and among these petitions, i.e. whether (a) there is identity of parties, or at least 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 facts; and (c) the identity of the two
preceding particulars is such that any judgment rendered in the pending case, regardless of which party is successful, would amount to res judicata in
the other.

The first element is clearly present as between the RTC-Makati petition and the CA-Cebu petition. Both involved the Banks on one hand, and
the PDIC on the other.

The second and third elements of litispendentia, however, are patently wanting. 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 CA-Manila Petition was one for injunction
with a prayer for preliminary injunction.

A petition for declaratory relief is filed by any person interested under a deed, will, contract or other written instrument, or whose rights are
affected by a statute, executive order or regulation, ordinance, or any other governmental regulation, 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]

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 injunction, or to refrain from doing a particular act, in which case it is called a prohibitory injunction. As a main action, injunction
seeks to permanently enjoin the defendant through a final injunction issued by the court and contained in the judgment. [48]

Clearly, there is a marked difference between the reliefs sought under an action for declaratory relief and an action for injunction. While an
action for declaratory relief seeks a declaration of rights or duties, or the determination of any question or validity arising under a statute, executive order
or regulation, ordinance, or any other governmental regulation, or under a deed, will, contract or other written instrument, under which his rights are
affected, and before breach or violation, an action for injunction ultimately seeks to enjoin or to compel a party to perform certain acts.

Moreover, as stated in the RTC-Makati Decision, because the Banks had already breached the provisions of law on which declaratory
judgment was being sought, it 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 Petition. Thus, the RTC was correct in dismissing the case, having been bereft of jurisdiction to take cognizance
of the action for declaratory judgment.
As between the CA-Manila and the CA-Cebu petitions, the second and third elements of litispendentia are absent. The rights asserted and
reliefs prayed for were different, although founded on the same set of facts.

The CA-Manila Petition is a petition for injunction wherein the Banks prayed that:
1) Immediately upon filing of this Petition, a Writ of Preliminary Injunction and/or Temporary Restraining Order be issued
commanding the respondent and all its officers, employees and agents to cease and desist from proceeding with the investigations
sought to be conducted on the petitioners head and branch offices while the Petition for Declaratory Relief before Branch 58 of the
Makati Regional Trial Court is pending.
2) After due proceedings, judgment be rendered declaring as permanent the Writ of Preliminary Injunction and/or
Temporary Restraining Order prayed for above.
Other equitable reliefs are likewise prayed for.[49]
[Underscoring supplied]

The CA-Cebu Petition, on the other hand, is denominated as a Petition for Injunction With Prayer for Writ of Preliminary Injunction and/or
Restraining Order. The Banks prayed therein that:
1) Upon filing of this Petition, a Writ of Preliminary Injunction and/or Temporary Restraining Order be issued forthwith,
enjoining Respondent PDIC and all its officers, employees and agents to cease and desist from conducting

examinations/investigations on Petitioner Banks head and branch offices without securing the requisite approval from the Monetary
Board of the BangkoSentralngPilipinas, as required by Sec. 8, Paragraph 8 of the PDIC Charter, as amended;
2) After due proceedings, judgment be rendered declaring as permanent the Writ of Preliminary Injunction and/or Temporary
Restraining Order prayed for above.
Other equitable reliefs are likewise prayed for.[50]
As can be gleaned from the above-cited portions of the CA-Manila and CA-Cebu petitions, the petitions seek different reliefs.

Therefore, as between and among the RTC Makati, and the CA-Manila and CA-Cebu petitions, there is no forum shopping.
III - Whether petitioner was deprived of its opportunity to be heard when the Court of
Appeals-Cebu issued the writ of injunction.

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 Resolution, violated the fundamental rule that courts should avoid issuing injunctive relief which would in effect dispose of the main case without
trial.[51] PDIC argues that a TRO is intended only as a restraint until the propriety of granting a temporary injunction can be determined, and it
goes no further than to preserve the status until that determination.[52] Moreover, its purpose is merely to suspend proceedings until such time when
there may be an opportunity to inquire whether any injunction should be granted, and it is not intended to operate as an injunction pendentelite, 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 by proceeding in
the acquisition or alteration of the property the right to which is disputed while the hands of the other party are tied. [53]
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 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 Appeals,[56] the Banks state that the essence of due process is the reasonable opportunity to be heard and to submit

evidence one may have in support of ones defense,[57] and PDIC was able to do so.

On March 15, 2006, the CA-Cebu issued a resolution granting their prayer for a 60-day TRO, and requiring PDIC to file its comment. [58] The
latter thereafter filed its Comment ad Cautelam dated March 30, 2006.[59] [Underscoring ours]

On May 16, 2006, the CA-Cebu issued another resolution, this time granting the prayer for a preliminary injunction and requiring the parties to
file their respective memoranda. PDIC thereafter filed its memorandum dated July 31, 2006.[60]

On September 18, 2006, the CA-Cebu promulgated its Decision granting the Petition for Injunction. [61] PDIC filed a motion for reconsideration
dated October 10, 2006,[62] which was subsequently denied.

The essence of procedural due process is found in the reasonable opportunity to be heard and submit ones evidence in support of his
defense.[63] The Court finds that procedural due process was observed by the CA-Cebu. The parties were afforded equal opportunity to present their
arguments. In the absence of any 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 matter of whether it erred in its conclusion and issuance of the TRO, preliminary injunction and final
injunction is another matter altogether.

IV Whether the issues raised by petitioner are the same issues raised in G.R. No.
173370 which was earlier dismissed by this Court.
In G.R. 173370, a petition for certiorari under Rule 65 of the Rules of Court, PDIC alleged that the CA-Cebu committed grave abuse of
discretion amounting to lack or excess of jurisdiction in taking cognizance of the Banks petition, and in issuing a TRO and a writ of preliminary
injunction.[64]
In the case at bench, a petition for review under Rule 45, PDICs core contention is that the CA-Cebu erred in finding that prior approval of
the Monetary Board of the BSP is necessary before it may conduct an investigation of the Banks.

Clearly then, the two petitions were of different nature raising different issues.

G.R. 173370 challenged the CA-Cebus having taken cognizance of the Banks 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 merits of the CA-Cebu, and not merely the
interlocutory orders. While both G.R. 173370 and the present case may have been anchored on the same set of facts, that is, the refusal of the Banks
to allow PDIC to conduct an investigation without 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 tores judicata in this case.
V Whether the Court of Appeals-Cebu erred in finding that prior approval of the
Monetary Board of the BangkoSentralngPilipinas is necessary before the PDIC may
conduct an investigation of respondent banks.

PDIC is of the position that in order for it to exercise its power of investigation, the law requires that:
(a) The investigation is based on a complaint of a depositor or any other government agency, or on the report of
examination of [the] BangkoSentralngPilipinas (BSP) and/or PDIC; and,
(b) The complaint alleges, or the BSP and/or PDIC Report of Examination contains adverse findings of, fraud, irregularities
or anomalies committed by the Bank and/or its directors, officers, employees or agents; and,
(c) The investigation is upon the authority of the PDIC Board of Directors. [65]
It argues that when it commenced its investigation on the Banks, all of the aforementioned requirements were met. PDIC stresses that its power
of 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 approval of the PDIC Board. [66] It further claims that the power of examination cannot be exercised within twelve (12) months from the last
examination conducted, whereas the power of investigation is without limitation as to the frequency of its conduct. It states that the purpose of the
PDICs power of examination is merely to look into the condition of the bank, whereas the power of investigation aims to address fraud, irregularities and
anomalies based on complaints from depositors and other government agencies or upon reports of examinations conducted by the PDIC itself or by the
BSP.[67]
The Banks, on the other hand, are of the opinion that a holistic reading of the PDIC charter shows that petitioners power of examination is
synonymous with its power of investigation.[68] They cite, as bases, the law dictionary definitions, Section 8, Eighth paragraph[69] 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 investigation as follows:
(l) Investigation shall refer to fact-finding examination, study or inquiry for determining whether the allegations in a
complaint or findings in a final report of examination may properly be the subject of an administrative, criminal or civil action.
The Banks further cite Section X658 of the Manual of Regulations for Banks, which states:
Sec. X658
Examination by the BSP. The term examination shall, henceforth, refer to an investigation of an
institution under the supervisory authority of the BSP to determine compliance with laws and regulations. It shall include
determination that the institution is conducting its business on a safe and sound basis. Examination requires full and
comprehensive looking into the operations and books of institutions, and shall include, but need not be limited to the following:

a. Determination of the banks solvency and liquidity position;

b. Evaluation of asset quality as well as determination of sufficiency of valuation reserves on loans
and other risk assets;
c. Review of all aspects of bank operations;
d. Assessment of risk management system, including the evaluation of the effectiveness of the bank
managements oversight functions, policies, procedures, internal control and audit;
e. Appraisal of overall management of the bank;
f. Review of compliance and applicable laws, rules and regulations; and any other activities relevant
to the above.

After an evaluation of the respective positions of the parties, the Court is of the view that the Monetary Board approval is notrequired for PDIC to
conduct an investigation on the Banks.

The disagreement stems from the interpretation of these two key provisions of the PDIC Charter. The confusion can be attributed to the fact that
although investigation and examination are two separate and distinct procedures under the charter of the PDIC and the BSP, the words seem to be
used loosely and interchangeably.

It does not help that indeed these terms are very closely related in a generic sense. However, while examination connotes a mere generic
perusal or inspection, investigation refers to a more intensive scrutiny for a more specific fact-finding purpose. The latter term is also usually
associated with proceedings conducted prior to criminal prosecution.

The PDIC was created by R.A. No. 3591 on June 22, 1963 as an insurer of deposits in all banks entitled to the benefits of insurance under the
PDIC Charter to promote and safeguard the interests of the depositing public by way of providing permanent and continuing insurance coverage of all
insured deposits. It is a government instrumentality that operates under the Department of Finance. Its primary purpose is to act as deposit insurer, as
a co-regulator of banks, and as receiver and liquidator of closed banks.[71]

Section 1 of the PDIC Charter states:

SECTION 1. There is hereby created a Philippine Deposit Insurance Corporation hereinafter referred to as the Corporation
which shall insure, as herein provided, the deposits of all banks which are entitled to the benefits of insurance under this Act, and
which shall have the powers hereinafter granted.
The Corporation shall, as a basic policy, promote and safeguard the interests of the depositing public by way of providing
permanent and continuing insurance coverage on all insured deposits.

Section 1 of R.A. No. 9576 further provides: An Act Increasing the Maximum Deposit Insurance Coverage, and in connection therewith, to
Strengthen the Regulatory and Administrative Authority, and Financial Capability of the Philippine Deposit Insurance Corporation (PDIC), amending for
this purpose R.A. No. 3591, as Amended, otherwise known as the PDIC Charter.
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 system to generate, preserve, maintain faith and confidence in the countrys banking
system, and protect it from illegal schemes and machinations.
Towards this end, the government must extend all means and mechanisms necessary for the Philippine Deposit Insurance
Corporation to effectively fulfill its vital task of promoting and safeguarding the interests of the depositing public by way of providing
permanent and continuing insurance coverage on all insured deposits, and in helping develop a sound and stable banking system at
all times.

Under its charter, the PDIC is empowered to conduct examination of banks with prior approval of the Monetary Board:
Eighth To conduct examination of banks with prior approval of the Monetary Board : Provided, That no examination can be
conducted within twelve (12) months from the last examination date: Provided, however, That the Corporation may, in coordination
with the BangkoSentral, conduct a special examination as the Board of Directors, by an affirmative vote of a majority of all its
members, if there is a threatened or impending closure of a bank; Provided, further, That, notwithstanding the provisions of Republic
Act No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791, and other laws, the Corporation and/or the
BangkoSentral, may inquire into or examine deposit 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 examination shall maximize the efficient use
of the relevant reports, information, and findings of the BangkoSentral, which it shall make available to the Corporation; (As
amended by R.A. 9302, 12 August 2004, R.A. 9576, 1 June 2009)
xxx. [Underlining supplied]
Section 9(b-1) of the PDIC Charter further provides that the PDIC Board shall have the power to:

POWERS AND RESPONSIBILITIES AND PROHIBITIONS

SECTION 9.xxx
(b) The Board of Directors shall appoint examiners who shall have power, on behalf of the Corporation to examine any
insured bank. Each such examiner shall have the power to make a thorough examination of all the affairs of the bank and in doing
so, he shall have the power to administer oaths, to examine and take and preserve the testimony of any of the officers and agents
thereof, and, to compel 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 a full and detailed report of the condition of the bank to the Corporation. The
Board of Directors in like manner shall appoint claim agents who shall have the power to investigate and examine all claims for
insured deposits and transferred deposits. Each claim agent shall have the power to administer oaths and to examine under oath
and take and preserve testimony of any person relating to such claim. (As amended by E.O. 890, 08 April 1983; R.A. 7400, 13 April
1992)
(b-1) The investigators appointed by the Board of Directors shall have the power on behalf of the Corporation to conduct
investigations on frauds, irregularities and anomalies committed in banks, based on reports of examination conducted by the
Corporation and BangkoSentralngPilipinas or complaints from depositors or from other government agency. Each such investigator
shall have the power to administer oaths, and to examine and take and preserve the testimony of any person relating to the subject
of investigation. (As added by R.A. 9302, 12 August 2004)
xxx. [Underscoring supplied]

As stated above, the charter empowers the PDIC to conduct an investigation of a bank and to appoint examiners who shall have the power to
examine any insured bank. Such investigators are authorized to conduct investigations on frauds, irregularities and anomalies committed in
banks, based on an examination conducted by the PDIC and the BSP or on complaints from depositors or from other government agencies.

The distinction between the power to investigate and the power to examine is emphasized by the existence of two separate sets of rules
governing the procedure in the conduct of investigation and examination. Regulatory Issuance (RI) No. 2005-02 or the PDICRules on Fact-Finding
Investigation of Fraud, Irregularities and Anomalies Committed in Banks covers the procedural requirements of the exercise of the PDICs power of
investigation. On the other hand, RI No. 2009-05 sets forth the guidelines for the conduct of the power of examination.

The definitions provided under the two aforementioned regulatory issuances elucidate on the distinction between the power of examination
and the power of investigation.

Section 2 of RI No. 2005-02 states that its coverage shall be applicable to all fact-finding investigations on fraud, irregularities and/or
anomalies committed in banks that are conducted by PDIC based on: [a] complaints from depositors or other government agencies; and/or [b] final
reports of examinations of banks conducted by the BangkoSentralngPilipinas and/or PDIC.

The same issuance states that the Final Report of Examination [72] is one of the three pre-requisites to the conduct of an investigation, in
addition to the authorization of the PDIC Board [73] and a complaint.[74] Juxtaposing this provision with Section 9(b-1) of the PDIC Charter, since an
examination is explicitly made the basis of a fact-finding examination, then clearly examination and investigation are two different proceedings. It would
obviously defy logic to make the result of an investigation the basis of the same proceeding. Thus, RI No. 2005-02 defines an investigation as a factfinding examination, study or inquiry for determining whether the allegations in a complaint or findings in a final report of examination may properly be
the subject of an administrative, criminal or civil action.[75]

The Banks cite the dictionary definitions of examination and investigation to justify their conclusion that these terms refer to one and the
same proceeding. It is tempting to use these two terms interchangeably, which practice may be perfectly justified in a purely literary sense. Indeed, a
reading of the PDIC Charter shows 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 differentiate between the process of investigation and that of examination.

In 2009, to clarify procedural matters, PDIC released RI No. 2009-05 or the Rules and Regulations on Examination of Banks. Section 2 thereof
differentiated between the two types of examination as follows:
Section 2. Types of Examination
a. Regular Examination - An examination conducted independently or jointly with the BSP. It requires the prior approval of
the PDIC Board of Directors and the Monetary Board (MB). It may be conducted only after an interval of at least twelve (12) months
from the closing date of the last Regular Examination.
b. Special Examination An examination conducted at any time in coordination with the BSP, by an affirmative vote of a
majority of all the members of the PDIC 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. [Underscoring supplied]

Section 3 of RI No. 2009-05 provides for the general scope of the PDIC examination:

Section 3. Scope of Examination

The examination shall include, but need not be limited to, the following:
a. Determination of the banks solvency and liquidity position;
b. Evaluation of asset quality as well as determination of sufficiency of valuation reserves on loans and
other risk assets;
c.

Review of all aspects of bank operations;

d. Assessment of risk management system, including the evaluation of the effectiveness of the bank
managements oversight functions, policies, procedures, internal control and audit;
e. Appraisal of overall management of the bank;
f. Review of compliance with applicable banking laws, and rules and regulations, including PDIC
issuances;
g. Follow-through of specific exceptions/ violations noted during a previous examination; and
h.

Any other activity relevant to the above.

Rule 2, Section 1 of PDIC RI No. 2005-02 or the PDIC Rules on Fact-Finding Investigation of Fraud, Irregularities and Anomalies Committed
in Banks provides for the scope of fact-finding investigations as follows:
SECTION 1. Scope of the Investigation.
Fact-finding Investigations shall be limited to the particular acts or omissions subject of a complaint or a Final Report of
Examination.
From the above-cited provisions, it is clear that the process of examination covers a wider scope than that of investigation.

Examination involves an evaluation of the current status of a bank and determines its compliance with the set standards regarding solvency,
liquidity, asset valuation, operations, systems, management, and compliance with banking laws, rules and regulations.
Investigation, on the other hand, is conducted based on specific findings of certain 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. An investigation zeroes in on specific acts and omissions
uncovered via an examination, or which are cited in a complaint.

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 requires a detailed evaluation thereof. Such a process then involves an intrusion into a banks records.
In contrast, although it also involves a detailed evaluation, an investigation centers on specific acts of omissions and, thus, requires a less
invasive assessment.
The practical justification for not requiring the Monetary Board approval to conduct an investigation of banks is the administrative hurdles and
paperwork it entails, and the correspondent time to complete those additional steps or requirements. As in other types of investigation, time is always of
essence, and it is prudent to expedite the proceedings if an accurate conclusion is to be arrived at, as an investigation is only as precise as the evidence
on which it is based. The promptness with which such evidence is gathered is always of utmost importance because evidence, documentary evidence
in particular, is remarkably fungible. A 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 an administrative, criminal or civil action. [76] In other words, an investigation is based on reports of
examination and an examination is conducted with prior Monetary Board approval. Therefore, it would be unnecessary to secure a separate approval
for the conduct of an investigation. Such would merely prolong the process and provide unscrupulous individuals the opportunity to cover their tracks.

Indeed, while in a literary sense, the two terms may be used interchangeably, under the PDIC Charter, examination and investigation refer to
two different processes. To reiterate, an examination of banks requires the prior consent of the Monetary Board, whereas an investigation based on an
examination report, does not.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals in CA G.R. CEB SP. No. 01550,
dated September 18, 2006 and January 25, 2007 are REVERSED and SET ASIDE.

SO ORDERED.

UNITED COCONUT PLANTERS BANK, JERONIMO U. KILAYKO,

LORENZO V. TAN, ENRIQUE L. GANA, JAIME W. JACINTO and
EMILY R. LAZARO,
Petitioners,

G.R. No. 168859

- versus E. GANZON, INC.,

Respondent.
x-------------------- -x
E. GANZON, INC.,
Petitioner,
G.R. No. 168897
- versus Present:
UNITED COCONUT PLANTERS BANK, JAIME W. JACINTO and
EMILY R. LAZARO,
Respondents.

YNARES-SANTIAGO, J.,
Chairperson,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.
Promulgated:
June 30, 2009

DECISION
CHICO-NAZARIO, J.:
These are two consolidated[1] Petitions for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure.
United Coconut Planters Bank (UCPB) is a universal bank duly organized and existing under Philippine Laws. In G.R. No. 168859, UCPB and
its corporate officers, i.e., Jeronimo U. Kilayko, Lorenzo V. Tan, Enrique L. Gana, Jaime W. Jacinto and Emily R. Lazaro (UCPB, et al.) seek the reversal
and setting aside of the Decision[2] dated 14 October 2004 and Resolution[3] dated 7 July 2005 of the Court of Appeals in CA-G.R. SP No. 81385 and the
affirmation, instead, of the letter-decision [4] dated 16 September 2003 of the Monetary Board of the BangkoSentralngPilipinas (BSP). The Court of
Appeals, in its assailed Decision, set aside the aforesaid letter-decision of the BSP Monetary Board and remanded the case to the latter for further
proceedings; and in its questioned Resolution, denied for lack of merit the Motion for Reconsideration of UCPB, et al., as well as the Partial Motion for
Reconsideration of E. Ganzon, Inc. (EGI).

On the other hand, EGI is a corporation duly organized and existing under Philippine laws and engaged in real estate construction and
development business. In G.R. No. 168897, EGI prays for this Court to review the same Decision dated 14 October 2004 and Resolution dated 7 July
2005 of the Court of Appeals in CA-G.R. SP No. 81385, and to order the appellate court to (1) act on its findings in the case instead of remanding the
same to the BSP Monetary Board for further proceedings; (2) direct the BSP Monetary Board to impose the applicable administrative sanctions upon
UCPB, et al.; and (3) to amend its assailed Decision and Resolution by deleting therefrom the statements requiring the BSP Monetary Board to
scrutinize and dig deeper into the acts of UCPB, et al., and to determine if, indeed, there were irregular and unsound practices in its business dealings
with EGI.

The factual antecedents of these consolidated petitions are as follows:

Beginning 1995 to 1998, EGI availed itself of credit facilities from UCPB to finance its business expansion. To secure said credit facilities, EGI
mortgaged to UCPB its condominium unit inventories in EGI Rufino Plaza, located at the intersection of Buendia and Taft Avenues, Manila.

Initially, EGI was able to make periodic amortization payments of its loans to UCPB. When the negative effects of the Asian economic crisis
on the property development sector finally caught up with the corporation in the middle of 1998, EGI started defaulting in its payment of amortizations,
thus, making all of its obligations due and demandable. Subsequently, EGI was declared in default by UCPB in its letters dated 2 October 1998[5] and 16
February 1999.[6] Thereafter, UCPB stopped sending EGI monthly statements of its accounts.

In 1999, EGI and UCPB explored the possibility of using the mortgaged condominium unit inventories of EGI in EGI RufinoPlaza as payment for
the loans of EGI to UCPB. Upon agreeing on the valuation of said mortgaged properties, EGI and UCPB entered into a Memorandum of Agreement
(MOA)[7] on 28 December 1998 in settlement of the loans of EGI from UCPB. Based on this MOA, the outstanding loan obligations of EGI with UCPB
amounted to P915,838,822.50, inclusive of all interest, charges and fees. UCPB, through its corporate officers, assured EGI that the said amount
already represented the total loan obligations of EGI to UCPB.

On 18 January 2000, EGI and UCPB executed an Amendment of Agreement [8] to reflect the true and correct valuation of the properties of EGI
listed in the MOA that would be transferred to UCPB in settlement of the total loan obligations of the former with the latter. The properties of EGI to be
used in paying for its debt with UCPB were valued at P904,491,052.00.

According to the MOA and its amendments, titles to the properties of EGI shall be transferred to UCPB by the following modes: (1) foreclosure of
mortgage; (2) dacion en pago; (3) creation of a holding company; and (4) use of other alternatives as may be deemed appropriate by UCPB.

UCPB proceeded to foreclose some of the properties of EGI listed in the MOA. Per the Certificate of Sale [9] dated 13 April 2000, the foreclosure
proceeds of said properties amounted only to P723,592,000.00, less than the value of the properties of EGI stipulated in its amended MOA with UCPB.

UCPB applied the entire foreclosure proceeds of P723,592,000.00 to the principal amount of the loan obligations of EGI, pursuant to BSP Circular
No. 239,[10] which provided that partial property payments shall first be applied to the principal. After deducting the said amount from the total loan
obligations of EGI, there was still an unpaid balance of P192,246,822.50.

On 8 May 2001, some of the other properties of EGI at EGI Rufino Plaza, valued at P166,127,369.50, were transferred by way of dacion en
pago to UCPB. However, during the signing of the transaction papers for the dacion en pago, EGI Senior Vice-President, Architect Grace S. Layug
(Layug), noticed that said papers stated that the remaining loan balance of EGI in the amount ofP192,246,822.50 had increased
to P226,963,905.50. The increase was allegedly due to the addition of the transaction costs amounting to P34,717,083.00. EGI complained to UCPB
about the increase, yet UCPB did not take any action on the matter.

This prompted EGI President Engineer EulalioGanzon (Ganzon) and Senior Vice-President Layug to review their files to verify the figures on the
loan obligations of EGI as computed by UCPB. In the process, they discovered the UCPB Internal Memorandum dated 22 February 2001,[11] signed by
UCPB corporate officers. The said Internal Memorandum presented two columns, one with the heading ACTUAL and the other DISCLOSED TO
EGI. The figures in the two columns were conflicting. The figures in the DISCLOSED TO EGI column computed the unpaid balance of the loan
obligations of EGI to beP226,967,194.80, the amount which UCPB actually made known to and demanded from EGI. The figures in the ACTUAL
column calculated the remaining loan obligations of EGI to be only P146,849,412.58.

Consequently, EGI wrote UCPB a letter dated 21 May 2001, [12] which included, among other demands, the refund by UCPB to EGI of the overpayment of P83,000,000.00;[13] return to EGI of all the remaining Transfer Certificates of Title (TCTs)/Condominium Certificates of Title (CCTs) in the
possession of UCPB; and cost of damage to EGI for the delay in the release of its certificates of title.

In response, UCPB explained[14] that the ACTUAL column in its Internal Memorandum dated 22 February 2001 contained the same amounts
reflected or recorded in its financial statements, in accordance with the Manual of Accounts for Banks, Manual of Regulations for Banks [15] and BSP
Circular No. 202,[16] Series of 1999. In contrast, the DISCLOSED TO EGI column showed the total amount still due from EGI, including the total
principal, interests, transaction and other costs after the foreclosure, whether reflected in the financial books of UCPB or not. Further, UCPB maintained
that the difference in the figures in the two columns was because BSP Circular No. 202 and Section X305.4 of the Manual of Regulations for Bank
disallowed banks from accruing in its books interest on loans which had become non-performing.

Despite the explanation of UCPB, EGI insisted that the figures appearing in the ACTUAL column of the formers Internal Memorandum dated 22
February 2001 revealed the true and actual amount of its loan obligations to UCPB, P146,849,412.58.

EGI Senior Vice-President Layug met with UCPB Vice-President, Jaime W. Jacinto (Jacinto) to discuss the demand of EGI for the return of its
overpayment. UCPB Vice-President Jacinto, however, refused to concede that UCPB had any obligation to make a refund to EGI and, instead, insisted
that EGI Senior Vice-President Layug disclose who gave her a copy of the UCPB Internal Memorandum dated 22 February 2001.

Based on the possession by EGI of the UCPB Internal Memorandum dated 22 February 2001, UCPB filed a criminal case for theft and/or
discovery of secrets against EGI President Ganzon and Senior Vice-President Layug, but the said case was dismissed. [17]

On 5 November 2002, EGI, also on the basis of the UCPB Internal Memorandum dated 22 February 2001, EGI filed with the BSP an
administrative complaint[18] against UCPB, et al., for violation of Sections 36 [19] and 37,[20] Article IV of Republic Act No. 7653, [21] in relation to Section
55.1(a)[22] of Republic Act No. 8791;[23] and for the commission of irregularities and conducting business in an unsafe or unsound manner.

In a letter-decision[24] dated 16 September 2003, the BSP Monetary Board dismissed the administrative complaint of EGI, holding as follows:
Please be informed that the Monetary Board decided to dismiss the complaint based on the evaluation conducted by the
Supervision and Examination Department I and the Office of the General Counsel and Legal Services to the effect that:
1.
UCPB computed interest on the loans based on BSP rules and regulations which prohibit banks from accruing interest
on loans that have become non-performing (BSP Circular No. 202). This is different from interest which may have run and accrued
based on the promissory notes/loan documents from the date of default up to settlement date.
2.
Fair market value of assets to be foreclosed is different from the bid price submitted during foreclosure and there is no
statutoryobligation for the latter to be equivalent to the former.
3.
Regarding the alleged P145,163,000.00 fabricated loan, the documents showed that there were the EGI Board
Resolution to borrow, promissory note signed by Mr. EulalioGanzon, and Loan Agreement stating that the proceeds shall be used to pay
outstanding availments and interest servicing.
4.
transactioncosts.[25]

There is no finding by Supervision and Examination Department I on the alleged double charging and/or padding of

EGI filed a Motion for Reconsideration and a Supplemental Motion for Reconsideration of the aforequoted letter-decision of the BSP Monetary
Board. The BSP Monetary Board denied both motions in its letter[26] dated 8 December 2003 as there was no sufficient basis to grant the same.

EGI then filed a Petition for Review under Rule 43 of the 1997 Revised Rules of Civil Procedure with the Court of Appeals raising the sole issue of
whether the BangkoSentralngPilipinas erred in dismissing the administrative complaint filed by EGI against UCPB, et al. The case was docketed as
CA-G.R. SP No. 81385.

On 14 October 2004, the Court of Appeals rendered its assailed Decision granting the Petition for Review of EGI, thus, setting aside the BSP
letter-decision dated 16 September 2003 and remanding the case to the BSP Monetary Board for further proceedings.

UCPB, et al., moved for the reconsideration of the 14 October 2004 Decision of the appellate court, praying for a new judgment dismissing the
appeal of EGI for lack of jurisdiction and/or lack of merit. EGI also filed a Partial Motion for Reconsideration of the same Court of Appeals Decision, with
the prayer that the appellate court, instead of still remanding the case to the BSP Monetary Board for further proceedings, already direct the latter to
impose the applicable administrative sanctions upon UCPB, et al.,.

In a Resolution dated 7 July 2005, the Court of Appeals denied for lack of merit both the Motion for Reconsideration of UCPB, et al. and the
Motion for Partial Reconsideration of EGI.

G.R. No. 168859

Aggrieved by the 14 October 2004 Decision and 7 July 2005 Resolution of the Court of Appeals, UCPB, et al. comes before this Court, via a
Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure, based on the following assignment of errors:
I.
THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND GRAVELY ERRED IN
HOLDING THAT IT HAS APPELLATE JURISDICTION OVER DECISIONS OF THE BSP/MONETARY BOARD.
II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE BANGKO SENTRAL
SUMMARILY DISMISSED THE COMPLAINT OF [EGI].
III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DISREGARDING THE FINDINGS OF FACT OF
THE BANGKO SENTRAL AND IN HOLDING THAT [UCPB, et al.] COMMITTED IRREGULAR AND UNSOUND BANKING
PRACTICES IN THE SUBJECT TRANSACTIONS. [27]

The Petition is docketed as G.R. No. 168859.

UCPB, et al., aver that the Court of Appeals has no appellate jurisdiction over decisions, orders and/or resolutions of the BSP Monetary Board on
administrative matters. The BSP Monetary Board is not among the quasi-judicial agencies enumerated under Rule 43 of the 1997 Revised Rules of Civil
Procedure, over which the Court of Appeals has appellate jurisdiction. Further, there is nothing in Republic Act No. 7653 or in Republic Act No. 8791
which explicitly allows an appeal of the decisions or orders of the BSP Monetary Board to the Court of Appeals. Resultantly, the Court of Appeals has no
power to review, much less set aside, the findings of fact of the BSP Monetary Board as contained in its letter-decision dated 16 September 2003.

UCPB, et al. also claim that, contrary to the ruling of the Court of Appeals, the letter-decision dated 16 September 2003 of the BSP Monetary
Board plainly reveals that the administrative complaint of EGI against UCPB, et al. was not summarily dismissed. The charges of EGI against UCPB, et
al. was resolved only after the BSP Monetary Board thoroughly reviewed pertinent bank records and studied the arguments raised by EGI in its
complaint and Motion for Partial Reconsideration. In its letter-decision dated 16 September 2003, the BSP Monetary Board stated in no uncertain terms
that the dismissal of the complaint of EGI was based on the evaluation conducted by its Supervision and Examination Department I and the Office of the
General Counsel and Legal Services. Also, in its letter dated 8 December 2003, the BSP Monetary Board denied the Motion for Reconsideration and

Supplemental Motion for Reconsideration of EGI because the latter did not present any new evidence in support of its motions. Hence, there is no basis
for the claim of EGI that the BSP Monetary Board overlooked and completely ignored its accusations of irregular and unsound banking practice against
UCPB, et al.

Finally, UCPB, et al., maintain that the findings of fact of administrative bodies like the BSP Monetary Board are accorded great respect, if not
finality, especially if supported by substantial evidence. Such findings are to be respected by the courts, especially in the absence of grave abuse of
discretion or grave errors by the BSP Monetary Board. No other office, much less an appellate tribunal, can substitute its own findings of fact over that
of the concerned administrative agency in view of the expertise and specialized knowledge acquired by it on matters falling within its areas of
concern. UCPB, et al. insist that it is the BSP which has the necessary expertise to draft guidelines for the evaluation of the performance and conduct of
banks.

Thus, the Court of Appeals committed grave error in disregarding the findings of fact of the BSP Monetary Board which justified the latters

dismissal of the administrative complaint of EGI against UCPB, et al.

The issue of jurisdiction of the Court of Appeals over appeals of decisions, orders and/or resolutions of the BSP Monetary Board on administrative
matters must first be resolved, before the other issues raised herein by UCPB, et al.

Truly, there is nothing in Republic Act No. 7653 or in Republic Act No. 8791 which explicitly allows an appeal of the decisions of the BSP
Monetary Board to the Court of Appeals. However, this shall not mean that said decisions are beyond judicial review.

Section 9(3) of Batas PambansaBlg. 129, otherwise known as The Judiciary Reorganization Act of 1980, as amended, reads:
SEC. 9. Jurisdiction. The Court of Appeals shall exercise:
x xxx
(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional Trial
Courts and quasi-judicial agencies, instrumentalities, boards or commissions, including the Securities and Exchange
Commission, the Social Security Commission, the Employees Compensation Commission and the Civil Service
Commission, except those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the
Labor Code of the Philippines under Presidential Decree No. 442, as amended, the provisions of this Act, and of subparagraph (1)
of the third paragraph and subparagraph 4 of the fourth paragraph of Section 17 of the Judiciary Act of 1948. (Emphasis ours.)

In accordance with the afore-quoted provision, Rule 43 of the 1997 Revised Rules of Civil Procedure, on Appeals from the Court of Tax
Appeals and Quasi-Judicial Agencies to the Court of Appeals, defines its scope as follows:
SECTION 1. Scope. - This Rule shall apply to appeals from judgments or final orders of the Court of Tax Appeals and from
awards, judgments, final orders or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasijudicial functions. Among these agencies are the Civil Service Commission, Central Board of Assessment Appeals, Securities and
Exchange Commission, Office of the President, Land Registration Authority, Social Security Commission, Civil Aeronautics Board,
Bureau of Patents, Trademarks and Technology Transfer, National Electrification Administration, Energy Regulatory Board, National
Telecommunications Commission, Department of Agrarian Reform under Republic Act No. 6657, Government Service Insurance
System, Employees Compensation Commission, Agricultural Inventions Board, Insurance Commission, Philippine Atomic Energy
Commission, Board of Investments, Construction Industry Arbitration Commission, and voluntary arbitrators authorized by
law. (Emphasis ours.)

A perusal of Section 9(3) of Batas PambansaBlg. 129, as amended, and Section 1, Rule 43 of the 1997 Revised Rules of Civil Procedure reveals
that the BSP Monetary Board is not included among the quasi-judicial agencies explicitly named therein, whose final judgments, orders, resolutions or
awards are appealable to the Court of Appeals. Such omission, however, does not necessarily mean that the Court of Appeals has no appellate
jurisdiction over the judgments, orders, resolutions or awards of the BSP Monetary Board.

It bears stressing that Section 9(3) of Batas PambansaBlg. 129, as amended, on the appellate jurisdiction of the Court of Appeals, generally
refers to quasi-judicial agencies, instrumentalities, boards, or commissions. The use of the word including in the said provision, prior to the naming of
several

quasi-judicial

agencies,

necessarily

conveys

the

very

idea

of

non-exclusivity

of

the

enumeration. The

principle

of expressiouniusestexclusioalterius does not apply where other circumstances indicate that the enumeration was not intended to be exclusive, or where
the enumeration is by way of example only.[28]

Similarly, Section 1, Rule 43 of the 1997 Revised Rules of Civil Procedure merely mentions several quasi-judicial agencies without
exclusivity in its phraseology.[29] The enumeration of the agencies therein mentioned is not exclusive.[30] The introductory phrase [a]mong these
agencies are preceding the enumeration of specific quasi-judicial agencies only highlights the fact that the list is not meant to be exclusive or
conclusive. Further, the overture stresses and acknowledges the existence of other quasi-judicial agencies not included in the enumeration but
should be deemed included.[31]

A quasi-judicial agency or body is an organ of government other than a court and other than a legislature, which affects the rights of private
parties through either adjudication or rule-making. [32] The very definition of an administrative agency includes its being vested with quasi-judicial
powers. The ever increasing variety of powers and functions given to administrative agencies recognizes the need for the active intervention of
administrative agencies in matters calling for technical knowledge and speed in countless controversies which cannot possibly be handled by regular
courts.[33] A "quasi-judicial function" is a term which applies to the action, discretion, etc., of public administrative officers or bodies, who are required to
investigate facts, or ascertain the existence of facts, hold hearings, and draw conclusions from them, as a basis for their official action and to exercise
discretion of a judicial nature.[34]

Undoubtedly, the BSP Monetary Board is a quasi-judicial agency exercising quasi-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 corporate with fiscal and administrative autonomy,
mandated to provide policy directions in the areas of money, banking and credit. [35] It has power to issue subpoena, to sue for contempt those refusing
to obey the subpoena without justifiable reason, [36] to administer oaths and compel presentation of books, records and others, needed in its examination,
[37]

to impose fines and other sanctions and to issue cease and desist order. [38] Section 37 of Republic Act No. 7653, [39] in particular, explicitly provides

that the BSP Monetary Board shall exercise its discretion in determining whether administrative sanctions should be imposed on banks and quasi-banks,
which necessarily implies that the BSP Monetary Board must conduct some form of investigation or hearing regarding the same.

Having established that the BSP Monetary Board is indeed a quasi-judicial body exercising quasi-judicial functions; then as such, it is one of
those quasi-judicial agencies, though not specifically mentioned in Section 9(3) of Batas PambansaBlg. 129, as amended, and Section 1, Rule 43 of the
1997 Revised Rules of Civil Procedure, are deemed included therein. Therefore, the Court of Appeals has appellate jurisdiction over final judgments,
orders, resolutions or awards of the BSP Monetary Board on administrative complaints against banks and quasi-banks, which the former acquires
through the filing by the aggrieved party of a Petition for Review under Rule 43 of the 1997 Revised Rules of Civil Procedure.

As a futile effort of UCPB, et al. to convince this Court that the Court of Appeals has no appellate jurisdiction over the final judgments, orders,
resolutions or awards of the BSP Monetary Board, it cited Salud v. Central Bank of the Philippines.[40]

The invocation of UCPB, et al. of Salud is evidently misplaced.

The present case involves a decision of the BSP Monetary Board as regards an administrative complaint against a bank and its corporate
officers for the alleged violation of Sections 36 and 37, Article IV of Republic Act No. 7653, in relation to Section 55.1(a) of Republic Act No. 8791, and
for the commission of irregularity and unsafe or unsound banking practice. There isnothing in the aforesaid laws which state that the final
judgments, orders, resolutions or awards of the BSP Monetary Board on administrative complaints against banks or quasi-banks shall be final and
executory and beyond the subject of judicial review. Without being explicitly excepted or exempted, the final judgments, orders, resolutions or awards of
the BSP Monetary Board are among those appealable to the Court of Appeals by way of Petition for Review, as provided in Section 9(3) of Batas
PambansaBlg. 129, as amended, and Section 1, Rule 43 of the 1997 Revised Rules of Civil Procedure.

Although in Salud, this Court declared that the Intermediate Appellate Court (now Court of Appeals) has no appellate jurisdiction over
resolutions or orders of the Monetary Board of the Central Bank of the Philippines (CBP, now BSP), because no law prescribes any mode of appeal
therefrom, the factual settings of the said case are totally different from the one presently before us. Salud involved a resolution issued by the Monetary
Board, pursuant to Section 29 of Republic Act No. 265, otherwise known as the old Central Bank Act, forbidding banking institutions to do business
on account of a "condition of insolvency" or because "its continuance in business would involve probable loss to depositors or creditors;" or appointing a
receiver to take charge of the assets and liabilities of the bank; or determining whether the banking institutions should be rehabilitated or liquidated, and
if in the latter case, appointing a liquidator towards this end. The said Section 29 of the old Central Bank Act was explicit that the determination by the
Monetary Board of whether a banking institution is insolvent, or should be rehabilitated or liquidated, is final and executory. However, said
determination could be set aside by the trial court if there was convincing proof that the Monetary Board acted arbitrarily or in bad faith. Under the
circumstances obtaining in Salud, it is apparent that our ruling therein is limited to cases of insolvency, and not to all cases cognizable by the
Monetary Board.

At any rate, under the new law, i.e., Section 30 of Republic Act No. 7653, otherwise known as The New Central Bank Act, which took effect on
3 July 1993, the order of the BSP Monetary Board, even regarding the liquidation of a bank, can be questioned via a Petition for Certiorari before a court
when the same was issued in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction. The court
referred to therein can be construed to mean the Court of Appeals because it is in the said court where a Petition for Certiorari can be filed following the
hierarchy of courts.

Moreover, the appellate jurisdiction of the Court of Appeals over the final judgments, orders, resolutions or awards of the BSP Monetary Board
in administrative cases involving directors and officers of banks, quasi-banks, and trust entities, is affirmed in BSP Circular No. 477, Series of 2005. The
said BSP Circular expressly provides that the resolution rendered by the BSP Monetary Board in administrative cases may be appealed to the Court of
Appeals within the period and the manner provided under Rule 43 of the 1997 Revised Rules of Civil Procedure.

With all the foregoing, it cannot now be questioned that the Court of Appeals has appellate jurisdiction over the final judgments, orders,
resolutions or awards rendered by the BSP Monetary Board in administrative cases against banks and their directors and officers, such as UCPB, et al.

The Court then proceeds to resolve the issue of whether the Court of Appeals erred in holding that the BSP Monetary Board summarily dismissed
the administrative complaint of EGI against UCPB, et al.

After a meticulous scrutiny of the 16 September 2003 letter-decision of the BSP Monetary Board, this Court rules in the negative and affirms the
finding of the Court of Appeals that the BSP Monetary Board did, indeed, summarily dismiss administrative complaint of EGI against UCPB, et al., for
violation of Sections 36 and 37, Article IV of Republic Act No. 7653, in relation to Section 55.1(a) of Republic Act No. 8791, and for the commission of
irregularity and unsafe or unsound banking practice.

Given the gravity and seriousness of the charges of EGI against UCPB, et al., the sweeping statement of the BSP Monetary Board that it was
inclined to dismiss the complaint of EGI based on the evaluation made by its Supervision and Examination Department I and Office of the General
Counsel and Legal Services, is simply insufficient and unsatisfactory. Worse, the BSP Monetary Board merely presented the following conclusions
without bothering to explain its bases for the same: (1) UCPB computed interest on loans based on BSP rules and regulations which prohibit banks from
accruing interest on loans that have become non-performing (BSP Circular No. 202); (2) fair market value of assets to be foreclosed is different from the
bid price submitted during foreclosure and there is no statutory obligation for the latter to be equivalent to the former; (3) regarding the
alleged P145,163,000.00 fabricated loan, the documents showed that there were the EGI Board resolution to borrow, promissory note signed by Mr.
EulalioGanzon, and Loan Agreement stating the proceeds shall be used to pay outstanding availments and interest servicing; and (4) there is no finding
by Supervision and Examination Department I on the alleged double charging and/or padding of transaction costs.

Further, in resolving the matter before it, the BSP Monetary Board never considered the UCPB Internal Memorandum dated22 February 2001,
which was the heart of the administrative complaint of EGI against UCPB, et al. The BSP Monetary Board did not even attempt to establish whether it
was regular or sound practice for a bank to keep a record of its borrowers loan obligations with two different sets of figures, one higher than the other;
and to disclose to the borrower only the higher figures. The explanation of UCPB, et al., adopted by the BSP Monetary Board that the figures in the
ACTUAL column were lower than those in the DISCLOSED TO EGI column because the former was computed in accordance with BSP rules and
regulations prohibiting the accrual of interest on loans that have become non-performing gives rise to more questions than answers. Examples of
some of these questions would be whether the loan obligations of EGI have become non-performing; whether the differences between the figures in the
ACTUAL and DISCLOSED TO EGI columns indeed corresponded to the interest that should be excluded from the figures in the first column per BSP
rules and regulations; and whether the computations of the figures in both columns should have been freely disclosed and sufficiently explained to EGI
in the name of transparency.

The BSP Monetary Board similarly failed to clarify whether UCPB can foreclose the mortgaged properties of EGI in amounts that were less
than the values of the said properties as determined and stipulated by EGI and UCPB in their amended MOA. The Court once more agrees in the ruling
of the Court of Appeals that the MOA entered into by EGI and UCPB serves as a contract between them, and it is the law that should govern their
relationship, which neither of the parties can simply abrogate, violate, or disregard. Unfortunately, the BSP Monetary Board never even referred to the
MOA executed by the parties in its letter-decision dated 16 September 2003.

Moreover, the BSP Monetary Board found that the P145,163,000.00 loan of EGI from UCPB was not fabricated based on several
documents. However, there is absolute lack of explanation by the BSP Monetary Board as to why said documents deserved more weight vis-vis evidence of EGI of suspicious circumstances surrounding the said loan, such as UCPB granting EGI said loan even when the latter was already in
default on its prior loan obligations, and without requiring additional security, detailed business plan, and financial projections from EGI.

The disregard by BSP Monetary Board of all the foregoing facts and issues in its letter-decision dated 16 September 2003leads this Court to
declare that it summarily dismissed the administrative complaint of EGI against UCPB, et al. There can be no complete resolution of the administrative
complaint of EGI without consideration of these facts and judgment on said issues.

Finally, there is no merit in the assertion of UCPB, et al. that the Court of Appeals erred in disregarding the findings of fact of the BSP Monetary
Board in the absence of grave abuse of discretion or lack of basis for the same.

Although, as a general rule, findings of facts of an administrative agency, which has acquired expertise in the particular field of its endeavor, are
accorded great weight on appeal, such rule cannot be applied with respect to the assailed findings of the BSP Monetary Board in this case. Rather, what
applies is the recognized exception that if such findings are not supported by substantial evidence, the Court can make its own independent evaluation
of the facts.[41]

The standard of substantial evidence required in administrative proceedings is more than a mere scintilla. It means such relevant evidence as
a reasonable mind might accept as adequate to support a conclusion. While rules of evidence prevailing in courts of law and equity shall not be
controlling, the obvious purpose being to free administrative boards from the compulsion of technical rules so that the mere admission of matter which
would be deemed incompetent in judicial proceedings would not invalidate the administrative order, this assurance of a desirable flexibility in
administrative procedure does not go so far as to justify orders without basis in evidence having rational probative force. [42]

It cannot be convincingly said herein that the factual findings of the BSP Monetary Board in its letter-decision dated 16 September 2003 was
supported by substantial evidence since (1) most of the findings were not supported by references to specific evidence; and (2) the findings were made
without consideration of the primary evidence presented by EGI (i.e., the MOA and its amendments and the UCPB Internal Memorandum dated 22
February 2001).

Even then, the Court of Appeals stopped short of categorically ruling that UCPB, et al. committed irregularities, or unsound or unsafe banking
practice in its transactions with EGI. What the Court of Appeals positively pronounced was that the BSP Monetary Board failed to give the necessary
consideration to the administrative complaint of EGI, summarily dismissing the same in its 16 September 2003 letter-decision. The 14 October
2004 Decision of the Court of Appeals clearly remanded the case to the BSP for further proceedings since the BSP, with its specialized knowledge and
expertise on banking matters, is more up to task to receive evidence, hold hearings, and thereafter resolve the issues based on its findings of fact and
law.

G.R. No. 168897

Also unsatisfied with the Decision dated 14 October 2004 and Resolution dated 7 July 2005 of the Court of Appeals, EGI filed with this Court its
own Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure, raising the following issues:
I.
The Honorable Court of Appeals does have appellate jurisdiction over decisions, orders, and resolutions of the
BSP/Monetary Board.
II.
EGI.

The Honorable Court of Appeals was correct in FINDING that the [BSP] summarily dismissed the complaint of

III.
Whether or not the Honorable Court of Appeals committed patent, grave, and reversible error when it remanded
the case to the [BSP] for further proceedings instead of acting upon its findings as narrated in its Decision.
IV.
Whether or not the Honorable Court of Appeals committed patent, grave, and reversible error in not directing the
[BSP] to impose the appropriate penalties against [UCPB, et al.].[43]

The Petition is docketed as G.R. No. 168897.

Since the first two issues have already been addressed by this Court in its previous discussion herein on G.R. No. 168859, we now proceed to
resolve the next two issues raised by EGI in its Petition in G.R. No. 168897.

EGI avers that the Court of Appeals committed reversible error when it remanded the case to the BSP for further proceedings instead of directing
the BSP to impose the applicable sanctions on UCPB, et al. EGI reasons that the appellate court, in its Decision dated 14 October 2004, already found
that UCPB had committed several acts of serious irregularity and conducted business in an unsafe and unsound manner. By reason thereof, there was
no more need for the Court of Appeals to remand this case to the BSP for a further determination of whether there were irregular and unsound practices
by UCPB, et al. in its dealings with EGI. Should this case be remanded to the BSP, there would be nothing to prevent the BSP from ruling again that
UCPB, et al., did not commit any irregularity and unsafe or unsound business practice. To require that this case be reviewed by the BSP would only lead
to multiplicity of suits, promote unnecessary delay and negate the constitutional rights of all persons to a speedy disposition of their cases before all
judicial, quasi-judicial or administrative bodies.

The Court reiterates that the Court of Appeals did not yet make conclusive findings in its Decision dated 14 October 2004, that UCPB, et al.,
committed irregularities and unsound or unsafe banking practices in their business dealings with EGI. The appellate court only adjudged that the BSP
Monetary Board summarily dismissed the administrative complaint of EGI, without fully appreciating the facts and evidence presented by the
latter. Given the seriousness of the charges of EGI against UCPB, et al., the BSP Monetary Board should have conducted a more intensive inquiry and
rendered a more comprehensive decision.

By remanding the case to the BSP Monetary Board, the Court of Appeals only acted in accordance with Republic Act No. 7653 and Republic Act
No. 8791, which tasked the BSP, through the Monetary Board, to determine whether a particular act or omission, which is not otherwise prohibited by
any law, rule or regulation affecting banks, quasi-banks or trust entities, may be deemed as conducting business in an unsafe or unsound manner. Also,
the BSP Monetary Board is the proper body to impose the necessary administrative sanctions for the erring bank and its directors or officers.

The Court of Appeals did not deem it appropriate, on appeal, to outright reverse the judgment of the BSP Monetary Board. The Court of Appeals
held that the BSP Monetary Board did not have sufficient basis for dismissing the administrative complaint of EGI in its 16 September 2003 letterdecision; yet, the appellate court likewise did not find enough evidence on record to already resolve the administrative complaint in favor of EGI and
against UCPB, et al., precisely the reason why it still remanded the case to the BSP Monetary Board for further proceedings. The Court of Appeals
never meant to give EGI an assurance of a favorable judgment; it only ensured that the BSP Monetary Board shall accord all parties concerned to equal
opportunity for presentation and consideration of their allegations, arguments, and evidence. While the speedy disposition of cases is a constitutionally
mandated right, the paramount duty of the courts, as well as quasi-judicial bodies, is to render justice by following the basic rules and principles of due
process and fair play.

WHEREFORE, premises considered, the Petition for Review on Certiorari of United Coconut Planters Bank, Jeronimo U. Kilayko, Lorenzo V. Tan,
Enrique L. Gana, Jaime W. Jacinto and Emily R. Lazaro, in G.R. No. 168859; as well as the Petition for Review on Certiorari of E. Ganzon, Inc. in G.R.
No. 168897, are hereby DENIED. The Decision dated 14 October 2004 and Resolution dated 7 July 2005 of the Court of Appeals in CA-G.R. SP No.
81385 are hereby AFFIRMED in toto.
SO ORDERED.

No costs.

ANA MARIA A. KORUGA,

G.R. No. 168332

Petitioner,

- versus -

TEODORO O. ARCENAS, JR., ALBERT C. AGUIRRE, CESAR S.

PAGUIO, FRANCISCO A. RIVERA, and THE HONORABLE COURT
OF APPEALS, THIRD DIVISION,
Respondents.
x-----------------------------x

G.R. No. 169053

Present:

TEODORO O. ARCENAS, JR., ALBERT C. AGUIRRE, CESAR S.

PAGUIO, and FRANCISCO A. RIVERA,
Petitioners,

YNARES-SANTIAGO, J.,
Chairperson,
CARPIO,*
CORONA,**

- versus -

NACHURA, and
PERALTA, JJ.
HON. SIXTO MARELLA, JR., Presiding Judge, Branch
138, Regional Trial Courtof Makati City, and ANA MARIA A.
KORUGA,

Promulgated:

Respondents.
June 19, 2009

DECISION

NACHURA, J.:
Before this Court are two petitions that originated from a Complaint filed by Ana Maria A. Koruga (Koruga) before the Regional Trial Court
(RTC) of Makati City against the Board of Directors of Banco Filipino and the Members of the Monetary Board of the BangkoSentralngPilipinas (BSP) for
violation of the Corporation Code, for inspection of records of a corporation by a stockholder, for receivership, and for the creation of a management
committee.
G.R. No. 168332
The first is a Petition for Certiorari under Rule 65 of the Rules of Court, docketed as G.R. No. 168332, praying for the annulment of the Court
of Appeals (CA) Resolution [1] in CA-G.R. SP No. 88422 dated April 18, 2005 granting the prayer for a Writ of Preliminary Injunction of therein petitioners
Teodoro O. Arcenas, Jr., Albert C. Aguirre, Cesar S. Paguio, and Francisco A. Rivera (Arcenas, et al.).
Koruga is a minority stockholder of Banco Filipino Savings and Mortgage Bank. On August 20, 2003, she filed a complaint before the Makati
RTC which was raffled to Branch 138, presided over by Judge SixtoMarella, Jr.[2] Korugas complaint alleged:
10. 1 Violation of Sections 31 to 34 of the Corporation Code (Code) which prohibit self-dealing and conflicts of interest of
directors and officers, thus:

(a)
For engaging in unsafe, unsound, and fraudulent banking practices that have jeopardized the
welfare of the Bank, its shareholders, who includes among others, the Petitioner, and depositors. (sic)
(b)
For granting and approving loans and/or loaned sums of money to six (6) dummy borrower
corporations (Borrower Corporations) which, at the time of loan approval, had no financial capacity to justify the loans.
(sic)
(c)
For approving and accepting a dacion en pago, or payment of loans with property instead of cash,
resulting to a diminished future cumulative interest income by the Bank and a decline in its liquidity position. (sic)
(d)
For knowingly giving favorable treatment to the Borrower Corporations in which some or most of
them have interests, i.e.interlocking directors/officers thereof, interlocking ownerships. (sic)
(e)
For employing their respective offices and functions as the Banks officers and directors, or
omitting to perform their functions and duties, with negligence, unfaithfulness or abuse of confidence of fiduciary duty,
misappropriated or misapplied or ratified by inaction the misappropriation or misappropriations, of (sic) almost P1.6 Billion
Pesos (sic) constituting the Banks funds placed under their trust and administration, by unlawfully releasing loans to the
Borrower Corporations or refusing or failing to impugn these, knowing before the loans were released or thereafter that
the Banks cash resources would be dissipated thereby, to the prejudice of the Petitioner, other Banco Filipino depositors,
and the public.
10.2 Right of a stockholder to inspect the records of a corporation (including financial statements) under Sections 74 and
75 of the Code, as implemented by the Interim Rules;
(a)
Unlawful refusal to allow the Petitioner from inspecting or otherwise accessing the corporate
records of the bank despite repeated demand in writing, where she is a stockholder. (sic)
10.3 Receivership and Creation of a Management Committee pursuant to:
(a)

Rule 59 of the 1997 Rules of Civil Procedure (Rules);

(b)

Section 5.2 of R.A. No. 8799;

(c)

Rule 1, Section 1(a)(1) of the Interim Rules;

(d)

Rule 1, Section 1(a)(2) of the Interim Rules;

(e)

Rule 7 of the Interim Rules;

(f)

Rule 9 of the Interim Rules; and

(g)

The General Banking Law of 2000 and the New Central Bank Act.[3]

On September 12, 2003, Arcenas, et al. filed their Answer raising, among others, the trial courts lack of jurisdiction to take cognizance of the
case. They also filed a Manifestation and Motion seeking the dismissal of the case on the following grounds: (a) lack of jurisdiction over the subject
matter; (b) lack of jurisdiction over the persons of the defendants; (c) forum-shopping; and (d) for being a nuisance/harassment suit. They then moved
that the trial court rule on their affirmative defenses, dismiss the intra-corporate case, and set the case for preliminary hearing.
In an Order dated October 18, 2004, the trial court denied the Manifestation and Motion, ruling thus:
The result of the procedure sought by defendants Arcenas, et al. (sic) is for the Court to conduct a preliminary hearing on the
affirmative defenses raised by them in their Answer. This [is] proscribed by the Interim Rules of Procedure on Intracorporate (sic)
Controversies because when a preliminary hearing is conducted it is as if a Motion to Dismiss was filed (Rule 16, Section 6, 1997
Rules of Civil Procedure). A Motion to Dismiss is a prohibited pleading under the Interim Rules, for which reason, no favorable
consideration can be given to the Manifestation and Motion of defendants, Arcenas, et al.
The Court finds no merit to (sic) the claim that the instant case is a nuisance or harassment suit.
WHEREFORE, the Court defers resolution of the affirmative defenses raised by the defendants Arcenas, et al.[4]

Arcenas, et al. moved for reconsideration[5] but, on January 18, 2005, the RTC denied the motion.[6] This prompted Arcenas, et al. to file before
the CA a Petition for Certiorari and Prohibition under Rule 65 of the Rules of Court with a prayer for the issuance of a writ of preliminary injunction and a
temporary retraining order (TRO).[7]

On February 9, 2005, the CA issued a 60-day TRO enjoining Judge Marella from conducting further proceedings in the case. [8]
On February 22, 2005, the RTC issued a Notice of Pre-trial [9] setting the case for pre-trial on June 2 and 9, 2005. Arcenas, et al. filed a
Manifestation and Motion[10] before the CA, reiterating their application for a writ of preliminary injunction. Thus, on April 18, 2005, the CA issued the
assailed Resolution, which reads in part:
(C)onsidering that the Temporary Restraining Order issued by this Court on February 9, 2005 expired on April 10, 2005, it is
necessary that a writ of preliminary injunction be issued in order not to render ineffectual whatever final resolution this Court may
render in this case, after the petitioners shall have posted a bond in the amount of FIVE HUNDRED THOUSAND ( P500,000.00)
PESOS.
SO ORDERED.[11]

Dissatisfied, Koruga filed this Petition for Certiorari under Rule 65 of the Rules of Court. Koruga alleged that the CA effectively gave due
course to Arcenas, et al.s petition when it issued a writ of preliminary injunction without factual or legal basis, either in the April 18, 2005 Resolution itself
or in the records of the case. She prayed that this Court restrain the CA from implementing the writ of preliminary injunction and, after due proceedings,
make the injunction against the assailed CA Resolution permanent. [12]
In their Comment, Arcenas, et al. raised several procedural and substantive issues. They alleged that the Verification and Certification against
Forum-Shopping attached to the Petition was not executed in the manner prescribed by Philippine law since, as admitted by Korugas counsel himself,
the same was only a facsimile.
They also averred that Koruga had admitted in the Petition that she never asked for reconsideration of the CAs April 18, 2005 Resolution,
contending that the Petition did not raise pure questions of law as to constitute an exception to the requirement of filing a Motion for Reconsideration
before a Petition for Certiorari is filed.
They, likewise, alleged that the Petition may have already been rendered moot and academic by the July 20, 2005 CA Decision, [13] which
denied their Petition, and held that the RTC did not commit grave abuse of discretion in issuing the assailed orders, and thus ordered the RTC to
proceed with the trial of the case.
Meanwhile, on March 13, 2006, this Court issued a Resolution granting the prayer for a TRO and enjoining the Presiding Judge of Makati
RTC, Branch 138, from proceeding with the hearing of the case upon the filing by Arcenas, et al. of a P50,000.00 bond. Koruga filed a motion to lift the
TRO, which this Court denied on July 5, 2006.
On the other hand, respondents Dr. Conrado P. Banzon and Gen. Ramon Montao also filed their Comment on Korugas Petition, raising
substantially the same arguments as Arcenas, et al.
G.R. No. 169053
G.R. No. 169053 is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, with prayer for the issuance of a TRO and a writ of
preliminary injunction filed by Arcenas, et al.
In their Petition, Arcenas, et al. asked the Court to set aside the Decision [14] dated July 20, 2005 of the CA in CA-G.R. SP No. 88422, which
denied their petition, having found no grave abuse of discretion on the part of the Makati RTC. The CA said that the RTC Orders were interlocutory in
nature and, thus, may be assailed by certiorari or prohibition only when it is shown that the court acted without or in excess of jurisdiction or with grave
abuse of discretion. It added that the Supreme Court frowns upon resort to remedial measures against interlocutory orders.

Arcenas, et al. anchored their prayer on the following grounds: that, in their Answer before the RTC, they had raised the issue of failure of the
court to acquire jurisdiction over them due to improper service of summons; that the Koruga action is a nuisance or harassment suit; that there is
another case involving the same parties for the same cause pending before the Monetary Board of the BSP, and this constituted forum-shopping; and
that jurisdiction over the subject matter of the case is vested by law in the BSP.[15]
Arcenas, et al. assign the following errors:
I.

THE COURT OF APPEALS, IN FINDING NO GRAVE ABUSE OF DISCRETION COMMITTED BY PUBLIC

RESPONDENT REGIONAL TRIAL COURT OF MAKATI, BRANCH 138, IN ISSUING THE ASSAILED ORDERS, FAILED
TO CONSIDER AND MERELY GLOSSED OVER THE MORE TRANSCENDENT ISSUES OF THE LACK OF
JURISDICTION ON THE PART OF SAID PUBLIC RESPONDENT OVER THE SUBJECT MATTER OF THE CASE
BEFORE IT, LITIS PENDENTIA AND FORUM SHOPPING, AND THE CASE BELOW BEING A NUISANCE OR
HARASSMENT SUIT, EITHER ONE AND ALL OF WHICH GOES/GO TO RENDER THE ISSUANCE BY PUBLIC
RESPONDENT OF THE ASSAILED ORDERS A GRAVE ABUSE OF DISCRETION.

II.

THE FINDING OF THE COURT OF APPEALS OF NO GRAVE ABUSE OF DISCRETION COMMITTED BY PUBLIC
RESPONDENT REGIONAL TRIAL COURT OF MAKATI, BRANCH 138, IN ISSUING THE ASSAILED ORDERS, IS NOT
IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THIS HONORABLE COURT.[16]

Meanwhile, in a Manifestation and Motion filed on August 31, 2005, Koruga prayed for, among others, the consolidation of her Petition with the
Petition for Review on Certiorari under Rule 45 filed by Arcenas, et al., docketed as G.R. No. 169053. The motion was granted by this Court in a
Resolution dated September 26, 2005.
Our Ruling
Initially, we will discuss the procedural issue.
Arcenas, et al. argue that Korugas petition should be dismissed for its defective Verification and Certification Against Forum-Shopping, since
only a facsimile of the same was attached to the Petition. They also claim that the Verification and Certification Against Forum-Shopping, allegedly
executed in Seattle, Washington, was not authenticated in the manner prescribed by Philippine law and not certified by the Philippine Consulate in
the United States.
This contention deserves scant consideration.
On the last page of the Petition in G.R. No. 168332, Korugas counsel executed an Undertaking, which reads as follows:
In view of that fact that the Petitioner is currently in the United States, undersigned counsel is attaching a facsimile copy of
the Verification and Certification Against Forum-Shopping duly signed by the Petitioner and notarized by Stephanie N. Goggin, a
Notary Public for the Sate (sic) ofWashington. Upon arrival of the original copy of the Verification and Certification as certified by the
Office of the Philippine Consul, the undersigned counsel shall immediately provide duplicate copies thereof to the Honorable Court.
[17]

Thus, in a Compliance[18] filed with the Court on September 5, 2005, petitioner submitted the original copy of the duly notarized and
authenticated Verification and Certification Against Forum-Shopping she had executed. [19] This Court noted and considered the Compliance satisfactory
in its Resolution dated November 16, 2005. There is, therefore, no need to further belabor this issue.
We now discuss the substantive issues in this case.
First, we resolve the prayer to nullify the CAs April 18, 2005 Resolution.
We hold that the Petition in G.R. No. 168332 has become moot and academic. The writ of preliminary injunction being questioned had
effectively been dissolved by the CAs July 20, 2005 Decision. The dispositive portion of the Decision reads in part:

The case is REMANDED to the court a quo for further proceedings and to resolve with deliberate dispatch the intracorporate controversies and determine whether there was actually a valid service of summons. If, after hearing, such service is
found to have been improper, then new summons should be served forthwith.[20]

Accordingly, there is no necessity to restrain the implementation of the writ of preliminary injunction issued by the CA on April 18, 2005, since it no longer
exists.
However, this Court finds that the CA erred in upholding the jurisdiction of, and remanding the case to, the RTC.
The resolution of these petitions rests mainly on the determination of one fundamental issue: Which body has jurisdiction over the Koruga
Complaint, the RTC or the BSP?
We hold that it is the BSP that has jurisdiction over the case.
A reexamination of the Complaint is in order.
Korugas Complaint charged defendants with violation of Sections 31 to 34 of the Corporation Code, prohibiting self-dealing and conflict of
interest of directors and officers; invoked her right to inspect the corporations records under Sections 74 and 75 of the Corporation Code; and prayed for
Receivership and Creation of a Management Committee, pursuant to Rule 59 of the Rules of Civil Procedure, the Securities Regulation Code, the
Interim Rules of Procedure Governing Intra-Corporate Controversies, the General Banking Law of 2000, and the New Central Bank Act. She accused
the directors and officers of Banco Filipino of engaging in unsafe, unsound, and fraudulent banking practices, more particularly, acts that violate the
prohibition on self-dealing.
It is clear that the acts complained of pertain to the conduct of Banco Filipinos banking business. A bank, as defined in theGeneral Banking
Law,

[21]

refers to an entity engaged in the lending of funds obtained in the form of deposits. [22] The banking business is properly subject to reasonable

regulation under the police power of the state because of its nature and relation to the fiscal affairs of the people and the revenues of the state. Banks
are affected with public interest because they receive funds from the general public in the form of deposits. It is the Governments responsibility to see to
it that the financial interests of those who deal with banks and banking institutions, as depositors or otherwise, are protected. In this country, that task is
delegated to the BSP, which pursuant to its Charter, is authorized to administer the monetary, banking, and credit system of the Philippines. It is further
authorized to take the necessary steps against any banking institution if its continued operation would cause prejudice to its depositors, creditors and the
general public as well.[23]
The law vests in the BSP the supervision over operations and activities of banks. The New Central Bank Act provides:
Section 25. Supervision and Examination. - The BangkoSentral shall have supervision over, and conduct periodic or
special examinations of, banking institutions and quasi-banks, including their subsidiaries and affiliates engaged in allied activities. [24]
Specifically, the BSPs supervisory and regulatory powers include:
4.1

The issuance of rules of conduct or the establishment of standards of operation for uniform application to all institutions or
functions covered, taking into consideration the distinctive character of the operations of institutions and the substantive
similarities of specific functions to which such rules, modes or standards are to be applied;

4.2

The conduct of examination to determine compliance with laws and regulations if the circumstances so warrant as
determined by the Monetary Board;

4.3

Overseeing to ascertain that laws and Regulations are complied with;

4.4

Regular investigation which shall not be oftener than once a year from the last date of examination to
determine whetheran institution is conducting its business on a safe or sound basis: Provided, That
the deficiencies/irregularities found by or discovered by an audit shall be immediately addressed;

4.5

Inquiring into the solvency and liquidity of the institution (2-D); or

4.6

Enforcing prompt corrective action.[25]

Koruga alleges that the dispute in the trial court involves the manner with which the Directors (sic) have handled the Banks affairs,
specifically the fraudulent loans and dacion en pago authorized by the Directors in favor of several dummy corporations known to have close ties and
are indirectly controlled by the Directors. [26] Her allegations, then, call for the examination of the allegedly questionable loans. Whether these loans are
covered by the prohibition on self-dealing is a matter for the BSP to determine. These are not ordinary intra-corporate matters; rather, they involve
banking activities which are, by law, regulated and supervised by the BSP. As the Court has previously held:
It is well-settled in both law and jurisprudence that the Central Monetary Authority, through the Monetary Board, is vested
with exclusive authority to assess, evaluate and determine the condition of any bank, and finding such condition to be one of
insolvency, or that its continuance in business would involve a probable loss to its depositors or creditors, forbid bank or non-bank
financial institution to do business in the Philippines; and shall designate an official of the BSP or other competent person as
receiver to immediately take charge of its assets and liabilities. [27]

Correlatively, the General Banking Law of 2000 specifically deals with loans contracted by bank directors or officers, thus:
SECTION 36.Restriction on Bank Exposure to Directors, Officers, Stockholders and Their Related Interests. No
director or officer of any bank shall, directly or indirectly, for himself or as the representative or agent of others, borrow from such
bank nor shall he become a guarantor, indorser or surety for loans from such bank to others, or in any manner be an obligor or incur
any contractual liability to the bank except with the written approval of the majority of all the directors of the bank, excluding the
director concerned: Provided, That such written approval shall not be required for loans, other credit accommodations and advances
granted to officers under a fringe benefit plan approved by the BangkoSentral. The required approval shall be entered upon the
records of the bank and a copy of such entry shall be transmitted forthwith to the appropriate supervising and examining department
of the BangkoSentral.
Dealings of a bank with any of its directors, officers or stockholders and their related interests shall be upon terms not less
favorable to the bank than those offered to others.
After due notice to the board of directors of the bank, the office of any bank director or officer who violates the provisions
of this Section may be declared vacant and the director or officer shall be subject to the penal provisions of the New Central Bank
Act.
The Monetary Board may regulate the amount of loans, credit accommodations and guarantees that may be
extended, directly or indirectly, by a bank to its directors, officers, stockholders and their related interests, as well as
investments of such bank in enterprises owned or controlled by said directors, officers, stockholders and their related
interests. However, the outstanding loans, credit accommodations and guarantees which a bank may extend to each of its
stockholders, directors, or officers and their related interests, shall be limited to an amount equivalent to their respective
unencumbered deposits and book value of their paid-in capital contribution in the bank: Provided, however, That loans, credit
accommodations and guarantees secured by assets considered as non-risk by the Monetary Board shall be excluded from such
limit: Provided, further, That loans, credit accommodations and advances to officers in the form of fringe benefits granted in
accordance with rules as may be prescribed by the Monetary Board shall not be subject to the individual limit.
The Monetary Board shall define the term related interests.
The limit on loans, credit accommodations and guarantees prescribed herein shall not apply to loans, credit
accommodations and guarantees extended by a cooperative bank to its cooperative shareholders.[28]

Furthermore, the authority to determine whether a bank is conducting business in an unsafe or unsound manner is also vested in the
Monetary Board. The General Banking Law of 2000 provides:
SECTION 56.Conducting Business in an Unsafe or Unsound Manner. In determining whether a particular act or
omission, which is not otherwise prohibited by any law, rule or regulation affecting banks, quasi-banks or trust entities, may be
deemed as conducting business in an unsafe or unsound manner for purposes of this Section, the Monetary Board shall consider
any of the following circumstances:
56.1.

The act or omission has resulted or may result in material loss or damage, or abnormal risk or danger to the
safety, stability, liquidity or solvency of the institution;

56.2.

The act or omission has resulted or may result in material loss or damage or abnormal risk to the institution's
depositors, creditors, investors, stockholders or to the BangkoSentral or to the public in general;

56.3.

The act or omission has caused any undue injury, or has given any unwarranted benefits, advantage or preference
to the bank or any party in the discharge by the director or officer of his duties and responsibilities through
manifest partiality, evident bad faith or gross inexcusable negligence; or

56.4.

The act or omission involves entering into any contract or transaction manifestly and grossly disadvantageous to
the bank, quasi-bank or trust entity, whether or not the director or officer profited or will profit thereby.

Whenever a bank, quasi-bank or trust entity persists in conducting its business in an unsafe or unsound manner, the
Monetary Board may, without prejudice to the administrative sanctions provided in Section 37 of the New Central Bank Act, take
action under Section 30 of the same Act and/or immediately exclude the erring bank from clearing, the provisions of law to the
contrary notwithstanding.

Finally, the New Central Bank Act grants the Monetary Board the power to impose administrative sanctions on the erring bank:
Section 37. Administrative Sanctions on Banks and Quasi-banks. - Without prejudice to the criminal sanctions against the
culpable persons provided in Sections 34, 35, and 36 of this Act, the Monetary Board may, at its discretion, impose upon any
bank or quasi-bank, their directors and/or officers, for any willful violation of its charter or by-laws, willful delay in the submission
of reports or publications thereof as required by law, rules and regulations; any refusal to permit examination into the affairs of the
institution; any willful making of a false or misleading statement to the Board or the appropriate supervising and examining
department or its examiners; any willful failure or refusal to comply with, or violation of, any banking law or any order, instruction or
regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor; or any commission of irregularities,
and/or conducting business in an unsafe or unsound manner as may be determined by the Monetary Board , the following
administrative sanctions, whenever applicable:
(a) fines in amounts as may be determined by the Monetary Board to be appropriate, but in no case to exceed Thirty
thousand pesos (P30,000) a day for each violation, taking into consideration the attendant circumstances, such as the
nature and gravity of the violation or irregularity and the size of the bank or quasi-bank;
(b) suspension of rediscounting privileges or access to BangkoSentral credit facilities;
(c) suspension of lending or foreign exchange operations or authority to accept new deposits or make new investments;
(d) suspension of interbank clearing privileges; and/or
(e) revocation of quasi-banking license.
Resignation or termination from office shall not exempt such director or officer from administrative or criminal sanctions.
The Monetary Board may, whenever warranted by circumstances, preventively suspend any director or officer of a bank
or quasi-bank pending an investigation: Provided, That should the case be not finally decided by the BangkoSentral within a period
of one hundred twenty (120) days after the date of suspension, said director or officer shall be reinstated in his position: Provided,
further, That when the delay in the disposition of the case is due to the fault, negligence or petition of the director or officer, the
period of delay shall not be counted in computing the period of suspension herein provided.
The above administrative sanctions need not be applied in the order of their severity.
Whether or not there is an administrative proceeding, if the institution and/or the directors and/or officers concerned
continue with or otherwise persist in the commission of the indicated practice or violation, the Monetary Board may issue an order
requiring the institution and/or the directors and/or officers concerned to cease and desist from the indicated practice or violation,
and may further order that immediate action be taken to correct the conditions resulting from such practice or violation. The cease
and desist order shall be immediately effective upon service on the respondents.
The respondents shall be afforded an opportunity to defend their action in a hearing before the Monetary Board or any
committee chaired by any Monetary Board member created for the purpose, upon request made by the respondents within five (5)
days from their receipt of the order. If no such hearing is requested within said period, the order shall be final. If a hearing is
conducted, all issues shall be determined on the basis of records, after which the Monetary Board may either reconsider or make
final its order.
The Governor is hereby authorized, at his discretion, to impose upon banking institutions, for any failure to comply with
the requirements of law, Monetary Board regulations and policies, and/or instructions issued by the Monetary Board or by the
Governor, fines not in excess of Ten thousand pesos (P10,000) a day for each violation, the imposition of which shall be final and
executory until reversed, modified or lifted by the Monetary Board on appeal. [29]Koruga also accused Arcenas, et al. of violation of
the Corporation Codes provisions on self-dealing and conflict of interest. She invoked Section 31 of the Corporation Code, which
defines the liability of directors, trustees, or officers of a corporation for, among others, acquiring any personal or pecuniary interest
in conflict with their duty as directors or trustees, and Section 32, which prescribes the conditions under which a contract of the
corporation with one or more of its directors or trustees the so-called self-dealing directors [30] would be valid. She also alleged
that Banco Filipinos directors violated Sections 33 and 34 in approving the loans of corporations with interlocking ownerships, i.e.,
owned, directed, or managed by close associates of Albert C. Aguirre.
Sections 31 to 34 of the Corporation Code provide:
Section 31. Liability of directors, trustees or officers. - Directors or trustees who wilfully and knowingly vote for or assent
to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation
or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and
severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons.

When a director, trustee or officer attempts to acquire or acquires, in violation of his duty, any interest adverse to the
corporation in respect of any matter which has been reposed in him in confidence, as to which equity imposes a disability upon him
to deal in his own behalf, he shall be liable as a trustee for the corporation and must account for the profits which otherwise would
have accrued to the corporation.
Section 32. Dealings of directors, trustees or officers with the corporation. - A contract of the corporation with one or more
of its directors or trustees or officers is voidable, at the option of such corporation, unless all the following conditions are present:
1. That the presence of such director or trustee in the board meeting in which the contract was approved was not
necessary to constitute a quorum for such meeting;
2. That the vote of such director or trustee was not necessary for the approval of the contract;
3. That the contract is fair and reasonable under the circumstances; and
4. That in case of an officer, the contract has been previously authorized by the board of directors.
Where any of the first two conditions set forth in the preceding paragraph is absent, in the case of a contract with a
director or trustee, such contract may be ratified by the vote of the stockholders representing at least two-thirds (2/3) of the
outstanding capital stock or of at least two-thirds (2/3) of the members in a meeting called for the purpose: Provided, That full
disclosure of the adverse interest of the directors or trustees involved is made at such meeting: Provided, however, That the contract
is fair and reasonable under the circumstances.
Section 33. Contracts between corporations with interlocking directors. - Except in cases of fraud, and provided the
contract is fair and reasonable under the circumstances, a contract between two or more corporations having interlocking directors
shall not be invalidated on that ground alone: Provided, That if the interest of the interlocking director in one corporation is
substantial and his interest in the other corporation or corporations is merely nominal, he shall be subject to the provisions of the
preceding section insofar as the latter corporation or corporations are concerned.
Stockholdings exceeding twenty (20%) percent of the outstanding capital stock shall be considered substantial for
purposes of interlocking directors.
Section 34. Disloyalty of a director. - Where a director, by virtue of his office, acquires for himself a business opportunity
which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, he must account to the latter
for all such profits by refunding the same, unless his act has been ratified by a vote of the stockholders owning or representing at
least two-thirds (2/3) of the outstanding capital stock. This provision shall be applicable, notwithstanding the fact that the director
risked his own funds in the venture.

Korugas invocation of the provisions of the Corporation Code is misplaced. In an earlier case with similar antecedents, we ruled that:
The Corporation Code, however, is a general law applying to all types of corporations, while the New Central Bank Act
regulates specifically banks and other financial institutions, including the dissolution and liquidation thereof. As between a general
and special law, the latter shall prevail generaliaspecialibus non derogant.[31]

Consequently, it is not the Interim Rules of Procedure on Intra-Corporate Controversies, [32] or Rule 59 of the Rules of Civil Procedure on
Receivership, that would apply to this case. Instead, Sections 29 and 30 of the New Central Bank Act should be followed, viz.:
Section 29. Appointment of Conservator. - Whenever, on the basis of a report submitted by the appropriate supervising or
examining department, the Monetary Board finds that a bank or a quasi-bank is in a state of continuing inability or unwillingness to
maintain a condition of liquidity deemed adequate to protect the interest of depositors and creditors, the Monetary Board may
appoint a conservator with such powers as the Monetary Board shall deem necessary to take charge of the assets, liabilities, and
the management thereof, reorganize the management, collect all monies and debts due said institution, and exercise all powers
necessary to restore its viability. The conservator shall report and be responsible to the Monetary Board and shall have the power to
overrule or revoke the actions of the previous management and board of directors of the bank or quasi-bank.
x xxx
The Monetary Board shall terminate the conservatorship when it is satisfied that the institution can continue to operate on
its own and the conservatorship is no longer necessary. The conservatorship shall likewise be terminated should the Monetary
Board, on the basis of the report of the conservator or of its own findings, determine that the continuance in business of the
institution would involve probable loss to its depositors or creditors, in which case the provisions of Section 30 shall apply.

Section 30. Proceedings in Receivership and Liquidation. - Whenever, upon report of the head of the supervising or
examining department, the Monetary Board finds that a bank or quasi-bank:
(a) is unable to pay its liabilities as they become due in the ordinary course of business: Provided, That this
shall not include inability to pay caused by extraordinary demands induced by financial panic in the banking
community;
(b) has insufficient realizable assets, as determined by the BangkoSentral, to meet its liabilities; or
(c) cannot continue in business without involving probable losses to its depositors or creditors; or

(d) has willfully violated a cease and desist order under Section 37 that has become final, involving acts or
transactions which amount to fraud or a dissipation of the assets of the institution; in which cases, the
Monetary Board may summarily and without need for prior hearing forbid the institution from doing
business in the Philippines and designate the Philippine Deposit Insurance Corporation as receiver of
the banking institution.
x xxx
The actions of the Monetary Board taken under this section or under Section 29 of this Act shall be final and
executory, and may not be restrained or set aside by the court except on petition for certiorari on the ground that the
action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of
jurisdiction. The petition for certiorari may only be filed by the stockholders of record representing the majority of the capital stock
within ten (10) days from receipt by the board of directors of the institution of the order directing receivership, liquidation or
conservatorship.
The designation of a conservator under Section 29 of this Act or the appointment of a receiver under this section shall
be vested exclusively with the Monetary Board. Furthermore, the designation of a conservator is not a precondition to the
designation of a receiver.[33]

On the strength of these provisions, it is the Monetary Board that exercises exclusive jurisdiction over proceedings for receivership of banks.
Crystal clear in Section 30 is the provision that says the appointment of a receiver under this section shall be vested exclusively with the
Monetary Board. The term exclusively connotes that only the Monetary Board can resolve the issue of whether a bank is to be placed under
receivership and, upon an affirmative finding, it also has authority to appoint a receiver. This is further affirmed by the fact that the law allows the
Monetary Board to take action summarily and without need for prior hearing.
And, as a clincher, the law explicitly provides that actions of the Monetary Board taken under this section or under Section 29 of this Act shall
be final and executory, and may not be restrained or set aside by the court except on a petition for certiorari on the ground that the action taken was in
excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction.
From the foregoing disquisition, there is no doubt that the RTC has no jurisdiction to hear and decide a suit that seeks to place Banco Filipino
under receivership.
Koruga herself recognizes the BSPs power over the allegedly unlawful acts of Banco Filipinos directors. The records of this case bear out
that Koruga, through her legal counsel, wrote the Monetary Board [34] on April 21, 2003 to bring to its attention the acts she had enumerated in her
complaint before the RTC. The letter reads in part:
Banco Filipino and the current members of its Board of Directors should be placed under investigation for violations of
banking laws, the commission of irregularities, and for conducting business in an unsafe or unsound manner. They should likewise
be placed under preventive suspension by virtue of the powers granted to the Monetary Board under Section 37 of the Central Bank
Act. These blatant violations of banking laws should not go by without penalty. They have put Banco Filipino, its depositors and
stockholders, and the entire banking system (sic) in jeopardy.
xxxx
We urge you to look into the matter in your capacity as regulators. Our clients, a minority stockholders, (sic) and many
depositors of Banco Filipino are prejudiced by a failure to regulate, and taxpayers are prejudiced by accommodations granted by the
BSP to Banco Filipino[35]

In a letter dated May 6, 2003, BSP Supervision and Examination Department III Director Candon B. Guerrero referred Korugas letter to
Arcenas for comment.[36] On June 6, 2003, Banco Filipinos then Executive Vice President and Corporate Secretary Francisco A. Rivera submitted the
banks comments essentially arguing that Korugas accusations lacked legal and factual bases.[37]
On the other hand, the BSP, in its Answer before the RTC, said that it had been looking into Banco Filipinos activities. An October 2002
Report of Examination (ROE) prepared by the Supervision and Examination Department (SED) noted certain dacionpayments, out-of-the-ordinary
expenses, among other dealings. On July 24, 2003, the Monetary Board passed Resolution No. 1034 furnishing Banco Filipino a copy of the ROE with
instructions for the bank to file its comment or explanation within 30 to 90 days under threat of being fined or of being subjected to other remedial

actions. The ROE, the BSP said, covers substantially the same matters raised in Korugas complaint. At the time of the filing of Korugas complaint on
August 20, 2003, the period for Banco Filipino to submit its explanation had not yet expired.[38]
Thus, the courts jurisdiction could only have been invoked after the Monetary Board had taken action on the matter and only on the ground
that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction.

Finally, there is one other reason why Korugas complaint before the RTC cannot prosper. Given her own admission and the same is
likewise supported by evidence that she is merely a minority stockholder of Banco Filipino, she would not have the standing to question the Monetary
Boards action. Section 30 of the New Central Bank Act provides:
The petition for certiorari may only be filed by the stockholders of record representing the majority of the capital stock within ten (10)
days from receipt by the board of directors of the institution of the order directing receivership, liquidation or conservatorship.

All the foregoing discussion yields the inevitable conclusion that the CA erred in upholding the jurisdiction of, and remanding the case to, the
RTC. Given that the RTC does not have jurisdiction over the subject matter of the case, its refusal to dismiss the case on that ground amounted to
grave abuse of discretion.
WHEREFORE, the foregoing premises considered, the Petition in G.R. No. 168332 is DISMISSED, while the Petition in G.R. No. 169053
is GRANTED. The Decision of the Court of Appeals dated July 20, 2005 in CA-G.R. SP No. 88422 is herebySET ASIDE. The Temporary Restraining
Order

issued

by

this

Court

on

March

13,

2006

is

made PERMANENT.

Consequently,

the Regional Trial Court of Makati City, is DISMISSED.

SO ORDERED.

BANGKO SENTRAL NG PILIPINAS MONETARY BOARD

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

G.R. No. 184778

Present:
YNARES-SANTIAGO, J.,
Chairperson,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.

Promulgated:
October 2, 2009

DECISION
VELASCO, JR., J.:

Civil

Case

No.

03-985,

pending

before

The Case

This is a Petition for Review on Certiorari under Rule 45 with Prayer for Issuance of a Temporary Restraining Order (TRO)/Writ of Preliminary
Injunction, questioning the Decision dated September 30, 2008 [1] of the Court of Appeals (CA) in CA-G.R. SP No. 103935. The CA Decision upheld the
Order[2] dated June 4, 2008 of the Regional Trial Court (RTC), Branch 28 in Manila, issuing writs of preliminary injunction in Civil Case Nos. 08-119243,
08-119244, 08-119245, 08-119246, 08-119247, 08-119248, 08-119249, 08-119250, 08-119251, and 08-119273, and the Order dated May 21, 2008 that
consolidated the civil cases.

The Facts

In September of 2007, the Supervision and Examination Department (SED) of the BangkoSentralngPilipinas (BSP) conducted examinations of the
books of the following banks: Rural Bank of Paraaque, Inc. (RBPI), Rural Bank of San Jose (Batangas), Inc., Rural Bank of Carmen (Cebu), Inc.,
Pilipino Rural Bank, Inc., Philippine Countryside Rural Bank, Inc., Rural Bank of Calatagan (Batangas), Inc. (now Dynamic Rural Bank), Rural Bank of
Darbci, Inc., Rural Bank of Kananga (Leyte), Inc. (now First Interstate Rural Bank), Rural Bank de BisayasMinglanilla (now Bank of East Asia), and San
Pablo City Development Bank, Inc.

After the examinations, exit conferences were held with the officers or representatives of the banks wherein the SED examiners provided them
with copies of Lists of Findings/Exceptions containing the deficiencies discovered during the examinations. These banks were then required to comment
and to undertake the remedial measures stated in these lists within 30 days from their receipt of the lists, which remedial measures included the infusion
of additional capital. Though the banks claimed that they made the additional capital infusions, petitioner ChuchiFonacier, officer-in-charge of the SED,
sent separate letters to the Board of Directors of each bank, informing them that the SED found that the banks failed to carry out the required remedial
measures. In response, the banks requested that they be given time to obtain BSP approval to amend their Articles of Incorporation, that they have an
opportunity to seek investors. They requested as well that the basis for the capital infusion figures be disclosed, and noted that none of them had
received the Report of Examination (ROE) which finalizes the audit findings. They also requested meetings with the BSP audit teams to reconcile audit
figures. In response, Fonacier reiterated the banks failure to comply with the directive for additional capital infusions.

On May 12, 2008, the RBPI filed a complaint for nullification of the BSP ROE with application for a TRO and writ of preliminary injunction before
the RTC docketed as Civil Case No. 08-119243 against Fonacier, the BSP, Amado M. Tetangco, Jr., Romulo L. Neri, Vicente B. Valdepenas, Jr., Raul A.
Boncan, Juanita D. Amatong, Alfredo C. Antonio, and Nelly F. Villafuerte. RBPI prayed that Fonacier, her subordinates, agents, or any other person
acting in her behalf be enjoined from submitting the ROE or any similar report to the Monetary Board (MB), or if the ROE had already been submitted,
the MB be enjoined from acting on the basis of said ROE, on the allegation that the failure to furnish the bank with a copy of the ROE violated its right to
due process.

The Rural Bank of San Jose (Batangas), Inc., Rural Bank of Carmen (Cebu), Inc., Pilipino Rural Bank, Inc., Philippine Countryside Rural Bank,
Inc., Rural Bank of Calatagan (Batangas), Inc., Rural Bank of Darbci, Inc., Rural Bank of Kananga (Leyte), Inc., and Rural Bank de BisayasMinglanilla
followed suit, filing complaints with the RTC substantially similar to that of RBPI, including the reliefs prayed for, which were raffled to different branches
and docketed as Civil Cases Nos. 08-119244, 08-119245, 08-119246, 08-119247, 08-119248, 08-119249, 08-119250, and 08-119251, respectively.

On May 13, 2008, the RTC denied the prayer for a TRO of Pilipino Rural Bank, Inc. The bank filed a motion for reconsideration the next day.

On May 14, 2008, Fonacier and the BSP filed their opposition to the application for a TRO and writ of preliminary injunction in Civil Case No. 08119243 with the RTC. Respondent Judge Nina Antonio-Valenzuela of Branch 28 granted RBPIs prayer for the issuance of a TRO.

The other banks separately filed motions for consolidation of their cases in Branch 28, which motions were granted. Judge Valenzuela set the
complaint of Rural Bank of San Jose (Batangas), Inc. for hearing on May 15, 2008. Petitioners assailed the validity of the consolidation of the nine
cases before the RTC, alleging that the court had already prejudged the case by the earlier issuance of a TRO in Civil Case No. 08-119243, and moved
for the inhibition of respondent judge. Petitioners filed a motion for reconsideration regarding the consolidation of the subject cases.

On May 16, 2008, San Pablo City Development Bank, Inc. filed a similar complaint against the same defendants with the RTC, and this was
docketed as Civil Case No. 08-119273 that was later on consolidated with Civil Case No. 08-119243. Petitioners filed an Urgent Motion to Lift/Dissolve
the TRO and an Opposition to the earlier motion for reconsideration of Pilipino Rural Bank, Inc.

On May 19, 2008, Judge Valenzuela issued an Order granting the prayer for the issuance of TROs for the other seven cases consolidated with
Civil Case No. 08-119243. On May 21, 2008, Judge Valenzuela issued an Order denying petitioners motion for reconsideration regarding the
consolidation of cases in Branch 28. On May 22, 2008, Judge Valenzuela granted the urgent motion for reconsideration of Pilipino Rural Bank, Inc. and
issued a TRO similar to the ones earlier issued.

On May 26, 2008, petitioners filed a Motion to Dismiss against all the complaints (except that of the San Pablo City Development Bank, Inc.), on
the grounds that the complaints stated no cause of action and that a condition precedent for filing the cases had not been complied with. On May 29,
2008, a hearing was conducted on the application for a TRO and for a writ of preliminary injunction of San Pablo City Development Bank, Inc.

The Ruling of the RTC

After the parties filed their respective memoranda, the RTC, on June 4, 2008, ruled that the banks were entitled to the writs of preliminary
injunction prayed for. It held that it had been the practice of the SED to provide the ROEs to the banks before submission to the MB. It further held that
as the banks are the subjects of examinations, they are entitled to copies of the ROEs. The denial by petitioners of the banks requests for copies of the
ROEs was held to be a denial of the banks right to due process.

The dispositive portion of the RTCs order reads:

WHEREFORE, the Court rules as follows:
1)

Re: Civil Case No. 08-119243. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff Rural Bank of
Paranaque Inc. is directed to post a bond executed to the defendants, in the amount of P500,000.00 to the effect that the
plaintiff will pay to the defendants all damages which they may sustain by reason of the injunction if the Court should finally
decide that the plaintiff was not entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary
injunction be issued to enjoin and restrain the defendants from submitting the Report of Examination or any other similar report
prepared in connection with the examination conducted on the plaintiff, to the Monetary Board. In case such a Report on
Examination [sic] or any other similar report prepared in connection with the examination conducted on the plaintiff has been
submitted to the Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong,
Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report.

2)

Re: Civil Case No. 08-119244. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff Rural Bank of San
Jose (Batangas), Inc. is directed to post a bond executed to the defendants, in the amount of P500,000.00 to the effect that the
plaintiff will pay to the defendants all damages which they may sustain by reason of the injunction if the Court should finally

decide that the plaintiff was not entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary
injunction be issued to enjoin and restrain the defendants from submitting the Report of Examination or any other similar report
prepared in connection with the examination conducted on the plaintiff, to the Monetary Board. In case such a Report on
Examination [sic] or any other similar report prepared in connection with the examination conducted on the plaintiff has been
submitted to the Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong,
Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report.
3)

Re: Civil Case No. 08-119245. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff Rural Bank of
Carmen (Cebu), Inc. is directed to post a bond executed to the defendants, in the amount of P500,000.00 to the effect that the
plaintiff will pay to the defendants all damages which they may sustain by reason of the injunction if the Court should finally
decide that the plaintiff was not entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary
injunction be issued to enjoin and restrain the defendants from submitting the Report of Examination or any other similar report
prepared in connection with the examination conducted on the plaintiff, to the Monetary Board. In case such a Report on
Examination [sic] or any other similar report prepared in connection with the examination conducted on the plaintiff has been
submitted to the Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong,
Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report.

4)

Re: Civil Case No. 08-119246. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff Pilipino Rural Bank
Inc. is directed to post a bond executed to the defendants, in the amount of P500,000.00 to the effect that the plaintiff will pay
to the defendants all damages which they may sustain by reason of the injunction if the Court should finally decide that the
plaintiff was not entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary injunction be issued to
enjoin and restrain the defendants from submitting the Report of Examination or any other similar report prepared in connection
with the examination conducted on the plaintiff, to the Monetary Board. In case such a Report on Examination [sic] or any
other similar report prepared in connection with the examination conducted on the plaintiff has been submitted to the Monetary
Board, the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and Villafuerte) are
enjoined and restrained from acting on the basis of said report.

5)

Re: Civil Case No. 08-119247. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff Philippine
Countryside Rural Bank Inc. is directed to post a bond executed to the defendants, in the amount of P500,000.00 to the effect
that the plaintiff will pay to the defendants all damages which they may sustain by reason of the injunction if the Court should
finally decide that the plaintiff was not entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary
injunction be issued to enjoin and restrain the defendants from submitting the Report of Examination or any other similar report
prepared in connection with the examination conducted on the plaintiff, to the Monetary Board. In case such a Report on
Examination [sic] or any other similar report prepared in connection with the examination conducted on the plaintiff has been
submitted to the Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong,
Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report.

6)

Re: Civil Case No. 08-119248. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff Dynamic Bank Inc.
(Rural Bank of Calatagan) is directed to post a bond executed to the defendants, in the amount of P500,000.00 to the effect
that the plaintiff will pay to the defendants all damages which they may sustain by reason of the injunction if the Court should
finally decide that the plaintiff was not entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary
injunction be issued to enjoin and restrain the defendants from submitting the Report of Examination or any other similar report
prepared in connection with the examination conducted on the plaintiff, to the Monetary Board. In case such a Report on
Examination [sic] or any other similar report prepared in connection with the examination conducted on the plaintiff has been
submitted to the Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong,
Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report.

7)

Re: Civil Case No. 08-119249. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff Rural Bank of
DARBCI, Inc. is directed to post a bond executed to the defendants, in the amount of P500,000.00 to the effect that the plaintiff
will pay to the defendants all damages which they may sustain by reason of the injunction if the Court should finally decide that
the plaintiff was not entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary injunction be
issued to enjoin and restrain the defendants from submitting the Report of Examination or any other similar report prepared in
connection with the examination conducted on the plaintiff, to the Monetary Board. In case such a Report on Examination [sic]
or any other similar report prepared in connection with the examination conducted on the plaintiff has been submitted to the
Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong, Antonio, and
Villafuerte) are enjoined and restrained from acting on the basis of said report.

8)

Re: Civil Case No. 08-119250. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff Rural Bank of
Kananga Inc. (First Intestate Bank), is directed to post a bond executed to the defendants, in the amount of P500,000.00 to the
effect that the plaintiff will pay to the defendants all damages which they may sustain by reason of the injunction if the Court
should finally decide that the plaintiff was not entitled thereto. After posting of the bond and approval thereof, let a writ of
preliminary injunction be issued to enjoin and restrain the defendants from submitting the Report of Examination or any other
similar report prepared in connection with the examination conducted on the plaintiff, to the Monetary Board. In case such a
Report on Examination [sic] or any other similar report prepared in connection with the examination conducted on the plaintiff
has been submitted to the Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan,
Amatong, Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report.

9)

Re: Civil Case No. 08-119251. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff Banco Rural De
BisayasMinglanilla (Cebu) Inc. (Bank of East Asia) is directed to post a bond executed to the defendants, in the amount of
P500,000.00 to the effect that the plaintiff will pay to the defendants all damages which they may sustain by reason of the
injunction if the Court should finally decide that the plaintiff was not entitled thereto. After posting of the bond and approval
thereof, let a writ of preliminary injunction be issued to enjoin and restrain the defendants from submitting the Report of
Examination or any other similar report prepared in connection with the examination conducted on the plaintiff, to the Monetary
Board. In case such a Report on Examination [sic] or any other similar report prepared in connection with the examination
conducted on the plaintiff has been submitted to the Monetary Board, the latter and its members (i.e. defendants Tetangco,
Neri, Valdepenas, Boncan, Amatong, Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said
report.

10) Re: Civil Case No. 08-119273. Pursuant to Rule 58, Section 4(b) of the Revised Rules of Court, plaintiff San Pablo City
Development Bank, Inc. is directed to post a bond executed to the defendants, in the amount of P500,000.00 to the effect that
the plaintiff will pay to the defendants all damages which they may sustain by reason of the injunction if the Court should finally
decide that the plaintiff was not entitled thereto. After posting of the bond and approval thereof, let a writ of preliminary
injunction be issued to enjoin and restrain the defendants from submitting the Report of Examination or any other similar report
prepared in connection with the examination conducted on the plaintiff, to the Monetary Board. In case such a Report on
Examination [sic] or any other similar report prepared in connection with the examination conducted on the plaintiff has been
submitted to the Monetary Board, the latter and its members (i.e. defendants Tetangco, Neri, Valdepenas, Boncan, Amatong,
Antonio, and Villafuerte) are enjoined and restrained from acting on the basis of said report. [3]

The Ruling of the CA

Petitioners then brought the matter to the CA via a petition for certiorari under Rule 65 claiming grave abuse of discretion on the part of Judge
Valenzuela when she issued the orders dated May 21, 2008 and June 4, 2008.

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

The CA also found that aside from the technical aspect, there was no grave abuse of discretion on the part of the RTC, and if there was a mistake
in the assessment of evidence by the trial court, that should be characterized as an error of judgment, and should be correctable via appeal.

The CA held that the principles of fairness and transparency dictate that the respondent banks are entitled to copies of the ROE.

Regarding the consolidation of the 10 cases, the CA found that there was a similarity of facts, reliefs sought, issues raised, defendants, and that
plaintiffs and defendants were represented by the same sets of counsels. It found that the joint trial of these cases would prejudice any substantial right
of petitioners.

Finding that no grave abuse of discretion attended the issuance of the orders by the RTC, the CA denied the petition.

On November 24, 2008, a TRO was issued by this Court, restraining the CA, RTC, and respondents from implementing and enforcing the CA
Decision dated September 30, 2008 in CA-G.R. SP No. 103935.[4]
By reason of the TRO issued by this Court, the SED was able to submit their ROEs to the MB. The MB then prohibited the respondent banks from
transacting business and placed them under receivership under
Section 53 of Republic Act No. (RA) 8791[5] and Sec. 30 of RA7653[6] through MB Resolution No. 1616 dated December 9, 2008;
Resolution Nos. 1637 and 1638 dated December 11, 2008; Resolution Nos. 1647, 1648, and 1649 dated December 12, 2008; Resolution Nos. 1652 and
1653 dated December 16, 2008; and Resolution Nos. 1692 and 1695 dated December 19, 2008, with the Philippine Deposit Insurance Corporation as
the appointed receiver.

Now we resolve the main petition.

Grounds in Support of Petition

I.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT THE INJUNCTION ISSUED BY
THE REGIONAL TRIAL COURT VIOLATED SECTION 25 OF THE NEW CENTRAL BANK ACT AND EFFECTIVELY
HANDCUFFED THE BANGKO SENTRAL FROM DISCHARGING ITS FUNCTIONS TO THE GREAT AND
IRREPARABLE DAMAGE OF THE COUNTRYS BANKING SYSTEM;

II.

III.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RESPONDENTS ARE ENTITLED TO
BE FURNISHED COPIES OF THEIR RESPECTIVE ROEs BEFORE THE SAME IS SUBMITTED TO THE MONETARY
BOARD IN VIEW OF THE PRINCIPLES OF FAIRNESS AND TRANSPARENCY DESPITE LACK OF EXPRESS
PROVISION IN THE NEW CENTRAL BANK ACT REQUIRING BSP TO DO THE SAME
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DEPARTING FROM WELL-ESTABLISHED
PRECEPTS OF LAW AND JURISPRUDENCE
A.
B.
C.

THE EXCEPTIONS CITED BY PETITIONER JUSTIFIED RESORT TO PETITION FOR CERTIORARI

UNDER RULE 65 INSTEAD OF FIRST FILING A MOTION FOR RECONSIDERATION
RESPONDENT BANKS ACT OF RESORTING IMMEDIATELY TO THE COURT WAS PREMATURE SINCE
IT WAS MADE IN UTTER DISREGARD OF THE PRINCIPLE OF PRIMARY JURISDICTION AND
EXHAUSTION OF ADMINISTRATIVE REMEDY
THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION BY THE REGIONAL TRIAL COURT WAS
NOT ONLY IMPROPER BUT AMOUNTED TO GRAVE ABUSE OF DISCRETION[7]
Our Ruling

The petition is meritorious.

In Lim v. Court of Appeals it was stated:
The requisites for preliminary injunctive relief are: (a) the invasion of right sought to be protected is material and
substantial; (b) the right of the complainant is clear and unmistakable; and (c) there is an urgent and paramount necessity for the
writ to prevent serious damage.
As such, a writ of preliminary injunction may be issued only upon clear showing of an actual existing right to be protected
during the pendency of the principal action. The twin requirements of a valid injunction are the existence of a right and its actual or
threatened violations. Thus, to be entitled to an injunctive writ, the right to be protected and the violation against that right must be
shown.[8]
These requirements are absent in the present case.
In granting the writs of preliminary injunction, the trial court held that the submission of the ROEs to the MB before the respondent banks
would violate the right to due process of said banks.
This is erroneous.
The respondent banks have failed to show that they are entitled to copies of the ROEs. They can point to no provision of law, no section in
the procedures of the BSP that shows that the BSP is required to give them copies of the ROEs. Sec. 28 of RA 7653, or the New Central Bank Act,
which governs examinations of banking institutions, provides that the ROE shall be submitted to the MB; the bank examined is not mentioned as a
recipient of the ROE.

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

Respondent banks are already aware of what is required of them by the BSP, and cannot claim violation of their right to due process simply
because they are not furnished with copies of the ROEs. Respondent banks were held by the CA to be entitled to copies of the ROEs prior to or
simultaneously with their submission to the MB, on the principles of fairness and transparency. Further, the CA held that if the contents of the ROEs are
essentially the same as those of the lists of findings/exceptions provided to said banks, there is no reason not to give copies of the ROEs to the banks.
This is a flawed conclusion, since if the banks are already aware of the contents of the ROEs, they cannot say that fairness and transparency are not
present. If sanctions are to be imposed upon the respondent banks, they are already well aware of the reasons for the sanctions, having been informed
via the lists of findings/exceptions, demolishing that particular argument. The ROEs would then be superfluities to the respondent banks, and should not
be the basis for a writ of preliminary injunction. Also, the reliance of the RTC on Banco Filipino v. Monetary Board [9] is misplaced. The petitioner in that
case was held to be entitled to annexes of the Supervision and Examination Sectors reports, as it already had a copy of the reports themselves. It was

not the subject of the case whether or not the petitioner was entitled to a copy of the reports. And the ruling was made after the petitioner bank was
ordered closed, and it was allowed to be supplied with annexes of the reports in order to better prepare its defense. In this instance, at the time the
respondent banks requested copies of the ROEs, no action had yet been taken by the MB with regard to imposing sanctions upon said banks.

The issuance by the RTC of writs of preliminary injunction is an unwarranted interference with the powers of the MB. Secs. 29 and 30 of RA
[10]

7653

refer to the appointment of a conservator or a receiver for a bank, which is a power of the MB for which they need the ROEs done by the

supervising or examining department. The writs of preliminary injunction issued by the trial court hinder the MB from fulfilling its function under the
law. The actions of the MB under Secs. 29 and 30 of RA 7653 may not be restrained or set aside by the court except on petition for certiorari on the
ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction. The writs
of preliminary injunction order are precisely what cannot be done under the law by preventing the MB from taking action under either Sec. 29 or Sec. 30
of RA 7653.

As to the third requirement, the respondent banks have shown no necessity for the writ of preliminary injunction to prevent serious
damage. The serious damage contemplated by the trial court was the possibility of the imposition of sanctions upon respondent banks, even the
sanction of closure. Under the law, the sanction of closure could be imposed upon a bank by the BSP even without notice and hearing. The apparent
lack of procedural due process would not result in the invalidity of action by the MB. This was the ruling in Central Bank of the Philippines v. Court of
Appeals.[11] This close now, hear later scheme is grounded on practical and legal considerations to prevent unwarranted dissipation of the banks
assets and as a valid exercise of police power to protect the depositors, creditors, stockholders, and the general public. The writ of preliminary injunction
cannot, thus, prevent the MB from taking action, by preventing the submission of the ROEs and worse, by preventing the MB from acting on such
ROEs.

The trial court required the MB to respect the respondent banks right to due process by allowing the respondent banks to view the ROEs and
act upon them to forestall any sanctions the MB might impose. Such procedure has no basis in law and does in fact violate the close now, hear later
doctrine. We held in Rural Bank of San Miguel, Inc. v. Monetary Board, BangkoSentralngPilipinas:
It is well-settled that the closure of a bank may be considered as an exercise of police power. The action of the MB on
this matter is final and executory. Such exercise may nonetheless be subject to judicial inquiry and can be set aside if found to be in
excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction. [12]

The respondent banks cannotthrough seeking a writ of preliminary injunction by appealing to lack of due process, in a roundabout manner
prevent their closure by the MB. Their remedy, as stated, is a subsequent one, which will determine whether the closure of the bank was attended by
grave abuse of discretion. Judicial review enters the picture only after the MB has taken action; it cannot prevent such action by the MB. The threat of
the imposition of sanctions, even that of closure, does not violate their right to due process, and cannot be the basis for a writ of preliminary injunction.

The close now, hear later doctrine has already been justified as a measure for the protection of the public interest. Swift action is called for
on the part of the BSP when it finds that a bank is in dire straits. Unless adequate and determined efforts are taken by the government against
distressed and mismanaged banks, public faith in the banking system is certain to deteriorate to the prejudice of the national economy itself, not to
mention the losses suffered by the bank depositors, creditors, and stockholders, who all deserve the protection of the government. [13]

The respondent banks have failed to show their entitlement to the writ of preliminary injunction. It must be emphasized that an application for
injunctive relief is construed strictly against the pleader.[14] The respondent banks cannot rely on a simple appeal to procedural due process to prove
entitlement. The requirements for the issuance of the writ have not been proved. No invasion of the rights of respondent banks has been shown, nor is
their right to copies of the ROEs clear and unmistakable. There is also no necessity for the writ to prevent serious damage. Indeed the issuance of the
writ of preliminary injunction tramples upon the powers of the MB and prevents it from fulfilling its functions. There is no right that the writ of preliminary
injunction would protect in this particular case. In the absence of a clear legal right, the issuance of the injunctive writ constitutes grave abuse of
discretion.[15] In the absence of proof of a legal right and the injury sustained by the plaintiff, an order for the issuance of a writ of preliminary injunction
will be nullified.[16]
Courts are hereby reminded to take greater care in issuing injunctive relief to litigants, that it would not violate any law. The grant of a
preliminary injunction in a case rests on the sound discretion of the court with the caveat that it should be made with great caution. [17] Thus, the issuance
of the writ of preliminary injunction must have basis in and be in accordance with law. All told, while the grant or denial of an injunction generally rests on
the sound discretion of the lower court, this Court may and should intervene in a clear case of abuse. [18]

WHEREFORE, the petition is hereby GRANTED. The assailed CA Decision dated September 30, 2008 in CA-G.R. SP No. 103935 is
hereby REVERSED. The assailed order and writ of preliminary injunction of respondent Judge Valenzuela in Civil Case Nos. 08-119243, 08-119244, 08119245, 08-119246, 08-119247, 08-119248, 08-119249, 08-119250, 08-119251, and 08-119273 are hereby declared NULL and VOID.
SO ORDERED.

G.R. No. 156207

September 15, 2006

EQUITABLE PCI BANK (the Banking Entity into which Philippine Commercial International Bank was merged), petitioner,
vs.
ROWENA ONG, respondent.
DECISION
CHICO-NAZARIO, J.:
On 29 November 1991, WarlizaSarande deposited in her account at Philippine Commercial International (PCI) Bank Magsaysay Avenue, Santa Ana
District, Davao City Branch, under Account No. 8502-00347-6, a PCI Bank General Santos City Branch, TCBT 1 Check No. 0249188 in the amount
of P225,000.00. Upon inquiry by Serande at PCI Bank on 5 December 1991 on whether TCBT Check No. 0249188 had been cleared, she received an
affirmative answer. Relying on this assurance, she issued two checks drawn against the proceeds of TCBT Check No. 0249188. One of these was PCI
Bank Check No. 073661 dated 5 December 1991 for P132,000.00 which Sarande issued to respondent Rowena Ong Owing to a business transaction.
On the same day, Ong presented to PCI Bank Magsaysay Avenue Branch said Check No. 073661, and instead of encashing it, requested PCI Bank to
convert the proceeds thereof into a manager's check, which the PCI Bank obliged. Whereupon, Ong was issued PCI Bank Manager's Check No. 10983
dated 5 December 1991 for the sum of P132,000.00, the value of Check No. 073661.
The next day, 6 December 1991, Ong deposited PCI Bank Manager's Check No. 10983 in her account with Equitable Banking Corporation Davao City
Branch. On 9 December 1991, she received a check return-slip informing her that PCI Bank had stopped the payment of the said check on the ground of
irregular issuance. Despite several demands made by her to PCI Bank for the payment of the amount in PCI Bank Manager's Check No. 10983, the
same was met with refusal; thus, Ong was constrained to file a Complaint for sum of money, damages and attorney's fees against PCI Bank. 2
From PCI Bank's version, TCBT-General Santos City Check No. 0249188 was returned on 5 December 1991 at 5:00 pm on the ground that the account
against which it was drawn was already closed. According to PCI Bank, it immediately gave notice to Sarande and Ong about the return of Check No.
0249188 and requested Ong to return PCI Bank Manager's Check No. 10983 inasmuch as the return of Check No. 0249188 on the ground that the
account from which it was drawn had already been closed resulted in a failure or want of consideration for the issuance of PCI Bank Manager's Check
No. 10983.3

After the pre-trial conference, Ong filed a motion for summary judgment.4 Though they were duly furnished with a copy of the motion for summary
judgment, PCI Bank and its counsel failed to appear at the scheduled hearing. 5Neither did they file any written comment or opposition thereto. The trial
court thereafter ordered Ong to formally offer her exhibits in writing, furnishing copies of the same to PCI Bank which was directed to file its comment or
objection.6
Ong complied with the Order of the trial court, but PCI Bank failed to file any comment or objection within the period given to it despite receipt of the
same order.7 The trial court then granted the motion for summary judgment and in its Order dated 2 March 1995, it held:
IN THE LIGHT OF THE FOREGOING, the motion for summary judgment is GRANTED, ordering defendant Philippine Commercial
International Bank to pay the plaintiff the amount of ONE HUNDRED THIRTY-TWO THOUSAND PESOS (P132,000.00) equivalent to the
amount of PCIB Manager's Check No. 10983.
Set the reception of the plaintiff's evidence with respect to the damages claimed in the complaint. 8
PCI Bank filed a Motion for Reconsideration which the trial court denied in its Order dated 11 April 1996. 9 After the reception of Ong's evidence in
support of her claim for damages, the trial court rendered its Decision10 dated 3 May 1999 wherein it ruled:
IN LIGHT OF THE FOREGOIN CONSIDERATION, and as plaintiff has preponderantly established by competent evidence her claims in the
Complaint, judgment in hereby rendered for the plaintiff against the defendant-bank ordering the latter:
1. To pay the plaintiff the sum of FIFTY THOUSAND PESOS (P50,000.00) in the concept of moral damages;
2. To pay the plaintiff the sum of TWENTY THOUSAND PESOS (P20,000.00) as exemplary damages;
3. To pay the plaintiff the sum of THREE THOUSAND FIVE HUNDRED PESOS (P3,500.00) representing actual expenses;
4. To pay the plaintiff the sum of TWENTY THOUSAND PESOS (P20,000.00) as and for attorney's fee's; and
5. To pay the costs.11
From this decision, PCI Bank sought recourse before the Court of Appeals. In a Decision 12 dated 29 October 2002, the appellate court denied the appeal
of PCI Bank and affirmed the orders and decision of the trial court.
Unperturbed, PCI Bank then filed the present petition for review before this Court and raised the following issues:
1. WHETHER OR NOT THE COURT OF APPEALS COMMITTED A GRAVE AND REVERSIBLE ERROR WHEN IT SUSTAINED THE
LOWER COURT'S ORDER DATED 2 MARCH 1999 GRANTING RESPONDENT'S MOTION FOR SUMMARY JUDGMENT
NOTWITHSTANDING THE GLARING FACT THAT THERE ARE GENUINE, MATERIAL AND FACTUAL ISSUES WHICH REQUIRE THE
PRESENTATION OF EVIDENCE.
2. WHETHER OR NOT THE COURT OF APPEALS WAS IN ERROR WHEN IT SUSTAINED THE LOWER COURT'S DECISION DATED 3
MAY 1999 GRANTING THE RELIEFS PRAYED FOR IN RESPONDENT ONG'S COMPLAINT INSPITE OF THE FACT THAT RESPONDENT
ONG WOULD BE "UNJUSTLY ENRICHED" AT THE EXPENSE OF PETITIONER BANK, IF PETITIONER BANK WOULD BE REQUIRED TO
PAY AN UNFUNDED CHECK.
3. WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERRORS WHEN IT AFFIRMED THE COURT A QUO'S
DECISIION DATED 3 MAY 1999 AWARDING DAMAGES TO RESPONDENT ONG AND HOLDING THAT RESPONDENT ONG HAD
PREPONDERANTLY ESTABLISHED BY COMPETENT EVIDENCE HER CLAIMS IN THE COMPLAINT INSPITE OF THE FACT THAT THE
EVIDENCE ON RECORD DOES NOT JUSTIFY THE AWARD OF DAMAGES.
4. WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT AFFIRMED THE LOWER COURT'S
FACTUAL FINDING IN ITS DECISION DATED 3 MAY 1999 HOLDING RESPONDENT ONG A "HOLDER IN DUE COURSE" INSPITE OF
THE FACT THAT THE REQUISITE OF "GOOD FAITH" AND FOR VALUE IS LACKING AND DESPITE THE ABSENCE OF A PROPER TRIAL
TO DETERMINE SUCH FACTUAL ISSUE.
5. WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT UPHELD THE LOWER COURT'S
DECISION DATED 3 MAY 1999 DENYING PETITIONER EPCI BANK'S COUNTERCLAIM INSPITE OF THE FACT THAT IT WAS SHOWN
THAT RESPONDENT ONG'S COMPLAINT LACKS MERIT.13
We affirm the Decision of the trial court and the Court of Appeals.
The provision on summary judgment is found in Section 1, Rule 35 of the 1997 Rules of Court:
SECTION 1.Summary judgment for claimant. A party seeking to recover upon a claim, counterclaim, or cross-claim or to obtain a declaratory
relief may, at any time after the pleading in answer thereto has been served, move with supporting affidavits, depositions or admissions for a
summary judgment in his favor upon all or any part thereof.

Thus, it has been held that a summary judgment is proper where, upon a motion filed after the issues had been joined and on the basis of the pleadings
and papers filed, the court finds that there is no genuine issue as to any material fact to except as to the amount of damages. A genuine issue has been
defined as an issue of fact which calls for the presentation of evidence, as distinguished from an issue which is sham, fictitious, contrived and patently
unsubstantial so as not to constitute a genuine issue for trial.14
A court may grant summary judgment to settle expeditiously a case if, on motion of either party, there appears from the pleadings, depositions,
admissions, and affidavits that no important issues of fact are involved, except the amount of damages.15 Rule 35, Section 3, of the Rules of Court
provides two requisites for summary judgment to be proper: (1) there must be no genuine issue as to any material fact, except for the amount of
damages; and (2) the party presenting the motion for summary judgment must be entitled to a judgment as a matter of law.16
Certainly, when the facts as pleaded appear uncontested or undisputed, then there's no real or genuine issue or question as to the facts, and summary
judgment is called for.17
By admitting it committed an error, clearing the check of Sarande and issuing in favor of Ong not just any check but a manager's check for that matter,
PCI Bank's liability is fixed. Under the circumstances, we find that summary judgment was proper and a hearing would serve no purpose. That summary
judgment is appropriate was incisively expounded by the trial court when it made the following observation:
[D]efendant-bank had certified plaintiff's PCIB Check No. 073661 and since certification is equivalent to acceptance, defendant-bank as
drawee bank is bound on the instrument upon certification and it is immaterial to such liability in favor of the plaintiff who is a holder in due
course whether the drawer (WarlizaSarande) had funds or not with the defendant-bank (Security vs. State Bank, 154 N.W. 282) or the drawer
was indebted to the bank for more than the amount of the check (Nat. Bank vs. Schmelz, Nat. Bank, 116 S.E. 880) as the certifying bank as all
the liabilities under Sec. 62 of the Negotiable Instruments Law which refers to liability of acceptor (Title Guarantee vs. Emadee Realty Corp.,
240 N.Y. 36).
It may be true that plaintiff's PCIB Check No. 073661 for P132,000.00 which was paid to her by WarlizaSarande was actually not funded but
since plaintiff became a holder in due course, defendant-bank cannot interpose a defense of want or lack of consideration because that
defense is equitable or personal and cannot prosper against a holder in due course pursuant to Section 28 of the Negotiable Instruments Law.
Therefore, when the aforementioned check was endorsed and presented by the plaintiff and certified to and accepted by defendant-bank in
the purchase of PCIB Manager's Check No. 1983 in the amount ofP132,000.00, there was a valid consideration.18
The property of summary judgment was further explained by this Court when it pronounced that:
The theory of summary judgment is that although an answer may on its face appear to tender issues requiring trial yet if it is demonstrated
by affidavits, depositions, or admissions that those issues are not genuine, but sham or fictitious, the Court is unjustified in dispensing with the
trial and rendering summary judgment for plaintiff. The court is expected to act chiefly on the basis of the affidavits, depositions, admissions
submitted by the movant, and those of the other party in opposition thereto. The hearing contemplated (with 10-day notice) is for the purpose
of determining whether the issues are genuine or not, not to receive evidence on the issues set up in the pleadings. A hearing is not thus de
riguer. The matter may be resolved, and usually is, on the basis of affidavits, depositions, admissions. This is not to say that a hearing may be
regarded as a superfluity. It is not, and the Court has plenary discretion to determine the necessity therefore.19
The second and fourth issues are inter-related and so they shall be resolved together. The second issue has reference to PCI Bank's claim of unjust
enrichment on the part of Ong if it would be compelled to make good the manager's check it had issued. As asserted by PCI Bank under the fourth
issue, Ong is not a holder in due course because the manager's check was drawn against a closed account; therefore, the same was issued without
consideration.
On the matter of unjust enrichment, the fundamental doctrine of unjust enrichment is the transfer of value without just cause or consideration. The
elements of this doctrine are: enrichment on the part of the defendant; impoverishment on the part of the plaintiff; and lack of cause. The main objective
is to prevent one to enrich himself at the expense of another.20 It is based on the equitable postulate that it is unjust for a person to retain benefit without
paying for it.21 It is well to stress that the check of Sarande had been cleared by the PCI Bank for which reason the former issued the check to Ong. A
check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to
the amount credited to his account.22
Having cleared the check earlier, PCI Bank, therefore, became liable to Ong and it cannot allege want or failure of consideration between it and
Sarande. Under settled jurisprudence, Ong is a stranger as regards the transaction between PCI Bank and Sarande. 23
PCI Bank next insists that since there was no consideration for the issuance of the manager's check, ergo, Ong is not a holder in due course. This claim
is equally without basis. Pertinent provisions of the Negotiable Instruments Law are hereunder quoted:
SECTION 52. What constitutes a holder in due course. A holder in due course is a holder who has taken the instrument under the following
conditions:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and without notice it had been previously dishonored, if such was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.

The same law provides further:

Sec. 24. Presumption of consideration. Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration;
and every person whose signature appears thereon to have become a party thereto for value.
Sec. 26. What constitutes holder for value. Where value has at any time been given for the instrument, the holder is deemed a holder for
value in respect to all parties who become such prior to that time.
Sec. 28. Effect of want of consideration. Absence or failure of consideration is a matter of defense as against any person not a holder in due
course; and partial failure of consideration is a defense pro tanto, whether the failure is an ascertained and liquidated amount or otherwise.
Easily discernible is that what Ong obtained from PCI Bank was not just any ordinary check but a manager's check. A manager's check is an order of the
bank to pay, drawn upon itself, committing in effect its total resources, integrity and honor behind its issuance. By its peculiar character and general use
in commerce, a manager's check is regarded substantially to be as good as the money it represents.24
A manager's check stands on the same footing as a certified check.25 The effect of certification is found in Section 187, Negotiable Instruments Law.
Sec. 187. Certification of check; effect of. Where a check is certified by the bank on which it is drawn, the certification is equivalent to an
acceptance.26
The effect of issuing a manager's check was incontrovertibly elucidated when we declared that:
A manager's check is one drawn by the bank's manager upon the bank itself. It is similar to a cashier's check both as to effect and use. A
cashier's check is a check of the bank's cashier on his own or another check. In effect, it is a bill of exchange drawn by the cashier of a bank
upon the bank itself, and accepted in advance by the act of its issuance. It is really the bank's own check and may be treated as a promissory
note with the bank as a maker. The check becomes the primary obligation of the bank which issues it and constitutes its written promise to pay
upon demand. The mere issuance of it is considered an acceptance thereof. x x x.27
In the case of New Pacific Timber & Supply Co., Inc. v. Seneris28:
[S]ince the said check had been certified by the drawee bank, by the certification, the funds represented by the check are transferred from the
credit of the maker to that of the payee or holder, and for all intents and purposes, the latter becomes the depositor of the drawee bank, with
rights and duties of one in such situation. Where a check is certified by the bank on which it is drawn, the certification is equivalent to
acceptance. Said certification "implies that the check is drawn upon sufficient funds in the hands of the drawee, that they have been set apart
for its satisfaction, and that they shall be so applied whenever the check is presented for payment. It is an understanding that the check is
good then, and shall continue good, and this agreement is as binding on the bank as its notes circulation, a certificate of deposit payable to
the order of depositor, or any other obligation it can assume. The object of certifying a check, as regards both parties, is to enable the holder
to use it as money." When the holder procures the check to be certified, "the check operates as an assignment of a part of the funds to the
creditors." Hence, the exception to the rule enunciated under Section 63 of the Central Bank Act to the effect "that a check which has been
cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor in cash in an amount equal to the amount
credited to his account" shall apply in this case x xx.
By accepting PCI Bank Check No. 073661 issued by Sarande to Ong and issuing in turn a manager's check in exchange thereof, PCI Bank assumed
the liabilities of an acceptor under Section 62 of the Negotiable Instruments Law which states:
Sec. 62. Liability of acceptor. The acceptor by accepting the instruments engages that he will pay it according to the tenor of his acceptance;
and admits
(a) The existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument; and
(b) The existence of the payee and his then capacity to indorse.
With the above jurisprudential basis, the issues on Ong being not a holder in due course and failure or want of consideration for PCI Bank's issuance of
the manager's check is out of sync.
Section 2, of Republic Act No. 8791, The General Banking Law of 2000 decrees:
SEC. 2. Declaration of Policy. The State recognizes the vital role of banks in providing an environment conducive to the sustained
development of the national economy and the fiduciary nature of banking that requires high standards of integrity and performance. In
furtherance thereof, the State shall promote and maintain a stable and efficient banking and financial system that is globally competitive,
dynamic and responsive to the demands of a developing economy.
In Associated Bank v. Tan,29 it was reiterated:
"x xx the degree of diligence required of banks is more than that of a good father of a family where the fiduciary nature of their relationship with
their depositors is concerned." Indeed, the banking business is vested with the trust and confidence of the public; hence the "appropriate
standard of diligence must be very high, if not the highest degree of diligence."

Measured against these standards, the next question that needs to be addressed is: Did PCI Bank exercise the requisite degree of diligence required of
it? From all indications, it did not. PCI Bank distinctly made the following uncontested admission:
1. On 29 November 1991, one WarlizaSarande deposited to her savings account with PCI Bank's Magsaysay Avenue Branch, TCBT-General
Santos Branch Check No. 0249188 for P225,000.00. Said check, however, was inadvertently sent by PCI Bank through local clearing
when it should have been sent through inter-regional clearing since the check was drawn at TCBT-General Santos City.
2. On 5 December 1991, WarlizaSarande inquired whether TCBT Check No. 0249188 had been cleared. Not having received any advice from
the drawee bank within the regular clearing period for the return of locally cleared checks, and unaware then of the error of not having sent
the check through inter-regional clearing, PCI Bank advised her that Check No. 024188 is treated as cleared. x x x. 30(Emphasis
supplied.)
From the foregoing, it is palpable and readily apparent that PCI Bank failed to exercise the highest degree of care 31 required of it under the law.
In the case of Philippine National Bank v. Court of Appeals,32 we declared:
The banking system has become an indispensable institution in the modern world and plays a vital role in the economic life of every civilized
society. Whether as mere passive entities for the safe-keeping and saving of money or as active instruments of business and commerce,
banks have attained an ubiquitous presence among the people, who have come to regard them with respect and even gratitude and, most of
all, confidence.
Having settled the other issues, we now resolve the question on the award of moral and exemplary damages by the trial court to the respondent.
Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the
defendant's wrongful act or omission.33 The requisites for an award of moral damages are well-defined, thus, firstly, evidence of besmirched reputation or
physical, mental or psychological suffering sustained by the claimant; secondly, a culpable act or omission factually established; thirdly, proof that the
wrongful act or omission of the defendant is the proximate cause of the damages sustained by the claimant; and fourthly, that the case is predicated on
any of the instances expressed or envisioned by Article 221934 and Article 222035 of the Civil Code. All these elements are present in the instant case. 36
In the first place, by refusing to make good the manager's check it has issued, Ong suffered embarrassment and humiliation arising from the dishonor of
the said check.37 Secondly, the culpable act of PCI Bank in having cleared the check of Serande and issuing the manager's check to Ong is undeniable.
Thirdly, the proximate cause of the loss is attributable to PCI Bank. Proximate cause is defined as that cause which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred. 38 In this case, the proximate
cause of the loss is the act of PCI Bank in having cleared the check of Sarande and its failure to exercise that degree of diligence required of it under the
law which resulted in the loss to Ong.
On exemplary damages, Article 2229 of the Civil Code states:
Art. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral,
temperate, liquidated or compensatory damages.
The law allows the grant of exemplary damages to set an example for the public good. The banking system has become an indispensable institution in
the modern world and plays a vital role in the economic life of every civilized society. Whether as mere passive entities for the safe-keeping and saving
of money or as active instruments of business and commerce, banks have attained an ubiquitous presence among the people, who have come to regard
them with respect and even gratitude and most of all, confidence. For this reason, banks should guard against injury attributable to negligence or bad
faith on its part.39 Without a doubt, it has been repeatedly emphasized that since the banking business is impressed with public interest, of paramount
importance thereto is the trust and confidence of the public in general. Consequently, the highest degree of diligence is expected, and high standards of
integrity and performance are even required of it.40 Having failed in this respect, the award of exemplary damages is warranted.
Article 2216 of the Civil Code provides:
ART. 2216. No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary damages may be
adjudicated. The assessment of such damages, except liquidated ones, is left to the discretion of the court, according to the circumstances of
each case.
Based on the above provision, the determination of the amount to be awarded (except liquidated damages) is left to the sound discretion of the court
according to the circumstances of each case.41 In the case before us, we find that the award of moral damages in the amount of P50,000.00 and
exemplary damages in the amount ofP20,000.00 is reasonable and justified.
With the above disquisition, there is no necessity of further discussing the last issue on the PCI Bank's counterclaim based on the supposed lack of merit
of Ong's complaint.
WHEREFORE, premises considered, the Petition is DENIED and the Decision of the Court of Appeals dated 29 October 2002 in CA-G.R. CV No. 65000
affirming the Decision dated 3 may 1999, of the Regional Trial Court of Davao City, Branch 14, in Civil Case No. 21458-92, are AFFIRMED.
SO ORDERED.

UNION BANK OF THE PHILIPPINES,

G.R. Nos. 173090-91

Present:

Petitioner,
- versus -

CORONA, C.J.,
Chairperson,

SPOUSES RODOLFO T. TIU AND VICTORIA N. TIU,

Respondents.

LEONARDO-DE CASTRO,
BERSAMIN,
DEL CASTILLO, and
VILLARAMA, JR., JJ.

Promulgated:September 7, 2011

DECISION
LEONARDO-DE CASTRO, J.:

This is a Petition for Review on Certiorari seeking to reverse the Joint Decision [1] of the Court of Appeals dated February 21, 2006 in CA-G.R.
CV No. 00190 and CA-G.R. SP No. 00253, as well as the Resolution[2] dated June 1, 2006 denying the Motion for Reconsideration.
The factual and procedural antecedents of this case are as follows:

On November 21, 1995, petitioner Union Bank of the Philippines (Union Bank) and respondent spouses Rodolfo T. Tiu and Victoria N. Tiu (the
spouses Tiu) entered into a Credit Line Agreement (CLA) whereby Union Bank agreed to make available to the spouses Tiu credit facilities in such
amounts as may be approved.[3] From September 22, 1997 to March 26, 1998, the spouses Tiu took out various loans pursuant to this CLA in the total
amount of three million six hundred thirty-two thousand dollars (US$3,632,000.00), as evidenced by promissory notes:

PN No.

Amount in US$

Date Granted

87/98/111

72,000.00

02/16/98

87/98/108

84,000.00

02/13/98

87/98/152

320,000.00

03/02/98

87/98/075

150,000.00

01/30/98

87/98/211

32,000.00

03/26/98

87/98/071

110,000.00

01/29/98

87/98/107

135,000.00

02/13//98

87/98/100

75,000.00

02/12/98

87/98/197

195,000.00

03/19/98

87/97/761

60,000.00

09/26/97

87/97/768

30,000.00

09/29/97

87/97/767

180,000.00

09/29/97

87/97/970

110,000.00

12/29/97

87/97/747

50,000.00

09/22/97

87/96/944

605,000.00

12/19/97

87/98/191

470,000.00

03/16/98

87/98/198

505,000.00

03/19/98

87/98/090

449,000.00

02/09/98

US$3,632,000.00[4]

On June 23, 1998, Union Bank advised the spouses Tiu through a letter [5] that, in view of the existing currency risks, the loans shall be
redenominated to their equivalent Philippine peso amount on July 15, 1998. On July 3, 1998, the spouses Tiu wrote to Union Bank authorizing the latter
to redenominate the loans at the rate of US$1=P41.40[6] with interest of 19% for one year.[7]
On December 21, 1999, Union Bank and the spouses Tiu entered into a Restructuring Agreement. [8] The Restructuring Agreement contains a
clause wherein the spouses Tiu confirmed their debt and waived any action on account thereof. To quote said clause:
1.

Confirmation of Debt The BORROWER hereby confirms and accepts that as of December 8, 1999, its outstanding
principal indebtedness to the BANK under the Agreement and the Notes amount to ONE HUNDRED FIFTY[-]FIVE
MILLION THREE HUNDRED SIXTY[-]FOUR THOUSAND EIGHT HUNDRED PESOS (PHP 155,364,800.00) exclusive of

interests, service and penalty charges (the Indebtedness) and further confirms the correctness, legality, collectability and
enforceability of the Indebtedness. The BORROWER unconditionally waives any action, demand or claim that they may
otherwise have to dispute the amount of the Indebtedness as of the date specified in this Section, or the collectability and
enforceability thereof. It is the understanding of the parties that the BORROWERs acknowledgment, affirmation, and
waiver herein are material considerations for the BANKs agreeing to restructure the Indebtedness which would have
already become due and payable as of the above date under the terms of the Agreement and the Notes.[9]

The restructured amount (P155,364,800.00) is the sum of the following figures: (1) P150,364,800.00, which is the value of the
US$3,632,000.00 loan as redenominated under the above-mentioned exchange rate of US$1=P41.40; and (2) P5,000,000.00, an additional loan given
to the spouses Tiu to update their interest payments.[10]
Under the same Restructuring Agreement, the parties declared that the loan obligation to be restructured (after deducting the dacion price of
properties ceded by the Tiu spouses and adding: [1] the taxes, registration fees and other expenses advanced by Union Bank in registering the Deeds of
Dation in Payment; and [2] other fees and charges incurred by the Indebtedness) is one hundred four million six hundred sixty-eight thousand seven
hundred forty-one pesos (P104,668,741.00) (total restructured amount).[11] The Deeds of Dation in Payment referred to are the following:
1.

Dation of the Labangon properties Deed executed by Juanita Tiu, the mother of respondent Rodolfo Tiu, involving ten parcels of land
with improvements located in Labangon, Cebu City and with a total land area of 3,344 square meters, for the amount
of P25,130,000.00. The Deed states that these properties shall be leased to the Tiu spouses at a monthly rate of P98,000.00 for a period
of two years.[12]

2.

Dation of the Mandaue property Deed executed by the spouses Tiu involving one parcel of land with improvements located in A.S.
Fortuna St., Mandaue City, covered by TCT No. T-31604 and with a land area of 2,960 square meters, for the amount
of P36,080,000.00. The Deed states that said property shall be leased to the Tiu spouses at a monthly rate ofP150,000.00 for a period of
two years.[13]

As likewise provided in the Restructuring Agreement, the spouses Tiu executed a Real Estate Mortgage in favor of Union Bank over their
residential property inclusive of lot and improvements located at P. Burgos St., Mandaue City, covered by TCT No. T-11951 with an area of 3,096
square meters.[14]
The spouses Tiu undertook to pay the total restructured amount (P104,668,741.00) via three loan facilities (payment schemes).
The spouses Tiu claim to have made the following payments: (1) P15,000,000.00 on August 3, 1999; and (2) anotherP13,197,546.79 as
of May 8, 2001. Adding the amounts paid under the Deeds of Dation in Payment, the spouses Tiu postulate that their payments added up
to P89,407,546.79.[15]
Asserting that the spouses Tiu failed to comply with the payment schemes set up in the Restructuring Agreement, Union Bank initiated
extrajudicial foreclosure proceedings on the residential property of the spouses Tiu, covered by TCT No. T-11951. The property was to be sold at public
auction on July 18, 2002.
The spouses Tiu, together with Juanita T. Tiu, Rosalinda T. King, Rufino T. Tiu, Rosalie T. Young and Rosenda T. Tiu, filed with the Regional
Trial Court (RTC) of Mandaue City a Complaint seeking to have the Extrajudicial Foreclosure declared null and void. The case was docketed as Civil
Case No. MAN-4363.[16] Named as defendants were Union Bank and Sheriff IV Veronico C. Ouano (Sheriff Oano) of Branch 55, RTC, Mandaue
City. Complainants therein prayed for the following: (1) that the spouses Tiu be declared to have fully paid their obligation to Union Bank; (2) that
defendants be permanently enjoined from proceeding with the auction sale; (3) that Union Bank be ordered to return to the spouses Tiu their properties
as listed in the Complaint; (4) that Union Bank be ordered to pay the plaintiffs the sum of P10,000,000.00 as moral damages, P2,000,000.00 as

exemplary damages,P3,000,000.00 as attorneys fees and P500,000.00 as expenses of litigation; and (5) a writ of preliminary injunction or temporary
restraining order be issued enjoining the public auction sale to be held on July 18, 2002.[17]
The spouses Tiu claim that from the beginning the loans were in pesos, not in dollars. Their office clerk, Lilia Gutierrez, testified that the
spouses Tiu merely received the peso equivalent of their US$3,632,000.00 loan at the rate of US$1=P26.00. The spouses Tiu further claim that they
were merely forced to sign the Restructuring Agreement and take up an additional loan ofP5,000,000.00, the proceeds of which they never saw because
this amount was immediately applied by Union Bank to interest payments. [18]
The spouses Tiu allege that the foreclosure sale of the mortgaged properties was invalid, as the loans have already been fully paid. They also
allege that they are not the owners of the improvements constructed on the lot because the real owners thereof are their co-petitioners, Juanita T. Tiu,
Rosalinda T. King, Rufino T. Tiu, Rosalie T. Young and Rosenda T. Tiu.[19]
The spouses Tiu further claim that prior to the signing of the Restructuring Agreement, they entered into a Memorandum of Agreement with
Union Bank whereby the former deposited with the latter several certificates of shares of stock of various companies and four certificates of title of
various parcels of land located in Cebu. The spouses Tiu claim that these properties have not been subjected to any lien in favor of Union Bank, yet the
latter continues to hold on to these properties and has not returned the same to the former.[20]
On the other hand, Union Bank claims that the Restructuring Agreement was voluntarily and validly entered into by both parties. Presenting
as evidence the Warranties embodied in the Real Estate Mortgage, Union Bank contends that the foreclosure of the mortgage on the residential property
of the spouses Tiu was valid and that the improvements thereon were absolutely owned by them. Union Bank denies receiving certificates of shares of
stock of various companies or the four certificates of title of various parcels of land from the spouses Tiu. However, Union Bank also alleges that even if
said certificates were in its possession it is authorized under the Restructuring Agreement to retain any and all properties of the debtor as security for the
loan.[21]
The RTC issued a Temporary Restraining Order [22] and, eventually, a Writ of Preliminary Injunction [23] preventing the sale of the residential
property of the spouses Tiu. [24]
On December 16, 2004, the RTC rendered its Decision [25] in Civil Case No. MAN-4363 in favor of Union Bank. The dispositive portion of the
Decision read:
WHEREFORE, premises considered, judgment is hereby rendered dismissing the Complaint and lifting and setting aside
the Writ of Preliminary Injunction. No pronouncement as to damages, attorneys fees and costs of suit.[26]

In upholding the validity of the Restructuring Agreement, the RTC held that the spouses Tiu failed to present any evidence to prove either
fraud or intimidation or any other act vitiating their consent to the same. The exact obligation of the spouses Tiu to Union Bank is
therefore P104,668,741.00, as agreed upon by the parties in the Restructuring Agreement. As regards the contention of the spouses Tiu that they have
fully paid their indebtedness, the RTC noted that they could not present any detailed accounting as to the total amount they have paid after the execution
of the Restructuring Agreement.[27]
On January 4, 2005, Union Bank filed a Motion for Partial Reconsideration, [28] protesting the finding in the body of the December 16, 2004
Decision that the residential house on Lot No. 639 is not owned by the spouses Tiu and therefore should be excluded from the real properties covered
by the real estate mortgage. On January 6, 2005, the spouses Tiu filed their own Motion for Partial Reconsideration and/or New Trial. [29] They alleged
that the trial court failed to rule on their fourth cause of action wherein they mentioned that they turned over the following titles to Union Bank: TCT Nos.

30271, 116287 and 116288 and OCT No. 0-3538. They also prayed for a partial new trial and for a declaration that they have fully paid their obligation to
Union Bank.[30]
On January 11, 2005, the spouses Tiu received from Sheriff Oano a Second Notice of Extra-judicial Foreclosure Sale of Lot No. 639 to be held
on February 3, 2005. To prevent the same, the Tiu spouses filed with the Court of Appeals a Petition for Prohibition and Injunction with Application for
TRO/Writ of Preliminary Injunction.[31] The petition was docketed as CA-G.R. SP No. 00253. The Court of Appeals issued a Temporary Restraining
Order on January 27, 2005.[32]
On January 19, 2005, the RTC issued an Order denying Union Banks Motion for Partial Reconsideration and the Tiu spouses Motion for
Partial Reconsideration and/or New Trial.[33]
Both the spouses Tiu and Union Bank appealed the case to the Court of Appeals. [34] The two appeals were given a single docket number, CAG.R. CEB-CV No. 00190. Acting on a motion filed by the spouses Tiu, the Court of Appeals consolidatedCA-G.R. SP No. 00253 with CA-G.R. CEB-CV
No. 00190.[35]
On April 19, 2005, the Court of Appeals issued a Resolution finding that there was no need for the issuance of a Writ of Preliminary Injunction
as the judgment of the lower court has been stayed by the perfection of the appeal therefrom.[36]
On May 9, 2005, Sheriff Oano proceeded to conduct the extrajudicial sale. Union Bank submitted the lone bid ofP18,576,000.00.[37] On June
14, 2005, Union Bank filed a motion with the Court of Appeals praying that Sheriff Oano be ordered to issue a definite and regular Certificate of Sale.
[38]

On July 21, 2005, the Court of Appeals issued a Resolution denying the Motion and suspending the auction sale at whatever stage, pending

resolution of the appeal and conditioned upon the filing of a bond in the amount of P18,000,000.00 by the Tiu spouses.[39] The Tiu spouses failed to file
said bond.[40]
On February 21, 2006, the Court of Appeals rendered the assailed Joint Decision in CA-G.R. CV No. 00190 and CA-G.R. SP No. 00253. The
Court of Appeals dismissed the Petition for Prohibition, CA-G.R. SP No. 00253, on the ground that the proper venue for the same is with the RTC. [41]
On the other hand, the Court of Appeals ruled in favor of the spouses Tiu in CA-G.R. CV No. 00190. The Court of Appeals held that the loan
transactions were in pesos, since there was supposedly no stipulation the loans will be paid in dollars and since no dollars ever exchanged
hands. Considering that the loans were in pesos from the beginning, the Court of Appeals reasoned that there is no need to convert the same. By
making it appear that the loans were originally in dollars, Union Bank overstepped its rights as creditor, and made unwarranted interpretations of the
original loan agreement. According to the Court of Appeals, the Restructuring Agreement, which purportedly attempts to create a novation of the original
loan, was not clearly authorized by the debtors and was not supported by any cause or consideration. Since the Restructuring Agreement is void, the
original loan of P94,432,000.00 (representing the amount received by the spouses Tiu of US$3,632,000.00 using the US$1=P26.00 exchange rate)
should subsist. The Court of Appeals likewise invalidated (1) the P5,000,000.00 charge for interest in the Restructuring Agreement, for having been
unilaterally imposed by Union Bank; and (2) the lease of the properties conveyed in dacion en pago, for being against public policy.[42]
In sum, the Court of Appeals found Union Bank liable to the spouses Tiu in the amount of P927,546.79. For convenient reference, we quote
relevant portion of the Court of Appeals Decision here:
To summarize the obligation of the Tiu spouses, they owe Union Bank P94,432,000.00. The Tiu spouses had already
paid Union Bank the amount of P89,407,546.79. On the other hand, Union Bank must return to the Tiu spouses the illegally
collected rentals in the amount ofP5,952,000.00. Given these findings, the obligation of the Tiu spouses has already been fully
paid. In fact, it is the Union Bank that must return to the Tiu spouses the amount of NINE HUNDRED TWENTY[-]SEVEN
THOUSAND FIVE HUNDRED FORTY[-]SIX PESOS AND SEVENTY[-]NINE CENTAVOS (P927,546.79).[43]

With regard to the ownership of the improvements on the subject mortgaged property, the Court of Appeals ruled that it belonged to respondent
Rodolfo Tius father, Jose Tiu, since 1981. According to the Court of Appeals, Union Bank should not have relied on warranties made by debtors that
they are the owners of the property. The appellate court went on to permanently enjoin Union Bank from foreclosing the mortgage not only of the
property covered by TCT No. T-11951, but also any other mortgage over any other property of the spouses Tiu.[44]
The Court of Appeals likewise found Union Bank liable to return the certificates of stocks and titles to real properties of the spouses Tiu in its
possession. The appellate court held that Union Bank made judicial admissions of such possession in its Reply to Plaintiffs Request for Admission. [45] In
the event that Union Bank can no longer return these certificates and titles, it was mandated to shoulder the cost for their replacement. [46]
Finally, the Court of Appeals took judicial notice that before or during the financial crisis, banks actively convinced debtors to make dollar loans
in the guise of benevolence, saddling borrowers with loans that ballooned twice or thrice their original loans. The Court of Appeals, noting the cavalier
way with which banks exploited and manipulated the situation, [47] held Union Bank liable to the spouses Tiu for P100,000.00 in moral
damages, P100,000.00 in exemplary damages, and P50,000.00 in attorneys fees.[48]
The Court of Appeals disposed of the case as follows:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us permanently enjoining Union Bank
from foreclosing the mortgage of the residential property of the Tiu spouses which is covered by Transfer Certificate of Title No.
11951 and from pursuing other foreclosure of mortgages over any other properties of the Tiu spouses for the above-litigated debt
that has already been fully paid. If a foreclosure sale has already been made over such properties, this Court orders the
cancellation of such foreclosure sale and the Certificate of Sale thereof if any has been issued. This Court orders Union Bank to
return to the Tiu spouses the amount of NINE HUNDRED TWENTY[-]SEVEN THOUSAND FIVE HUNDRED FORTY[-]SIX
PESOS AND SEVENTY[-]NINE CENTAVOS (P927,546.79) representing illegally collected rentals. This Court also orders Union
Bank to return to the Tiu spouses all the certificates of shares of stocks and titles to real properties of the Tiu spouses that were
deposited to it or, in lieu thereof, to pay the cost for the replacement and issuance of new certificates and new titles over the said
properties. This Court finally orders Union Bank to pay the Tiu spouses ONE HUNDRED THOUSAND PESOS (P100,000.00) in
moral damages, ONE HUNDRED THOUSAND PESOS (P100,000.00) in exemplary damages, FIFTY THOUSAND PESOS
(P50,000.00) in attorneys fees and cost, both in the lower court and in this Court.[49]

On June 1, 2006, the Court of Appeals rendered the assailed Resolution denying Union Banks Motion for Reconsideration.
Hence, this Petition for Review on Certiorari, wherein Union Bank submits the following issues for the consideration of this Court:
1.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR WHEN IT CONCLUDED
THAT THERE WERE NO DOLLAR LOANS OBTAINED BY [THE] TIU SPOUSES FROM UNION BANK DESPITE [THE]
CLEAR ADMISSION OF INDEBTEDNESS BY THE BORROWER-MORTGAGOR TIU SPOUSES.

2.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR WHEN IT NULLIFIED
THE RESTRUCTURING AGREEMENT BETWEEN TIU SPOUSES AND UNION BANK FOR LACK OF CAUSE OR
CONSIDERATION DESPITE THE ADMISSION OF THE BORROWER-MORTGAGOR TIU SPOUSES OF THE DUE AND
VOLUNTARY EXECUTION OF SAID RESTRUCTURING AGREEMENT.

3.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR WHEN IT
PERMANENTLY ENJOINED UNION BANK FROM FORECLOSING THE MORTGAGE ON THE RESIDENTIAL PROPERTY
OF THE TIU SPOUSES DESPITE THE ADMISSION OF NON-PAYMENT OF THEIR OUTSTANDING LOAN TO THE BANK
BY THE BORROWER-MORTGAGOR TIU SPOUSES;

4.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR WHEN IT FIXED THE
AMOUNT OF THE OBLIGATION OF RESPONDENT SPOUSES CONTRARY TO THE PROVISIONS OF THE PROMISSORY
NOTES, RESTRUCTURING AGREEMENT AND [THE] VOLUNTARY ADMISSIONS BY BORROWER-MORTGAGOR TIU
SPOUSES;

5.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR WHEN IT RULED ON
THE ALLEGED RENTALS PAID BY RESPONDENT SPOUSES WITHOUT ANY FACTUAL BASIS;

6.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR WHEN IT HELD
WITHOUT ANY FACTUAL BASIS THAT THE LOAN OBLIGATION OF TIU SPOUSES HAS BEEN FULLY PAID;

7.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR WHEN IT HELD
WITHOUT ANY FACTUAL BASIS THAT THE HOUSE INCLUDED IN THE REAL ESTATE MORTGAGE DID NOT BELONG TO
THE TIU SPOUSES.

8.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR IN ORDERING UNION
BANK TO RETURN THE CERTIFICATES OF SHARES OF STOCK AND TITLES TO REAL PROPERTIES OF TIU SPOUSES
ALLEGEDLY IN THE POSSESSION OF UNION BANK.

9.

WHETHER OR NOT THE COURT OF APPEALS VIOLATED THE DOCTRINES AND PRINCIPLES ON APPELLATE
JURISDICTION.

10. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR IN AWARDING
DAMAGES AGAINST UNION BANK.[50]

Validity of the Restructuring Agreement

As previously discussed, the Court of Appeals declared that the Restructuring Agreement is void on account of its being a failed novation of the
original loan agreements. The Court of Appeals explained that since there was no stipulation that the loans will be paid in dollars, and since no dollars
ever exchanged hands, the original loan transactions were in pesos. [51] Proceeding from this premise, the Court of Appeals held that the Restructuring
Agreement, which was meant to convert the loans into pesos, was unwarranted. Thus, the Court of Appeals reasoned that:
Be that as it may, however, since the loans of the Tiu spouses from Union Bank were peso loans from the very beginning,
there is no need for conversion thereof. A Restructuring Agreement should merely confirm the loans, not add thereto. By making it
appear in the Restructuring Agreement that the loans were originally dollar loans, Union Bank overstepped its rights as a creditor
and made unwarranted interpretations of the original loan agreement. This Court is not bound by such interpretations made by
Union Bank. When one party makes an interpretation of a contract, he makes it at his own risk, subject to a subsequent challenge
by the other party and a modification by the courts. In this case, that party making the interpretation is not just any party, but a well
entrenched and highly respected bank. The matter that was being interpreted was also a financial matter that is within the profound
expertise of the bank. A normal person who does not possess the same financial proficiency or acumen as that of a bank will most
likely defer to the latters esteemed opinion, representations and interpretations. It has been often stated in our jurisprudence that
banks have a fiduciary duty to their depositors. According to the case of Bank of the Philippine Islands vs. IAC (G.R. No. 69162,
February 21, 1992), as a business affected with public interest and because of the nature of its functions, the bank is under
obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their
relationship. Such fiduciary relationship should also extend to the banks borrowers who, more often than not, are also depositors
of the bank. Banks are in the business of lending while most borrowers hardly know the basics of such business. When transacting
with a bank, most borrowers concede to the expertise of the bank and consider their procedures, pronouncements and
representations as unassailable, whether such be true or not. Therefore, when there is a doubtful banking transaction, this Court
will tip the scales in favor of the borrower.
Given the above ruling, the Restructuring Agreement, therefore, between the Tiu spouses and Union Bank does not
operate to supersede all previous loan documents, as claimed by Union Bank. But the said Restructuring Agreement, as it was
crafted by Union Bank, does not merely confirm the original loan of the Tiu spouses but attempts to create a novation of the said
original loan that is not clearly authorized by the debtors and that is not supported by any cause or consideration. According to
Article 1292 of the New Civil Code, in order that an obligation may by extinguished by another which substitutes the same, it is
imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible with
each other. Such is not the case in this instance. No valid novation of the original obligation took place. Even granting arguendo
that there was a novation, the sudden change in the original amount of the loan to the new amount declared in the Restructuring
Agreement is not supported by any cause or consideration. Under Article 1352 of the Civil Code, contracts without cause, or with
unlawful cause, produce no effect whatever. A contract whose cause did not exist at the time of the transaction is void. Accordingly,
Article 1297 of the New Civil Code mandates that, if the new obligation is void, the original one shall subsist, unless the parties
intended that the former relation should be extinguished at any event. Since the Restructuring Agreement is void and since there
was no intention to extinguish the original loan, the original loan shall subsist. [52]

Union Bank does not dispute that the spouses Tiu received the loaned amount of US$3,632,000.00 in Philippine pesos, not dollars, at the
prevailing exchange rate of US$1=P26.[53] However, Union Bank claims that this does not change the true nature of the loan as a foreign currency loan,
[54]

and proceeded to illustrate in its Memorandum that the spouses Tiu obtained favorable interest rates by opting to borrow in dollars (but receiving the

equivalent peso amount) as opposed to borrowing in pesos.[55]

We agree with Union Bank on this point. Although indeed, the spouses Tiu received peso equivalents of the borrowed amounts, the loan
documents presented as evidence, i.e., the promissory notes,[56] expressed the amount of the loans in US dollars and not in any other currency. This

clearly indicates that the spouses Tiu were bound to pay Union Bank in dollars, the amount stipulated in said loan documents. Thus, before the
Restructuring Agreement, the spouses Tiu were bound to pay Union Bank the amount of US$3,632,000.00 plus the interest stipulated in the promissory
notes, without converting the same to pesos. The spouses Tiu, who are in the construction business and appear to be dealing primarily in Philippine
currency, should therefore purchase the necessary amount of dollars to pay Union Bank, who could have justly refused payment in any currency other
than that which was stipulated in the promissory notes.
We disagree with the finding of the Court of Appeals that the testimony of Lila Gutierrez, which merely attests to the fact that the spouses Tiu
received the peso equivalent of their dollar loan, proves the intention of the parties that such loans should be paid in pesos. If such had been the
intention of the parties, the promissory notes could have easily indicated the same.
Such stipulation of payment in dollars is not prohibited by any prevailing law or jurisprudence at the time the loans were taken. In this regard,
Article 1249 of the Civil Code provides:
Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such
currency, then in the currency which is legal tender in the Philippines.

Although the Civil Code took effect on August 30, 1950, jurisprudence had upheld[57] the continued effectivity of Republic Act No. 529, which took effect
earlier on June 16, 1950. Pursuant to Section 1[58] of Republic Act No. 529, any agreement to pay an obligation in a currency other than the Philippine
currency is void; the most that could be demanded is to pay said obligation in Philippine currency to be measured in the prevailing rate of exchange at
the time the obligation was incurred.[59] On June 19, 1964, Republic Act No. 4100 took effect, modifying Republic Act No. 529 by providing for several
exceptions to the nullity of agreements to pay in foreign currency.[60]
On April 13, 1993, Central Bank Circular No. 1389 [61] was issued, lifting foreign exchange restrictions and liberalizing trade in foreign
currency. In cases of foreign borrowings and foreign currency loans, however, prior BangkoSentral approval was required. On July 5, 1996, Republic
Act No. 8183 took effect,[62] expressly repealing Republic Act No. 529 in Section 2 [63]thereof.

The same statute also explicitly provided that parties may

agree that the obligation or transaction shall be settled in a currency other than Philippine currency at the time of payment. [64]
Although the Credit Line Agreement between the spouses Tiu and Union Bank was entered into on November 21, 1995,[65]when the
agreement to pay in foreign currency was still considered void under Republic Act No. 529, the actual loans, [66] as shown in the promissory notes, were
taken out from September 22, 1997 to March 26, 1998, during which time Republic Act No. 8183 was already in effect. In United Coconut Planters
Bank v. Beluso,[67] we held that:
[O]pening a credit line does not create a credit transaction of loan or mutuum, since the former is merely a preparatory contract to
the contract of loan or mutuum. Under such credit line, the bank is merely obliged, for the considerations specified therefor, to lend
to the other party amounts not exceeding the limit provided. The credit transaction thus occurred not when the credit line was
opened, but rather when the credit line was availed of. x x x.[68]

Having established that Union Bank and the spouses Tiu validly entered into dollar loans, the conclusion of the Court of Appeals that there
were no dollar loans to novate into peso loans must necessarily fail.
Similarly, the Court of Appeals pronouncement that the novation was not supported by any cause or consideration is likewise incorrect. This
conclusion suggests that when the parties signed the Restructuring Agreement, Union Bank got something out of nothing or that the spouses Tiu
received no benefit from the restructuring of their existing loan and was merely taken advantage of by the bank. It is important to note at this point that in
the determination of the nullity of a contract based on the lack of consideration, the debtor has the burden to prove the same. Article 1354 of the Civil
Code provides that [a]though the cause is not stated in the contract, it is presumed that it exists and is lawful, unless the debtor proves the contrary.

In the case at bar, the Restructuring Agreement was signed at the height of the financial crisis when the Philippine peso was rapidly
depreciating. Since the spouses Tiu were bound to pay their debt in dollars, the cost of purchasing the required currency was likewise swiftly
increasing. If the parties did not enter into the Restructuring Agreement in December 1999 and the peso continued to deteriorate, the ability of the
spouses Tiu to pay and the ability of Union Bank to collect would both have immensely suffered. As shown by the evidence presented by Union Bank,
the peso indeed continued to deteriorate, climbing to US$1=P50.01 on December 2000.[69] Hence, in order to ensure the stability of the loan agreement,
Union Bank and the spouses Tiu agreed in the Restructuring Agreement to peg the principal loan at P150,364,800.00 and the unpaid interest
at P5,000,000.00.
Before this Court, the spouses Tiu belatedly argue that their consent to the Restructuring Agreement was vitiated by fraud and mistake,
alleging that (1) the Restructuring Agreement did not take into consideration their substantial payment in the amount ofP40,447,185.60 before its
execution; and (2) the dollar loans had already been redenominated in 1997 at the rate of US$1=P26.34.[70]
We have painstakingly perused over the records of this case, but failed to find any documentary evidence of the alleged payment
of P40,447,185.60 before the execution of the Restructuring Agreement. In paragraph 16 of their Amended Complaint, the spouses Tiu alleged payment
of P40,447,185.60 for interests before the conversion of the dollar loan.[71] This was specifically denied by Union Bank in paragraph 5 of its Answer with
Counterclaim.[72] Respondent Rodolfo Tiu testified that they made 50 million plus in cash payment plus other monthly interest payments, [73] and
identified a computation of payments dated July 17, 2002 signed by himself. [74] Such computation, however, was never formally offered in evidence and
was in any event, wholly self-serving.
As regards the alleged redenomination of the same dollar loans in 1997 at the rate of US$1= P26.34, the spouses Tiu merely relied on the
following direct testimony of Herbert Hojas, one of the witnesses of Union Bank:
Q:

Could you please describe what kind of loan was the loan of the spouses Rodolfo Tiu, the plaintiffs in this case?

A:

It was originally an FCDU, meaning a dollar loan.

Q:

What happened to this FCDU loan or dollar loan?

A:

The dollar loan was re-denominated in view of the very unstable exchange of the dollar and the peso at that time,

Q:

Could you still remember what year this account was re-denominated from dollar to peso?

A:

I think it was on the year 1997.

Q:

Could [you] still remember what was then the prevailing exchange rate between the dollar and the peso at that year 1997?

A:

Yes. I have here the list of the dollar exchange rate from January 1987 (sic). It was P26.34 per dollar.[75]

Neither party presented any documentary evidence of the alleged redenomination in 1997. Respondent Rodolfo Tiu did not even mention it in
his testimony. Furthermore, Hojas was obviously uncertain in his statement that said redenomination was made in 1997.
As pointed out by the trial court, the Restructuring Agreement, being notarized, is a public document enjoying a prima faciepresumption of
authenticity and due execution. Clear and convincing evidence must be presented to overcome such legal presumption. [76] The spouses Tiu, who
attested before the notary public that the Restructuring Agreement is their own free and voluntary act and deed, [77] failed to present sufficient evidence
to prove otherwise. It is difficult to believe that the spouses Tiu, veteran businessmen who operate a multi-million peso company, would sign a very
important document without fully understanding its contents and consequences.
This Court therefore rules that the Restructuring Agreement is valid and, as such, a valid and binding novation of loans of the spouses Tiu
entered into from September 22, 1997 to March 26, 1998 which had a total amount of US$3,632,000.00.

Validity of the Foreclosure of Mortgage

The spouses Tiu challenge the validity of the foreclosure of the mortgage on two grounds, claiming that: (1) the debt had already been fully
paid; and (2) they are not the owners of the improvements on the mortgaged property.
(1) Allegation of full payment of the mortgage debt
In the preceding discussion, we have ruled that the Restructuring Agreement is a valid and binding novation of loans of the spouses Tiu
entered into from September 22, 1997 to March 26, 1998 in the total amount of US$3,632,000.00. Thus, in order that the spouses Tiu can be held to
have fully paid their loan obligation, they should present evidence showing their payment of the total restructured amount under the Restructuring
Agreement which was P104,668,741.00. As we have discussed above, however, while respondent Rodolfo Tiu appeared to have identified during his
testimony a computation dated July 17, 2002 of the alleged payments made to Union Bank, [78] the same was not formally offered in evidence. Applying
Section 34, Rule 132[79] of the Rules of Court, such computation cannot be considered by this Court. We have held that a formal offer is necessary
because judges are mandated to rest their findings of facts and their judgment only and strictly upon the evidence offered by the parties at the trial. It
has several functions: (1) to enable the trial judge to know the purpose or purposes for which the proponent is presenting the evidence; (2) to allow
opposing parties to examine the evidence and object to its admissibility; and (3) to facilitate review by the appellate court, which will not be required to
review documents not previously scrutinized by the trial court. [80] Moreover, even if such computation were admitted in evidence, the same is self-serving
and cannot be given probative weight. In the case at bar, the records do not contain even a single receipt evidencing payment to Union Bank.
The Court of Appeals, however, held that several payments made by the spouses Tiu had been admitted by Union Bank. Indeed, Section
11, Rule 8 of the Rules of Court provides that an allegation not specifically denied is deemed admitted. In such a case, no further evidence would be
required to prove the antecedent facts. We should therefore examine which of the payments specified by the spouses Tiu in their Amended
Complaint[81] were not specifically denied by Union Bank.
The allegations of payment are made in paragraphs 16 to 21 of the Amended Complaint:
16. Before conversion of the dollar loan into a peso loan[,] the spouses Tiu had already paid the defendant bank the
amount of P40,447,185.60 for interests;
17. On August 3, 1999 and August 12, 1999, plaintiffs made payments in the amount of P15,000,000.00;
18. In order to lessen the obligation of plaintiffs, the mother of plaintiff Rodolfo T. Tiu, plaintiff Juanita T. Tiu, executed a
deed of dacion in payment in favor of defendant involving her 10 parcels of land located in Labangon, Cebu City for the amount
of P25,130,000.00. Copy of the deed was attached to the original complaint as Annex C;
19. For the same purpose, plaintiffs spouses Tiu also executed a deed of dacion in payment of their property located at
A.S. Fortuna St., Mandaue City for the amount of P36,080,000.00. Copy of the deed was attached to the original complaint as
Annex D;
20. The total amount of the two dacions in payment made by the plaintiffs was P61,210,000.00;
21. Plaintiffs spouses Tiu also made other payment of the amount of P13,197,546.79 as of May 8, 2001;[82]

In paragraphs 4 and 5 of their Answer with Counterclaim, [83] Union Bank specifically denied the allegation in paragraph 9 of the Complaint, but
admitted the allegations in paragraphs 17, 18, 19, 20 and 21 thereof. Paragraphs 18, 19 and 20 allege the two deeds of dacion. However, these
instruments were already incorporated in the computation of the outstanding debt (i.e., subtracted from the confirmed debt of P155,364,800.00), as can
be gleaned from the following provisions in the Restructuring Agreement:
a.)

The loan obligation to the BANK to be restructured herein after deducting from the Indebtedness of the BORROWER
the dacion price of the properties subject of the Deeds of Dacion and adding to the Indebtedness all the taxes, registration
fees and other expenses advanced by the bank in registering the Deeds of Dacion, and also adding to the Indebtedness
the interest, and other fees and charges incurred by the Indebtedness, amounts to ONE HUNDRED FOUR MILLION SIX

HUNDRED SIXTY-EIGHT THOUSAND SEVEN HUNDRED FORTY-ONE PESOS (PHP104,668,741.00) (the TOTAL
RESTRUCTURED AMOUNT).[84]

As regards the allegations of cash payments in paragraphs 17 and 21 of the Amended Complaint, the date of the alleged payment is critical as
to whether they were included in the Restructuring Agreement. The payment of P15,000,000.00 alleged in paragraph 17 of the Amended Complaint was
supposedly made on August 3 and 12, 1999. This payment was before the date of execution of the Restructuring Agreement on December 21, 1999,
and is therefore already factored into the restructured obligation of the spouses. [85] On the other hand, the payment of P13,197,546.79 alleged in
paragraph 21 of the Amended Complaint was dated May, 8, 2001. Said payment cannot be deemed included in the computation of the spouses Tius
debt in the Restructuring Agreement, which was assented to more than a year earlier. This amount (P13,197,546.79) is even absent[86] in the
computation of Union Bank of the outstanding debt, in contrast with the P15,000,000.00 payment which is included[87] therein. Union Bank did not explain
this discrepancy and merely relied on the spouses Tius failure to formally offer supporting evidence. Since this payment ofP13,197,546.79 on May 8,
2001 was admitted by Union Bank in their Answer with Counterclaim, there was no need on the part of the spouses Tiu to present evidence on the
same. Nonetheless, if we subtract this figure from the total restructured amount (P104,668,741.00) in the Restructuring Agreement, the result is that the
spouses Tiu still owe Union Bank P91,471,194.21.

(2) Allegation of third party ownership of the improvements on the mortgaged lot
The Court of Appeals, taking into consideration its earlier ruling that the loan was already fully paid, permanently enjoined Union Bank from
foreclosing the mortgage on the property covered by Transfer Certificate of Title No. 11951 (Lot No. 639) and from pursuing other foreclosure of
mortgages over any other properties of the spouses Tiu. The Court of Appeals ruled:
The prayer, therefore, of the Tiu spouses to enjoin the foreclosure of the real estate mortgage over their residential
property has merit. The loan has already been fully paid. It should also be noted that the house constructed on the residential
property of the Tiu spouses is not registered in the name of the Tiu spouses, but in the name of Jose Tiu (Records, pp. 127-132), the
father of appellant and petitioner Rodolfo Tiu, since 1981. It had been alleged by the Tiu spouses that Jose Tiu died on December
18, 1983, and, that consequently upon his death, Juanita T. Tiu, Rosalinda T. King, Rufino T. Tiu, Rosalie T. Young and Rosenda T.
Tiu became owners of the house (Records, p. 116). This allegation has not been substantially denied by Union Bank. All that the
Union Bank presented to refute this allegation are a Transfer Certificate of Title and a couple of Tax Declarations which do not
indicate that a residential house is titled in the name of the Tiu spouses. In fact, in one of the Tax Declarations, the market value of
the improvements is worth only P3,630.00. Certainly, Union Bank should have been aware that this Tax Declaration did not cover
the residential house. Union Bank should also not rely on warranties made by debtors that they are the owners of the
property. They should investigate such representations. The courts have made consistent rulings that a bank, being in the business
of lending, is obligated to verify the true ownership of the properties mortgaged to them. Consequently, this Court permanently
enjoins Union Bank from foreclosing the mortgage of the residential property of the Tiu spouses which is covered by Transfer
Certificate of Title No. 11951 and from pursuing other foreclosure of mortgages over any other properties of the Tiu spouses. If a
foreclosure sale has already been made over such properties, this Court orders the cancellation of such foreclosure sale and the
Certificate of Sale thereof if any has been issued, and the return of the title to the Tiu spouses. [88]

We disagree. Contrary to the ruling of the Court of Appeals, the burden to prove the spouses Tius allegation that they do not own the
improvements on Lot No. 639, despite having such improvements included in the mortgage is on the spouses Tiu themselves. The fundamental rule is
that he who alleges must prove.[89] The allegations of the spouses Tiu on this matter, which are found in paragraphs 35 to 39 [90] of their Amended
Complaint, were specifically denied in paragraph 9 of Union Banks Answer with Counterclaim. [91]
Upon careful examination of the evidence, we find that the spouses Tiu failed to prove that the improvements on Lot No. 639 were owned by
third persons. In fact, the evidence presented by the spouses Tiu merely attempt to prove that the improvements on Lot No. 639 were declared for taxes
in the name of respondent Rodolfo Tius father, Jose Tiu, who allegedly died on December 18, 1983. There was no effort to show how their co-plaintiffs
in the original complaint, namely Juanita T. Tiu, Rosalinda T. King, Rufino T. Tiu, Rosalie T. Young and Rosenda T. Tiu, became co-owners of the

house. The spouses Tiu did not present evidence as to (1) who the heirs of Jose Tiu are; (2) if Juanita T. Tiu, Rosalinda T. King, Rufino T. Tiu, Rosalie T.
Young and Rosenda T. Tiu are indeed included as heirs; and (3) why petitioner Rodolfo Tiu is not included as an heir despite being the son of Jose
Tiu. No birth certificate of the alleged heirs, will of the deceased, or any other piece of evidence showing judicial or extrajudicial settlement of the estate
of Jose Tiu was presented.
In light of the foregoing, this Court therefore sets aside the ruling of the Court of Appeals permanently enjoining Union Bank from foreclosing
the mortgage on Lot No. 639, including the improvements thereon.
Validity of Alleged Rental Payments on the Properties Conveyed to the Bank via Dacion en
Pago

The Court of Appeals found the lease contracts over the properties conveyed to Union Bank via dacion en pago to be void for being against
public policy. The appellate court held that since the General Banking Law of 2000 [92] mandates banks to immediately dispose of real estate properties
that are not necessary for its own use in the conduct of its business, banks should not enter into two-year contracts of lease over properties paid to them
through dacion.[93] The Court of Appeals thus ordered Union Bank to return the rentals it collected. To determine the amount of rentals paid by the
spouses Tiu to Union Bank, the Court of Appeals simply multiplied the monthly rental stipulated in the Restructuring Agreement by the stipulated period of
the lease agreement:
For the Labangon property, the Tiu spouses paid rentals in the amount of P98,000.00 per month for two years, or a total
amount ofP2,352,000.00. For the A.S. Fortuna property, the Tiu spouses paid rentals in the amount of P150,000.00 per month for
two years, or a total amount of P3,600,000.00. The total amount in rentals paid by the Tiu spouses to Union Bank is FIVE MILLION
NINE HUNDRED FIFTY- TWO THOUSAND PESOS (P5,952,000.00). This Court finds that the return of this amount to the Tiu
spouses is called for since it will better serve public policy. These properties that were given by the Tiu spouses to Union Bank as
payment should not be used by the latter to extract more money from the former. This situation is analogous to having a debtor pay
interest for a debt already paid. Instead of leasing the properties, Union Bank should have instructed the Tiu spouses to vacate the
said properties so that it could dispose of them.[94]

The Court of Appeals committed a serious error in this regard. As pointed out by petitioner Union Bank, the spouses Tiu did not present any
proof of the alleged rental payments. Not a single receipt was formally offered in evidence. The mere stipulation in a contract of the monthly rent to be
paid by the lessee is certainly not evidence that the same has been paid. Since the spouses Tiu failed to prove their payment to Union Bank of the
amount of P5,952,000.00, we are constrained to reverse the ruling of the Court of Appeals ordering its return.
Even assuming arguendo that the spouses Tiu had duly proven that it had paid rent to Union Bank, we nevertheless disagree with the finding
of the Court of Appeals that it is against public policy for banks to enter into two-year contracts of lease of properties ceded to them through dacion en
pago. The provisions of law cited by the Court of Appeals, namely Sections 51 and 52 of the General Banking Law of 2000, merely provide:
SECTION 51. Ceiling on Investments in Certain Assets. Any bank may acquire real estate as shall be necessary for its
own use in the conduct of its business: Provided, however, That the total investment in such real estate and improvements thereof,
including bank equipment, shall not exceed fifty percent (50%) of combined capital accounts: Provided, further, That the equity
investment of a bank in another corporation engaged primarily in real estate shall be considered as part of the bank's total
investment in real estate, unless otherwise provided by the Monetary Board.
SECTION 52. Acquisition of Real Estate by Way of Satisfaction of Claims. Notwithstanding the limitations of the
preceding Section, a bank may acquire, hold or convey real property under the following circumstances:
52.1.

Such as shall be mortgaged to it in good faith by way of security for debts;

52.2.

Such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings; or

52.3. Such as it shall purchase at sales under judgments, decrees, mortgages, or trust deeds held by it and such as it
shall purchase to secure debts due it.
Any real property acquired or held under the circumstances enumerated in the above paragraph shall be disposed of by
the bank within a period of five (5) years or as may be prescribed by the Monetary Board: Provided, however, That the bank may,
after said period, continue to hold the property for its own use, subject to the limitations of the preceding Section.
Section 52.2 contemplates a dacion en pago. Thus, Section 52 undeniably gives banks five years to dispose of properties conveyed to them
in satisfaction of debts previously contracted in the course of its dealings, unless another period is prescribed by the Monetary Board. Furthermore,

there appears to be no legal impediment for a bank to lease the real properties it has received in satisfaction of debts, within the five-year period that
such bank is allowed to hold the acquired realty.
We do not dispute the interpretation of the Court of Appeals that the purpose of the law is to prevent the concentration of land holdings in a few
hands, and that banks should not be allowed to hold on to the properties contemplated in Section 52 beyond the five-year period unless such bank has
exerted its best efforts to dispose of the property in good faith but failed. However, inquiries as to whether the banks exerted best efforts to dispose of
the property can only be done if said banks fail to dispose of the same within the period provided. Such inquiry is furthermore irrelevant to the issues in
the case at bar.
Order to Return Certificates Allegedly in Union Banks Possession

In the Amended Complaint, the spouses Tiu alleged [95] that they delivered several certificates and titles to Union Bank pursuant to a
Memorandum of Agreement. These certificates and titles were not subjected to any lien in favor of Union Bank, but the latter allegedly continued to hold
on to said properties.
The RTC failed to rule on this issue. The Court of Appeals, tackling this issue for the first time, ruled in favor of the Tiu spouses and ordered
the return of these certificates and titles. The appellate court added that if Union Bank can no longer return these certificates or titles, it should shoulder
the cost for their replacement.[96]
Union Bank, asserting that the Memorandum of Agreement did not, in fact, push through, denies having received the subject certificates and
titles. Union Bank added that even assuming arguendo that it is in possession of said documents, the Restructuring Agreement itself allows such
possession.[97]
The evidence on hand lends credibility to the allegation of Union Bank that the Memorandum of Agreement did not push through. The copy of
the Memorandum of Agreement attached by the spouses Tiu themselves to their original complaint did not bear the signature of any representative from
Union Bank and was not notarized.[98]
We, however, agree with the finding of the Court of Appeals that despite the failure of the Memorandum of Agreement to push through, the
certificates and titles mentioned therein do appear to be in the possession of Union Bank. As held by the Court of Appeals:
Lastly, this Court will order, as it hereby orders, Union Bank to return to the Tiu spouses all the certificates of shares of
stocks and titles to real properties of the Tiu spouses in its possession. Union Bank cannot deny possession of these items since it
had made judicial admissions of such possession in their document entitled Reply to Plaintiffs request for Admission (records, pp.
216-217). While in that document, Union Bank only admitted to the possession of four real estate titles, this Court is convinced that
all the certificates and titles mentioned in the unconsummated Memorandum of Agreement (Records, pp. 211-213) were given by
the Tiu spouses to Union Bank for appraisal. This finding is further bolstered by the admission of the Union Bank that it kept the
titles for safekeeping after it rejected the Memorandum of Agreement. Since Union Bank rejected these certificates and titles of
property, it should return the said items to the Tiu spouses. If Union Bank can no longer return these certificates and titles or if it has
misplaced them, it shall shoulder the cost for the replacement and issuance of new certificates and new titles over the said
properties.[99]

As regards Union Banks argument that it has the right to retain said documents pursuant to the Restructuring Agreement, it is referring to
paragraph 11(b), which provides that:
11. Effects of Default When the BORROWER is in default, such default shall have the following effects, alternative,
concurrent and cumulative with each other:
x xxx
(b)
The BANK shall be entitled to all the remedies provided for and further shall have the right to effect or apply
against the partial or full payment of any and all obligations of the BORROWER under this Restructuring Agreement any and all
moneys or other properties of the BORROWER which, for any reason, are or may hereafter come into the possession of the

Bank or the Banks agent. All such moneys or properties shall be deemed in the BANKs possession as soon as put in transit
to the BANK by mail or carrier.[100]

In the first place, notwithstanding the foregoing provision, there is no clear intention on the part of the spouses Tiu to deliver the certificates
over certain shares of stock and real properties as security for their debt. From the terms of the Memorandum of Agreement, these certificates were
surrendered to Union Bank in order that the said properties described therein be given their corresponding loan values required for the restructuring of
the spouses Tius outstanding obligations. However, in the event the parties fail to agree on the valuation of the subject properties, Union Bank agrees to
release the same.[101] As Union Bank itself vehemently alleges, the Memorandum of Agreement was not consummated. Moreover, despite the fact that
the Bank was aware, or in possession, of these certificates, [102] at the time of execution of the Restructuring Agreement, only the mortgage over the real
property covered by TCT No. T-11951 was expressly mentioned as a security in the Restructuring Agreement. In fact, in its Reply to Request for
Admission,[103] Union Bank admitted that (1) the titles to the real properties were submitted to it for appraisal but were subsequently rejected, and (2) no
real estate mortgages were executed over the said properties. There being no agreement that these properties shall secure respondents obligation,
Union Bank has no right to retain said certificates.
Assuming arguendo that paragraph 11(b) of the Restructuring Agreement indeed allows the retention of the certificates (submitted to the Bank
ostensibly for safekeeping and appraisal) as security for spouses Tius debt, Union Banks position still cannot be upheld. Insofar as said provision
permits Union Bank to apply properties of the spouses Tiu in its possession to the full or partial payment of the latters obligations, the same appears to
impliedly allow Union Bank to appropriate these properties for such purpose. However, said provision cannot be validly applied to the subject certificates
and titles without violating the prohibition against pactumcommissorium contained in Article 2088 of the Civil Code, to the effect that [t]he creditor cannot
appropriate the things given by way of pledge or mortgage, or dispose of them[;] [a]ny stipulation to the contrary is null and void. Applicable by analogy
to the present case is our ruling in Nakpil v. Intermediate Appellate Court, [104] wherein property held in trust was ceded to the trustee upon failure of the
beneficiary to answer for the amounts owed to the former, to wit:
For, there was to be automatic appropriation of the property by Valdes in the event of failure of petitioner to pay the value of the
advances. Thus, contrary to respondent's manifestations, all the elements of a pactumcommissorium were present: there was a
creditor-debtor relationshipbetween the parties; the property was used as security for the loan; and, there was automatic
appropriation by respondent of PulongMaulap in case of default of petitioner.[105] (Emphases supplied.)

This Court therefore affirms the order of the Court of Appeals for Union Bank to return to the spouses Tiu all the certificates of shares of stock
and titles to real properties that were submitted to it or, in lieu thereof, to pay the cost for the replacement and issuance of new certificates and new titles
over the said properties.
Validity of the Award of Damages
The Court of Appeals awarded damages in favor of the spouses Tiu based on its taking judicial notice of the alleged exploitation by many
banks of the Asian financial crisis, as well as the foreclosure of the mortgage of the home of the spouses Tiu despite the alleged full payment by the
latter. As regards the alleged manipulation of the financial crisis, the Court of Appeals held:
As a final note, this Court observes the irregularity in the circumstances [surrounding] dollar loans granted by banks right
before or during the Asian financial crisis. It is of common knowledge that many banks, around that time, actively pursued and
convinced debtors to make dollar loans or to convert their peso loans to dollar loans allegedly because of the lower interest rate of
dollar loans. This is a highly suspect behavior on the part of the banks because it is irrational for the banks to voluntarily and
actively proffer a conversion that would give them substantially less income. In the guise of benevolence, many banks were able to
convince borrowers to make dollar loans or to convert their peso loans to dollar loans. Soon thereafter, the Asian financial crisis hit,
and many borrowers were saddled with loans that ballooned to twice or thrice the amount of their original loans. This court takes
judicial notice of these events or matters which are of public knowledge. It is inconceivable that the banks were unaware of the
looming Asian financial crisis. Being in the forefront of the financial world and having access to financial data that were not available
to the average borrower, the banks were in such a position that they had a higher vantage point with respect to the financial
landscape over their average clients. The cavalier way with which banks exploited and manipulated the situation is almost too
palpable that they openly and unabashedly struck heavy blows on the Philippine economy, industries and businesses. The banks
have a fiduciary duty to their clients and to the Filipino people to be transparent in their dealings and to make sure that the latters

interest are not prejudiced by the formers interest. Article 1339 of the New Civil Code provides that the failure to disclose facts,
when there is a duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud. Undoubtedly, the
banks and their clients are bound by confidential relations. The almost perfect timing of the banks in convincing their clients to shift
to dollar loans just when the Asian financial crisis struck indicates that the banks not only failed to disclose facts to their clients of the
looming crisis, but also suggests of the insidious design to take advantage of these undisclosed facts.[106]

We have already held that the foreclosure of the mortgage was warranted under the circumstances. As regards the alleged exploitation by
many banks of the Asian financial crisis, this Court rules that the generalization made by the appellate court is unfounded and cannot be the subject of
judicial notice. It is axiomatic that good faith is always presumed unless convincing evidence to the contrary is adduced. It is incumbent upon the party
alleging bad faith to sufficiently prove such allegation. Absent enough proof thereof, the presumption of good faith prevails. [107] The alleged insidious
design of many banks to betray their clients during the Asian financial crisis is certainly not of public knowledge. The deletion of the award of moral and
exemplary damages in favor of the spouses Tiu is therefore in order.
WHEREFORE, the Petition is PARTIALLY GRANTED. The Joint Decision of the Court of Appeals in CA-G.R. CV No. 00190 and CA-G.R. SP
No. 00253 dated February 21, 2006 is hereby AFFIRMED insofar as it ordered petitioner Union Bank of the Philippines to return to the respondent
spouses Rodolfo T. Tiu and Victoria N. Tiu all the certificates of shares of stock and titles to real properties that were submitted to it or, in lieu thereof, to
pay the cost for the replacement and issuance of new certificates and new titles over the said properties. The foregoing Joint Decision is hereby SET
ASIDE: (1) insofar as it permanently enjoined Union Bank of the Philippines from foreclosing the mortgage of the residential property of respondent
spouses Rodolfo T. Tiu and Victoria N. Tiu which is covered by Transfer Certificate of Title No. 11951; (2) insofar as it ordered Union Bank of the
Philippines to return to the respondent spouses Rodolfo T. Tiu and Victoria N. Tiu the amount of P927,546.79 representing illegally collected rentals; and
(3) insofar as it ordered Union Bank of the Philippines to pay the respondent spouses Rodolfo T. Tiu and Victoria N. TiuP100,000.00 in moral
damages, P100,000.00 in exemplary damages, P50,000.00 in attorneys fees and cost, both in the lower court and in this Court.
No further pronouncement as to costs.
SO ORDERED.