Case No.

7:

MIRANDA v. PDIC, BSP, PRIME SAVINGS BANK,

GR NO. 169334, SEPTEMBER 8, 2006

FACTS:

In this case, herein petitioner Ms. Leticia Miranda was a former depositor of Prime Savings
Bank (PSB), one of herein respondents. On June 3, 1999, Ms. Miranda withdrew large amounts
from her account in Prime Savings but instead of receiving cash, she preferred to be issued a
crossed cashier’s check1. Ms. Miranda then purchased and was subsequently issued two
crossed cashier’s checks, both totalling to P5,502,000.00. On the same day, she deposited
these checks unto her account with another bank. Incidentally, however, the Banko Sentral ng
Pilipinas (BSP) suspended the clearing privileges of PSB effective June 3, 1999, and,
consequently, the two crossed cashier checks were returned to Ms. Miranda unpaid. On June 4,
1993, PSB then declared a bank holiday2, and on January 7, 2000, it was placed by the BSP
under Philippine Deposit Insurance Corporation (PDIC) receivership.

Petitioner Miranda then filed a civil action for sum of money against PSB, PDIC, and BSP before
the Regional Trial Court (RTC). The RTC ruled in favour of petitioner and found PSB, PDIC, and
BSP solidarily liable for the payment of P5,502,000.00 to petitioner. Upon appeal, however, the
Court of Appeals (CA) reversed RTC’s decision, dismissing the case against PDIC and BSP,
without prejudice to the filing of the case against PSB in the proper liquidation court.

Petitioner’s Motion for Reconsideration was denied, hence, this instant petition.

ISSUES:

1. Whether the two crossed cashier’s checks operate as an assignment of funds in favour
of petitioner;
2. Whether petitioner’s claim is a “disputed claim” as defined in the Central Bank Act, and
should be under the jurisdiction of the liquidation court; and
3. Whether respondents PSB, PDIC, and BSP are solidarily liable to the petitioner.

RULING AND RATIO DECIDENDI:

1. No, the issuance of the two (2) crossed cashier’s checks did not constitute an
assignment of funds. This is because PSB was already insolvent at the time it issued the
said checks; it no longer had the funds, therefore, no assignment can be made thereof.

2. Yes, the claim is a “disputed claim”3 and is under the jurisdiction of the liquidation court
and not under the regular courts.

The claim of the petitioner involves the payment of the two crossed cashier’s checks
issued by PSB and were dishonored on account of the latter’s closure. This claim falls
under the definition of a “disputed claim”, as it is against the assets of the insolvent bank.

1A crossed check is one which is crossed with two parallel lines on the top-left hand corner which signifies that it may
only be deposited directly into a bank account and, thus, cannot be immediately cashed by a bank or by any other
credit institution. A cashier’s check is one issued by a bank on its own funds, thereby guaranteeing its payment.
2
A bank holiday is a business day on which physical branches of banks are closed due to several valid reasons.
3
“Disputed claims” refer to all claims, whether they be against the assets of the insolvent bank, for specific
performance, breach of contract, damages, or whatever.
 Further, the said issuance created a debtor-creditor relationship between PSB and the
Petitioner. Hence, this claim should be lodged in the liquidation proceedings with the
liquidation court and not with the regular court.

Regular courts do not have jurisdiction over actions filed by claimants against an
insolvent bank, unless there is a clear showing that the action taken by the BSP, through
the Monetary Board in the closure of financial institutions was in excess of jurisdiction, or
with grave abuse of discretion.

3. No, PDIC, and BSP, are not solidarily liable with PSB to the petitioner; only PSB is liable
to the Petitioner. First, PDIC and/or BSP were not parties to the issuance of the checks;
second, PDIC and BSP only acted accordingly to the mandate of the law as government
agencies tasked to determined the financial viability of the banks and quasi-banks, and
facilitate receivership and liquidation of closed financial institutions, and lastly, these
government agencies did not act in abuse of their authority. Hence, PDCI and BSP
cannot be held liable.

*On the sole and primary liability of PSB (rules on the element of fraud):

- In the absence of fraud on the part of the bank: the purchase of the cashier’s check
creates a debtor-creditor relationship between the purchaser and the bank. In effect, the
holder of said check is not entitled to a preference over general creditors in the assets of
the bank which issued the check when it fails before payment of the check;

-In the presence of fraud: where a cashier’s check is purchased from a bank at a time
when it is insolvent, as its officers know or are bound to know by the exercise of
reasonable diligence, it has been held that the purchase is entitled to a preference in the
assets of the bank on its liquidation before the check is paid.

In the case at bar, PSB’s officers knew that the bank was experiencing dire financial straits.
Hence, it could not have issued petitioner’s checks in good faith. Thus, fraud was evident in the
said issuance and PSB should be held liable therefore.

The present petition is DENIED; the CA Decision is upheld with the modification that petitioner
is entitled to a preference in the assets of PSB in its liquidation proceedings.

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Case No. 8:

PHIL. VETERANS BANK EMPLOYEES UNION, et. al. v. THE PHIL. VETERANS BANK
GR NO. 67125, AUGUST 24, 1990

FACTS:

On April 10, 1983, the Philippine Veterans Bank (PVB), due to its precarious condition, was
placed under receivership by the Monetary Board of the Central Bank. A year after, the
receivership was challenged by herein petitioner, and on the ground of security of tenure,
prayed that the program be declared prohibited.

While the case was pending, the Monetary Board ordered the liquidation of PVB. This was
opposed to by petitioner-union in a supplemental petition for prohibition with preliminary
injunction. On March 26, 1987, the Court issued a writ of preliminary injunction enjoining the
Central Bank from proceeding with liquidation proceedings against PVB.

On March 18, 1988, Simeon Medalla et.al., in their own right and “on behalf of the remaining
510, 000 WW2 veterans or their heirs”, filed an original petition for restitution and for
extraordinary and equitable writs. The said petition sought, among others, a judicial declaration
that the petitioners were entitled to the ownership, possession, and control of the Bank and an
order restraining the Central Bank from disposing of the assets of the Bank or making any
disbursements therefrom.

Hence, the instant consolidated petition.

ISSUE:

1. Whether the Central Bank (CB) has the power to liquidate the PVB

RULING AND RATIO DECIDENDI:

1. Yes, the CB is authorized to liquidate the PVB:

The arguments by petitioners which are COUNTERED by the Court:

a.) Petitioners aver that since the PVB was created by a special law, a contractual
relationship exists between the Government and the stockholders of PVB which
cannot be disturbed without violating the non- impairment clause4;

NO. The Court held:

First, the mere fact that PVB was created by a special law (RA No. 3518) does not
confer upon PVB extraordinary privileges above those granted similar charters like
the Land Bank of the Philippines and the Development Bank of the Philippines.
Being a lending institution, PVB remains part of the banking system of the
Philippines and under the regulatory power of the Central Bank, as stipulated by the
provisions of the Central Bank Act;

4
The purpose of the non-impairment clause of the Constitution is to safeguard the integrity of
contracts against unwarranted interference by the State. As a rule, contracts should not be tampered with
by subsequent laws that would change or modify the rights and obligations of the parties.
 Second, even if it be conceded that the PVB charter created a contract between the
Government and PVB, the said contract suffers from congenital infirmity, meaning,
where public interest is affected, the said contract may be validly altered. Hence, the
constitutional non-impairment clause does not apply when the contract calls for the
involvement of public interest.

b.) Petitioners contend that the benefits (referring to the stockholdings) accepted by the
petitioners cannot be revoked, and if revoked, may be done only by the Legislature
and not by the Central Bank; and

NO. The Court held:

First, the mere acceptance of these shares of stock by the petitioners did not create
any legal assurance from the Government that their original value would be
preserved and that the owners could not be deprived of such property under any
circumstance no matter how justified. These stockholdings are like any other
stockholdings of the same nature in the trade industry, and they do not enjoy any
special immunity.

Second, the mere circumstance that the charter was granted directly by Congress
does not mean that only Congress can modify or abrogate it by another enactment.
The PVB charter itself provides that it shall be subject to regulation by the Central
Bank which is empowered by law to order PVB’s liquidation. Also, by its own terms,
the charter will automatically become functus officio5 after 50 years and the Bank
itself will cease to exist, unless its life is extended by a positive act of the Legislature.

Third, quo warranto proceedings may be filed against the Bank by the Solicitor
General on behalf of the Republic of the Philippines (RP) pursuant to the Rules of
Court.

The foregoing exist and/or can be done without any legislative act.

c.) Petitioners proffer that the Central Bank cannot exercise any authority over the PVB
since the latter is also a government bank.

NO. The Court held:

First, the PVB Charter provides that although 51% of the capital stock was initially
fully subscribed by the RP for and in behalf of the veterans, their widows, orphans or
compulsory heirs, the corresponding shares of stock were to be turned over within 5
years from the organization of the Bank to the said beneficiaries who would
thereafter have the right to vote such common shares. The balance of about 49%
was to be divided into preferred shares which would be opened for subscription by
any recognized veteran, widow, orphans or compulsory heirs of said veteran.

Second, the PVB Charter also provides that the affairs of the bank are managed by a
Board of Directors composed of 11 members.

Lastly, the PVB Articles of Incorporation states that “notwithstanding the provisions of
any existing law to the contrary, said Bank shall be deemed registered and duly
authorized to do business and operate as a commercial bank as of the date of the
approval of this Act.”

5
Functus officio refers to an officer or agency whose mandate has expired, due to either the arrival of an
expiry date or an agency having accomplished the purpose for which it was created.
 It is therefore indubitable that, upon careful inspection of the provisions of the Central
Bank Act, and the Charter that created the PVB, the purpose of the same is to enable the
Central Bank, as the entity charged with the responsibility of maintaining the stability of the
banking and monetary systems of the country, to take the necessary steps against any banking
institution whose continued operation may cause prejudice to its depositors and creditors, and
the general public as well.

The instant petition is DENIED. The writ of preliminary injunction dated March 26, 1987
is lifted.

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Case No. 9:

RURAL BANK OF SAN MIGUEL v. MONETARY BOARD, BSP, and PDIC

GR NO. 150886, FEBRUARY 16, 2007

FACTS:

In a memorandum dated January 20, 2000, a Comptrollership/Monitoring Report was rendered

by the Director of the Department of Rural Banks, showing that the Rural Bank of San Miguel
(RBSM): (a) is unable to pay its liabilities as they become due in the ordinary course of
business; and (b) it cannot continue in business without involving probable losses to its
depositors and creditors.

On January 21, 2000, after deliberating and evaluating on the said Report, the Monetary Board
(MB) of the Central Bank issued Resolution No. 105, prohibiting RBSM from doing business in
the Philippines and placed the same under the Philippine Deposit Insurance Corporation (PDIC)
receivership. Concurrently, the PDIC implemented the closure order and took over the
management of RBSM’s assets and affairs.

On February 7, 2000, petitioners filed before the Court of Appeals (CA) a special civil action for
certiorari and prohibition against the Monetary Board and the Banko Sentral ng Pilipinas (BSP)
on the ground that the latter committed grave abuse of discretion in issuing Resolution NO. 105.

The CA dismissed the petition and ruled against petitioner, holding that the subject Resolution
was based on findings and recommendations of the Department of Rural Banks Supervision
and Examination Sector, the Comptroller Reports, and the unilateral declaration of RBSM of a
bank holiday.

Subsequently, on June 9, 2000, the MB passed Resolution No. 966 directing PDIC to proceed
with the liquidation of RBSM under Sec. 30 of RA 7653.

Hence, the instant petition.

ISSUE:

1. Whether the Monetary Board (MB) committed grave abuse of discretion amounting to
lack or excess of jurisdiction; PARTICULARLY, whether Sec. 30 of the Central Bank Act
(RA No. 7653) requires a current and complete examination of the bank before it can be
closed and placed under receivership.

RULING AND RATIO DECIDENDI:

1. No, a current and complete examination of the bank is not necessary before it can be
closed and placed under receivership. Therefore, the MB has not committed grave
abuse of discretion amounting to lack or excess of jurisdiction.

In the case, petitioners assert, citing Sec. 29, RA 265 (old Central Bank law) and the
Banco Filipino case, that an examination is necessary and not a mere report, otherwise,
the decision to close a bank would be arbitrary.

However, these bases are no longer applicable in this case. RA 265, including Section
29 thereof, was already expressly repealed by the new Central Bank law, RA No. 7653,
which took effect in 1993. The subject MB Resolution was issued on January 21, 2000,
well within the coverage of the new law.
Parenthetically, RA 7653 requires “only a report of the head of the supervising or
examining department”. Report is not synonymous with examination. According to
general definition, the word “report” has a definite and unambiguous meaning which is
clearly different from “examination”. A report, as a noun, may be defined as “something
that gives information” or “a usually detailed account or statement”. On the other hand,
an examination is a “search, investigation, or scrutiny.”

Applying statutory construction, where the words of a statute are clear, plain, and free
from ambiguity, it must be given its literal meaning and applied without attempted
interpretation.

Perforce, it is clear that Section 30 of RA No. 7653 no longer requires that an

examination be made before the MB can issue a closure order. The MB has thus
faithfully complied with the mandate of the law, thereby, committing no grave abuse of
discretion amounting to lack or excess of jurisdiction.

The instant petition is DENIED.

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Case No. 10:

KORUGA v. ARCENAS
GR NO. 168332, JUNE 19, 2009

ARCENAS, JR. V. MARELLA, JR.

GR NO. 169053, JUNE 19, 2009

FACTS:

Petitioner Ana Maria Koruga was a minority stockholder of Banco Filipino Savings and
Mortgage Bank (Banco Filipino for brevity). On August 20, 2003, Ms Koruga lodged a Complaint
against the Board of Directors (BOD) of Banco Filipino for alleged violations of the Corporation
Code, which was raffled to Makati RTC Branch 138, then presided by Judge Marella, Jr. In their
Answer, Arcenas, et.al. (BOD of Banco Filipino) asserted as their affirmative defense that the
RTC has no jurisdiction over the case and, through a Manifestation and Motion, called for its
dismissal. RTC Branch 138, however, denied the said Manifestation and Motion and
subsequently denied the Motion for Reconsideration by the same party.

Aggrieved, Arcenas, et.al. sought relief from the Court of Appeals (CA), filing a petition for
certiorari and prohibition (via Rule 65) with a prayer for the issuance of a writ of preliminary
injunction and a Temporary Restraining Order (TRO). The CA granted for a 60-day TRO
enjoining Judge Marella from conducting further proceedings on the case. On April 18, 2005,
the CA subsequently issued a Resolution which granted for the issuance of the writ of
preliminary injunction against Judge Marella, Jr.

The foregoing circumstance prompted petitioner Koruga to file a petition for certiorari against the
CA on the ground that the latter acted with grave abuse of discretion amounting to lack or
excess of jurisdiction when it issued the subject writ of preliminary injunction without factual or
legal basis. (This is GR NO. 168332)

On July 20, 2005, the CA denied the petition of Arcenas, et.al. finding that there was no grave
abuse of discretion on the part of RTC Branch 138. Consequently, Arcenas, et.al. filed a petition
for review on certiorari (via Rule 45) against the CA. (This is GR NO. 169053)

ISSUE:

Which between the RTC and the Banko Sentral ng Pilipinas (BSP) has jurisdiction over the
Complaint of petitioner Koruga; PARTICULARLY, Is it an intra-corporate controversy under RTC
or a receivership issue under BSP?

RULING AND RATIO DECIDENDI:

The Complaint is a receivership issue and BSP has jurisdiction over the same.

The Complaint of petitioner Koruga includes: the violation of Secs. 31-34 of the Corporation
Code; invocation of her right of inspection of the corporation’s records; prayer for the
receivership and creation of management committee; and accusing the directors and officers of
Banco Filipino of engaging in unsafe, unsound and fraudulent banking practices.

Plainly, the subject Complaint involves acts which pertain to the conduct of Banco Filipino’s
banking business, matters over which the BSP is vested with law to govern upon. The BSP is
tasked with the supervision of the operations and activities of the banks, and the administration
of the monetary, banking, and credit system of the Philippines. The provisions of the New
Central Bank Act elucidates on these duties.

Further, the incantation of the Corporation Code by petitioner Koruga finds no application in this
case. The Corporation Code is a general law which applies to all types of corporations while the
New Central Bank Act specifically regulates banks and other financial institutions, including the
dissolution and liquidation thereof. As between a general law and a special law, the latter shall
prevail.

Therefore, it is not the Interim Rules of Procedure on Intra-Corporate Controversies or Rule 59

on Receivership which shall be applied but the pertinent provisions of the New Central Bank Act
which succinctly provides that it is the Monetary Board (under the BSP) which exercises
exclusive jurisdiction over proceedings for receivership of banks.

Moreover, the same law provides that the actions of the Monetary Board 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, hence, other than this qualifying
condition, the courts have no jurisdiction to hear and decide a suit that seeks to place Banco
Filipino under receivership.

To reiterate, it is the BSP and not the RTC which shall exercise the jurisdiction of the Complaint
of petitioner Koruga.

Petition in GR NO. 168332 is DENIED.

Petition in GR NO. 168332 is GRANTED.

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Case No. 6:

CENTRAL BANK OF THE PHILS. V. COURT OF APPEALS, RTC JUDGE GUADIZ JR., et.al.
GR NO. 88353, MAY 8, 1992

ATTY. ENCARNACION v. PRODUCERS BANK OF THE PHILS. , et.al.

GR NO. 92943, MAY 8, 1992

FACTS:

On January 20, 1984, the Central Bank placed the Producers Bank of the Philippines (PBP)
under conservatorship after the latter’s overdraft6 with the former ballooned to more than 143
million pesos, a clear indication of PBP’s inability to maintain that condition of solvency and
liquidity necessary to protect the interests of its depositors and creditors. On August 27, 1987,
the PBP filed a Complaint, docketed as Civil Case No. 17692, against the Central Bank, the
Monetary Bank and the Central Bank Governor Fernandez, Jr., alleging, among others, that the
conservatorship was unwarranted, ill-motivated, illegal, utterly unnecessary and unjustified, and
that the appointment of the conservator was arbitrary; and prayed for the issuance of a
Temporary Restraining Order (TRO) and a writ of preliminary injunction against the said
respondents. The case was raffled to Makati RTC Branch 147 presided by Judge Guadiz, Jr.

On August 31, 1987, Judge Guadiz, Jr. issued the TRO and, subsequently, on September 21,
1987, granted the writ of preliminary injunction. On January 11, 1988, petitioners filed before the
Court of Appeals (CA) a petition for certiorari with preliminary injunction to annul the Order of
Judge Guadiz, Jr., restrain the implementation of the same, and nullify the writ of preliminary
injunction. Judge Guadiz, Jr. dismissed the petition for lack of merit, holding that the act of CB of
placing PBP under conservatorship deprived PBP of administrative due process and has eroded
the confidence which the banking public had hitherto reposed on the bank. In response,
petitioners then filed a motion for reconsideration which was also denied by RTC Branch 137
through Judge Guadiz, Jr.

On July 30, 1989, petitioners filed a petition for review via Rule 45 against RTC Branch 137
Judge Guadiz, Jr. (This is GR NO. 88353).

Atty. Encarnacion was appointed as the conservator of PBP and, as such, instituted reforms
aimed at making PBP more viable. On October 24, 1987, however, PBP, after obtaining the writ
of preliminary injunction from Judge Guadiz, Jr., filed an Omnibus Motion for certain reliefs.

Resultantly, on November 18, 1987, Guadiz, Jr. issued an Order requiring Atty. Encarnacion to:
(1) reinstate PBP officers to their original positions prior to the reorganization of the bank’s
personnel and restore PBP’s standing committees to their original compositions, and (b) restrain
from leasing out to third parties any portion of PBP’s space in the Producer’s Bank Centre
building. On December 22, 1987, Judge Guadiz, Jr., again issued two Orders: First, granting the
transfer of the administration of the three (3) buildings assigned to PBP to Producers Properties
Inc., (PPI); and Second, directing Atty. Encarnacion to publish the financial statements of PBP
in the manner prayed for by PBP. Having refused to do so, Atty. Encarnacion was declared in
contempt by Judge Guadiz, Jr. on November 9, 1988.

Atty. Encarnacion then filed a petition for certiorari against Judge Guadiz, Jr. Upon referral, the
Court of Appeals dismissed the petition, merely affirming the validity of the Orders issued by

6
An overdraft occurs when money is withdrawn from a bank account and the available balance goes below zero.
In this situation, the account is said to be “overdrawn”. It usually happens when there are no more funds in the
account in question, but a transaction still went through, leading to debt.
RTC Branch 137 thru Judge Guadiz, Jr. Her motion for reconsideration having been denied,
Atty. Encarnacion filed a petition for review via Rule 45 against the Court of Appeals. (This is
GR NO. 92943)

ISSUE:

Whether the Court of Appeals committed reversible error in affirming the challenged Orders of
Judge Guadiz, Jr.; PARTICULARLY, whether Judge Guadiz, Jr. committed grave abuse of
discretion amounting to lack of jurisdiction.

RULING AND RATIO DECIDENDI:

Yes, the Court of Appeals committed reversible error in affirming Judge Guadiz, Jr.’s Orders,
and that the latter committed grave abuse of discretion amounting to lack of jurisdiction.

The Court ruled that the following requisites must be present before the order of
conservatorship may be set aside by a court:

1. The appropriate pleading must be filed by the stockholders of record

representing the majority of the capital stock of the bank in the proper court;
2. Said pleading must be filed within ten (10) days from receipt of notice by said
majority stockholders of the order placing the bank under conservatorship; and
3. There must be convincing proof, after hearing, that the action is plainly arbitrary
and made in bad faith.

These requisites, when held against the circumstances of the instant case, are wanting as
illustrated by the following facts:

1. The original Complaint, Civil Case No. 17692, was not initiated by the majority of
the stockholders as it was only verified by its Board Chairman. Assuming
arguendo that the action was properly brought by the authorized party, the same
must nevertheless be dismissed for failure of the plaintiffs therein to pay the
correct docket fees;
2. The original Complaint, Civil Case No. 17692, was filed three (3) years, seven (7)
months and seven (7) days from receipt of notice of conservatorship, a glaring
delay of the expiration of the 10-day period to do so; and
3. Both the Court of Appeals and RTC Branch 137 have prejudged the case. Settled
is the doctrine that it is improper to issue a writ of preliminary mandatory injunction
prior to the final hearing, except in cases of extreme urgency, where the right is
very clear, where considerations of relative inconvenience bear strongly in
complainant’s favour, to name a few. The Orders issued by Judge Guadiz, Jr. and
the contempt against Atty. Encarnacion are likewise arbitrary and declared null for
having been issued with grave abuse of discretion amounting to lack of
jurisdiction.

Being so, the abovementioned petitions are GRANTED.

Respondent Judge Guadiz, Jr. is ORDERED TO DISMISS Civil Case No. 17692.
The WRIT OF PRELIMINARY INJUNCTION issued by RTC Judge Guadiz, Jr. is LIFTED.

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