SALUD v. CENTRAL BANK OF THE PHILIPPINES G.R. No.

L-17630
August 19, 1986 Ponente J. Narvasa
TOPIC IN SYLLABUS: Liquidation
SUMMARY: Central Bank filed a petition to liquidate Rural Bank of Muntinlupa, Inc. Muntinlupa
Bank filed an opposition (treated by the court as a motion to dismiss) stating that the Central
Bank's decision to liquidate was arbitrary given that its assets are more than its liabilities. RTC
agreed with Muntinlupa Bank. Central Bank appealed and IAC agreed with Central Bank and
ordered liquidation of the Muntinlupa Bank. Muntinlupa Bank stated that the RTC may rule upon
arbitrariness of the decision of the Monetary Board. Central Bank said it may do so but only in a
separate proceeding. SC said that RTC may decide on arbitrariness (alleged by Muntinlupa Bank)
in the same proceeding for assistance of liquidation filed by the Central Bank.

PROCEDURAL ANTECEDENTS: RTC (granted) Appeal to CA (affirmed) Petition for Review

FACTS:
The Central Bank issued Resolution No. 213, forbidding the Muntinlupa Bank to do
business and designating Consolacion Odra its statutory receiver.
The Central Bank issued Resolution No. 1523 ordering the liquidation of the Muntinlupa
Bank after confirmation that it was insolvent and could not resume business with safety to
all concerned, and that public interest did require said liquidation.
The Central Bank filed a Petition for the Assistance in the Liquidation of the Rural
Bank of Muntinlupa, Inc. with the CFI at Pasay City.
Muntinlupa Bank filed an opposition, claiming that:
o the liquidation was premature and void because Sec. 28-A of the Central Bank Act
mandates that prior to liquidation, it is the Central Bank's primordial duty to
reorganize the management (of Muntinlupa Bank) and to restore its viability and;
o the action of liquidation was arbitrary and in bad faith because the Muntinlupa
Bank is still capable of rehabilitation and the act was inconsistent with prior actions
of the Central Bank of rehabilitating similarly distressed banks, such as the
Republic Bank and the Overseas Bank of Manila, among others.
RTC: The action taken by the Monetary Board was arbitrary and it dismissed the petition of
the Central Bank. Based on the figures provided by Central Bank, Muntinlupa bank had
more assets than liabilities and could not under any circumstance, be considered in the
state of insolvency. Conservatorship (Sec. 28-A) and not liquidation (Sec. 29) was the
appropriate and mandatory remedy. MRs denied.
Central Bank and its Liquidator instituted with the SC a special civil action of certiorari and
mandamus, to annul RTC's orders which were issued without or in excess of jurisdiction or
with GAD. Petition was referred to IAC.
IAC: The matter of Monetary Bank's decisions, in terms of abuse, is subject to judicial
inquiry. Later however IAC clarified and said that petition of Central Bank was granted and
it ordered RTC to approve the petition for Assistance in the Liquidation of the Rural Bank of
Muntinlupa, Inc. This is now assailed by Muntinlupa Bank.

ISSUE: WoNYES.

MUNTINLUPA BANK'S ARGUMENT: RTC has jurisdiction to adjudicate the question of whether
the action of the Monetary Board in directing its dissolution (instead of rehabilitation) was
arbitrary and made in bad faith. It must be given opportunity to prove that the Central Bank's
Order directing dissolution was arbitrary and made in bad faith.

CENTRAL BANK AND LIQUIDATOR'S ARGUMENT: Where there is a petition for assistance in
the liquidation of a rural bank, the RTC has no jurisdiction over the issue of WON the Monetary
Board resolution is arbitrary and made in bad faith where that issue was raised in the same
proceeding either by an opposition or motion to dismiss, The issue may only be raised in a

Alinne CASE #85

separate action or proceeding, because a collateral attack on the liquidation can not be done
and an attack on the validity of the liquidation must be made directly.

HELD:
1. Resolutions of the Monetary Board forbidding banks 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 bank's
assets and liabilities; or determining whether the banking institutions may be
rehabilitated, or should be liquidated and appointing a liquidator, are by law final and
executory. But they can be set aside by the court on one specific ground: when
there is convincing proof that the action is plainly arbitrary and made in bad
faith.
The Central Bank concedes that the court has such power, but here insists that the setting
aside cannot be done in the same proceeding for assistance in liquidation, but in a
separate action instituted specifically for the purpose, citing Central Bank v. CA (106 SCRA
142).
The Court sees no reason at all why a claim that the Monetary Board's decision is arbitrary
cannot be asserted as an affirmative defense or as a counterclaim in the proceeding for
assistance in liquidation, but only as a cause of action in a separate and distinct action.
The Court also cannot see why a full-blown hearing on the issue is possible only if it is
asserted as a cause of action, but not when set up by way of affirmative defense or
counterclaim. There is no provision of law expressly or even by implication imposes the
requirement for a separate proceeding exclusively adjudicating the issue of arbitrariness.
This would lead to multiplicity of proceedings which the law abhors.
In Central Bank v. CA (106 SCRA 142), there were 2 separate proceedings, but this came
about only by pure chance because the petition to annul the Monetary Board resolution
authorizing liquidation was filed ahead of the petition for assistance in liquidation. In fact,
the 2 proceedings were at the parties' instance jointly heard, a certain indication of the
intimate relationship between the proceedings.

2. Central Bank raises for the first time that the Monetary Board is a quasi-judicial board
whose judgments are within the exclusive appellate jurisdiction of the IAC, to the exclusion
of the RTC. SC says this is devoid of merit as no law prescribes any mode of appeal from
the Monetary Board to the IAC. This is also inconsistent both with Sec. 29 of the Central
Bank Act as well as Central Bank's own theory in this case, which concedes original
jurisdiction in the RTC provided it is alleged as a cause of action distinct from a proceeding
for assistance in liquidation.

Alinne CASE #85