TARLAC STATE UNIVERSITY

Romulo Blvd, San Roque, Tarlac City

SCHOOL OF LAW
A.Y. 2019-2020
First Semester

Compilation of Case Digests

(Fifth Week / Fourth Meeting)

In partial fulfillment of the requirements of the course:

Banking Laws

Submitted to

Atty. Ronel U. Buenaventura, M.A.

Professor

Submitted by

THIRD YEAR (JD-IIIA & B)

CA Agro-industrial vs. Court of Appeals, 3 March 1993 (safety deposit box)

Doctrine: REPUBLIC ACT NO. 337, Sec. 72 (a). In addition to the operations specifically authorized elsewhere
in this Act, banking institutions other than building and loan associations may perform the following services:
(a) Receive in custody funds, documents, and valuable objects, and rent safety deposit boxes for the safeguarding
of such effects;
The banks shall perform the services permitted under subsections (a), (b) and (c) of this section as depositories
or as agents. Accordingly, they shall keep the funds, securities and other effects which they thus receive duly
separated and apart from the bank's own assets and liabilities.
The Monetary Board may regulate the operations authorized by this section in order to insure that said operations
do not endanger the interests of the depositors and other creditors of the banks.

Facts: CA Agro (through its President, Aguirre) and spouses Pugao entered into an agreement whereby the
former purchased two parcels of land for P350, 525 with a P75, 725 down payment while the balance was covered
by three (3) postdated checks. Among the terms embodied in a Memorandum of True and Actual Agreement of
Sale of Land were that titles to the lots shall be transferred to the petitioner upon full payment of the purchase
price and that the owner’s copies of the certificates of titles thereto shall be deposited in a safety deposit box of
any bank. The same could be withdrawn only upon the joint signatures of a representative of the petitioner upon
full payment of the purchase price. They then rented Safety Deposit box of private respondent Security Bank and
Trust Company (SBTC). For this purpose, both signed a contract of lease which contains the following conditions:
13. The bank is not a depositary of the contents of the safe and it has neither the possession nor control of the
same.
14. The bank has no interest whatsoever in said contents, except herein expressly provided, and it assumes
absolutely no liability in connection therewith.
After the execution of the contract, two (2) renter’s key were given to Aguirre, and Pugaos. A key guard remained
with the bank. The safety deposit box has two key holes and can be opened with the use of both keys. Petitioner
claims that the CTC were placed inside the said box.
Thereafter, a certain Mrs. Ramos offered to buy from the petitioner the two (2) lots at a price of P225 per sqm.
Mrs. Ramose demanded the execution of a deed of sale which necessarily entailed the production of the CTC.
Aguirre and Pugaos then proceeded to the bank to open the safety deposit box. However, when opened in the
presence of bank’s representative, the box yielded no certificates. Because of the delay in reconstitution of title,
Mrs. Ramos withdrew her earlier offer and as a consequence petitioner failed to realize the expected profit of
P280,500 . Hence, the latter filed a complaint for damages.
RTC: Dismissed the complaint
CA: Affirmed

Issue: Whether or not the contractual relation between a commercial bank and another party in the contract of
rent of a safety deposit box is one of bailor and bailee.
Ruling: Yes. The contract in the case at bar is a special kind of deposit. It cannot be characterized as an ordinary
contract of lease under Article 1643 because the full and absolute possession and control of the safety deposit box
was not given to the joint renters – the petitioner and Pugaos.
American Jurisprudence: The prevailing rule is that the relation between a bank renting out safe-deposit boxes
and its customer with respect to the contents of the box is that of a bail or bailee, the bailment being for hire and
mutual benefit.
Our provisions on safety deposit boxes are governed by Section 72 (a) of the General Banking Act, and this
primary function is still found within the parameters of a contract of deposit like the receiving in custody of funds,
documents and other valuable objects for safekeeping. The renting out of the safety deposit boxes is not
independent from, but related to or in conjunction with, this principal function. Thus, depositary’s liability is
governed by our civil code rules on obligation and contracts, and thus the SBTC would be liable if, in performing
its obligation, it is found guilty of fraud, negligence, delay or contravention of the tenor of the agreement.
.Sia vs. Court of Appeals, 13 May 1993 (safety deposit box)

Doctrine: The Supreme Court has explicitly rejected the contention that a contract for the use of a safety deposit
box is a contract of lease governed by Title VII, Book IV of the Civil Code, nor fully subscribed to the view that
it is a contract of deposit to be strictly governed by the Civil Code provision on deposit; it is, as declared, a
special kind of deposit.
Facts: Luzan Sia rented on the Safety Deposit Box No. 54 of the defendant bank at its Binondo Branch wherein
he placed his collection of stamps. The said safety deposit box leased by the petitioner was at the bottom level of
the safety deposit boxes. Due to the floods that took place in 1985 and 1986, floodwater entered into the defendant
bank's premises, seeped into the subject safety deposit box, and caused damage to his stamps collection.
The bank denied liability for the damage on the basis of paragraphs 9 and 13 of the "Rules and Regulations
Governing the Lease of Safe Deposit Boxes", stating:
"9. The liability of the Bank by reason of the lease, is limited to the exercise of the diligence to prevent the opening
of the safe by any person other than the Renter, his authorized agent or legal representative;
"13. The Bank is not a depository of the contents of the safe and it has neither the possession nor the control of
the same. The Bank has no interest whatsoever in said contents, except as herein provided, and it assumes
absolutely no liability in connection therewith."
Issues: 1. Whether or not the contact for the use of safety deposit box is a contract of lease
2. Whether or not the bank is liable for the damage
Ruling: 1. NO. The Supreme Court held that a contract for the use of safety deposit box is a special kind of
deposit. The prevailing rule in American jurisprudence which has been adopted in our jurisdiction is that the
relation between a bank renting out safty deposit boxes and its customer with respect to the contents of the box is
that of a bailor and bailee, the bailment for hire and mutual benefit.
Section 72 of the General Banking Act provides that a bank, acting as depositary, may "receive in custody funds,
documents, and valuable objects, and rent safety deposit boxes for the safequarding of such effects."
2. YES. The primary function of a contract for the use of safety deposit box is still found within the parameters
of a contract of deposit. Thus, applying the rules on deposit,the depositary would be liable if, in performing its
obligation, it is found guilty of fraud, negligence, delay or contravention of the tenor of the agreement. In the
absence of any stipulation prescribing the degree of diligence required, that of a good father of a family is to be
observed. Hence, any stipulation exempting the depositary from any liability arising from the loss of the thing
deposited on account of fraud, negligence or delay would be void for being contrary to law and public policy.
Therefore, paragraphs 9 and 13 are void as they are contrary to law and public policy, being inconsistent with the
respondent Bank's responsibility as a depositary under Section 72 of the General Banking Act.
Lastly, the defense of fortuitous event will not stand since, as correctly held by the trial court, the bank was guilty
of negligence. It was aware of the floods of 1985 and 1986; it also knew that the floodwaters inundated the room
where Safe Deposit Box No. 54 was located. In view thereof, it should have lost no time in notifying the petitioner
in order that the box could have been opened to retrieve the stamps, thus saving the same from further deterioration
and loss. In this respect, it failed to exercise the reasonable care and prudence expected of a good father of a
family, thereby becoming a party to the aggravation of the injury or loss.
PDIC vs. Citibank, 11 April 2012 (foreign banks, branches)

Doctrine: The Philippine branch of a foreign bank is without a separate legal personality from its parent
company because as the name implies, it is merely a branch, subject to the supervision and control of the parent
bank.

Facts: Petitioner Philippine Deposit Insurance Corporation (PDIC) conducted an examination on the books of
account of respondent Citibank and Bank of America. PDIC discovered that Citibank and BA received from its
head office and other foreign branches certain amounts in dollar that were interest-bearing with corresponding
maturity dates. These funds were not reported to PDIC as deposit liabilities that were subject to assessment for
insurance; hence PDIC sought the remittance of deficiency premium assessments for dollar deposits.

Issue: Whether or not the Philippine branch of a foreign bank has a separate legal personality with its foreign
head office for the purpose of PDIC.

Ruling: The Court begins by examining the manner by which a foreign corporation can establish its presence in
the Philippines. It may choose to incorporate its own subsidiary as a domestic corporation, in which case such
subsidiary would have its own separate and independent legal personality to conduct business in the country. In
the alternative, it may create a branch in the Philippines, which would not be a legally independent unit, and
simply obtain a license to do business in the Philippines.
In the case of Citibank and BA, it is apparent that they both did not incorporate a separate domestic corporation
to represent its business interests in the Philippines. Their Philippine branches are, as the name implies, merely
branches, without a separate legal personality from their parent company, Citibank and BA. Thus, being one and
the same entity, the funds placed by the respondents in their respective branches in the Philippines should not be
treated as deposits made by third parties subject to deposit insurance under the PDIC Charter.
DBP vs. COA, 16 January 2002 (bank audit)

Doctrine: COA’s power to examine and audit government agencies is non-exclusive. The COA's power to
examine and audit government banks must be reconciled with the Central Bank's power to supervise the same
banks. The inevitable conclusion is that the COA and the Central Bank have concurrent jurisdiction, under the
Constitution, to examine and audit government banks.

Facts: In 1986, the Philippine government obtained from the World Bank an Economic Recovery Loan (ERL) in
the amount of US$310 million, which was intended to support the recovery of the Philippine economy during that
time of financial crisis. As a condition for granting the loan, the World Bank required the Philippine government
to rehabilitate the DBP which was then saddled with huge non-performing loans, accordingly, the government
made a policy and the Monetary Board adopted Resolution No. 1079 amending the Central Bank's Manual of
Regulations for Banks and other Financial Intermediaries, in line with the government's commitment to the World
Bank to require a private external auditor for DBP. Former COA Chairman Teofisto Guingona Jr. did not object
said provisions and new regulations imposed, so DBP hired a private external auditor for calendar year 1986.
However, during a change of its leadership, the new COA Chairman, Eufemio Domingo, wrote the Central Bank
Governor protesting the Central Bank's issuance of said Circular No. 1124 which allegedly encroached upon the
COA's constitutional and statutory power to audit government agencies. Hence, claming that COA has exclusive
authority to audit Government banks he issued a Memorandum disallowing payments to said auditing firm saying
that the services rendered were unconstitutional, illegal and unnecessary.

Issue: Whether the Constitution vests in the COA the sole and exclusive power to examine and audit government
banks.

Ruling : NO. The clear and unmistakable conclusion from a reading of the entire Section 2 is that the COA's
power to examine and audit is non-exclusive. The mere fact that private auditors may audit government agencies
does not divest the COA of its power to examine and audit the same government agencies. The COA is neither
by-passed nor ignored since even with a private audit the COA will still conduct its usual examination and audit,
and its findings and conclusions will still bind government agencies and their officials. Moreover, Section 26 of
PD 1445 must also be applied in conformity with Sections 25 and 28 of the New Central Bank Act (RA No. 7653)
which authorize expressly the Monetary Board to conduct periodic or special examination of all banks. The COA's
power to examine and audit government banks must be reconciled with the Central Bank's power to supervise the
same banks. The inevitable conclusion is that the COA and the Central Bank have concurrent jurisdiction, under
the Constitution, to examine and audit government banks.
Central Bank Employees Association vs. BSP, 15 December 2004 (fiscal and administrative autonomy)
DOCTRINE: The equal protection clause does not demand absolute equality but it requires that all persons
shall be treated alike, under like circumstances and conditions both as to privileges conferred and liabilities
enforced.

FACTS: Central Bank (now BSP) Employees Association, Inc., filed a petition for prohibition against BSP to
restrain respondents from further implementing the last proviso in Section 15(c), Article II of R.A. No. 7653, on
the ground that it is unconstitutional. The thrust of petitioners challenge is that the above proviso makes an
unconstitutional cut between two classes of employees in the BSP, viz: (1) the BSP officers or those exempted
from the coverage of the Salary Standardization Law (SSL) (exempt class); and (2) the rank and file (Salary Grade
[SG] 19 and below), or those not exempted from the coverage of the SSL (non-exempt class). Petitioner posits
that the classification is not reasonable but arbitrary and capricious, and violates the equal protection clause of
the Constitution. BSP contends that the proviso is not unconstitutional as it can stand the constitutional test,
provided it is construed in harmony with other provisions of the same law, such as the mandate of the Monetary
Board to “establish professionalism and excellence at all levels in accordance with sound principles of
management.”

Issue: Whether the last paragraph of Section 15(c), Article II of R.A. No. 7653, runs afoul of the constitutional
mandate that "No person shall be. . . denied the equal protection of the laws."

Ruling: Yes, the proviso is unconstitutional for being violative of the equal protection clause. Equal protection
clause does not prevent the Legislature from establishing classes of individuals or objects upon which different
rules shall operate – so long as the classification is not unreasonable.
In the case at bar, it is clear in the legislative deliberations that the exemption of officers (SG 20 and above) from
the SSL was intended to address the BSP’s lack of competitiveness in terms of attracting competent officers and
executives. It was not intended to discriminate against the rank-and-file and the resulting discrimination or
distinction has a rational basis and is not palpably, purely, and entirely arbitrary in the legislative sense. However,
in the subsequent passages of the amendment on the charters of other GFI, the surrounding circumstances of the
case changed.
UCPB vs. Ganzon, 30 June 2009 (BSP as administrative body)

Doctrine: BSP, through the Monetary Board, shall 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.

Facts: EGI availed itself of credit facilities from UCPB to finance its business expansion and 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. When EGI was declared in default by UCPB they executed an
Amendment of Agreement on 18 January 2000, EGI and UCPB 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 where the properties of EGI to be used in paying for its debt with UCPB were valued
at ₱904,491,052.00, 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; and 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 dated 13 April 2000, the foreclosure proceeds of said properties amounted only to
₱723,592,000.00, less than the value of the properties of EGI stipulated in its amended MOA with UCPB.
However, during the signing of the transaction papers, EGI Senior Vice-President, Architect Layug (Layug),
noticed that said papers stated that the remaining loan balance of EGI in the amount of ₱192,246,822.50 had
increased to ₱226,963,905.50 which prompted EGI President Engineer 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, 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 be ₱226,967,194.80, the figures in the "ACTUAL" column calculated the remaining loan
obligations of EGI to be only ₱146,849,412.58. 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 against UCPB
however BSP Monetary Board dismissed the administrative complaint of EGI which was reversed by CA and
remanding the case to the BSP Monetary Board.

Issue: Whether or not CA committed grave error in remanding the case back to the BSP.

Ruling: No, in accordance with Republic Act No. 7653 and Republic Act No. 8791, the BSP which is an
administrative body who is tasked, 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.
Monetary Board vs. Philippine Veterans Bank, 21 January 2015 (BSP as administrative body)

Doctrine: 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.

FACTS: Respondent established a pension loan product for bona fide veterans or their surviving spouses, as well
as salary loan product for teachers and low-salaried employees pursuant to its mandate under Republic Act (RA)
Nos. 3518 (AN ACT CREATING THE PHILIPPINE VETERANS' BANK, AND FOR OTHER PURPOSES)
and 7169 (AN ACT TO REHABILITATE THE PHILIPPINE VETERANS BANK CREATED UNDER
REPUBLIC ACT NO. 3518, PROVIDING THE MECHANISMS THEREFOR, AND FOR OTHER
PURPOSES) to provide financial assistance to veterans and teachers.
As its clientele usually do not have real estate or security to cover their pension or salary loan, respondent devised
a program by charging a premium in the form of a higher fee known as Credit Redemption Fund (CRF) from said
borrowers. Resultantly, Special Trust Funds were established by respondent for the pension loans.
An examination was conducted by the Supervision and Examination Department (SED) II of the Bangko Sentral
ng Pilipinas (BSP). It found that respondent’s collection of premiums from the proceeds of various salary and
pension loans of borrowers to guarantee payment of outstanding loans violated Section 54 of RA No. 8791
(GENERAL BANKING ACT) which states that banks shall not directly engage in insurance business as insurer.
The BSP notified respondent about the Insurance Commission’s opinion that the CRF is a form of insurance.
Thus, respondent was requested to discontinue the collection of said fees.
Petitioners issued a Monetary Board (MB) Resolution directing respondent’s Trust and Investment Department
to return to the borrowers all the balances of the CRF and to preserve the records of borrowers who were deducted
CRFs from their loan proceeds. However, the same was denied. The RTC allowed respondent's motion for
reconsideration and required petitioners to file their answer. The RTC of Makati City granted respondent's petition
for declaratory relief

ISSUE: Whether or not the petition for declaratory relief is proper.

HELD: NO. Decisions of quasi-judicial agencies cannot be subjects of a petition for declaratory relief for the
simple reason that if a party is not agreeable to a decision either on questions of law or of fact, it may avail of the
various remedies provided by the Rules of Court. In view of the foregoing, the decision of the BSP Monetary
Board cannot be a proper subject matter for a petition for declaratory relief since it was issued by the BSP
Monetary Board in the exercise of its quasi-judicial powers or functions.
Declaratory relief is defined as an action by any person interested in a deed, will, contract or other written
instrument, executive order or resolution, to determine any question of construction or validity arising from the
instrument, executive order or regulation, or statute; and for a declaration of his rights and duties thereunder. The
only issue that may be raised in such a petition is the question of construction or validity of provisions in an
instrument or statute.

Undoubtedly, the BSP Monetary Board is a quasi-judicial agency exercising quasi-judicial powers or functions.
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
the 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.
Central Bank Board of Liquidators vs. Banco Filipino, 21 February 2017 (Central Bank of the Philippines
and Bangko Sentral ng Pilipinas)

DOCTRINE: Bangko Sentral ng Pilipinas and its MB have different legal personalities from those of the defunct
Central Bank and its MB. Since Bangko Sentral ng Pilipinas and its MB cannot be joined as parties with Central
Bank and its MB, then neither can the causes of action against them be joined.

FACTS: Central Bank issued MB Resolution No. 955 placing Banco Filipino under conserva-torship. Banco
Filipino filed a Complaint with the RTC Makati against the MB, assailing the lat-ter's act of placing the bank
under receivership. A year later, CB issued MB Resolution No. 75 ordering the closure of Banco Filipino and
placing the latter under receivership. Banco Filipino filed with the CA a petition seeking the annulment of MB
Resolution No. 75 on the ground of grave abuse of discretion. Few months later, CB issued another Resolution
placing Banco Filipi-no under liquidation. Respondent then filed another Complaint with the RTC to question the
propriety of the liquidation. During the pendency of the three consolidated cases, the New Cen-tral Bank Act took
effect. Under the new law, the CB was abolished and the BSP was created. The new law also created the CB-
BOL for the purpose of administering and liquidating the CB's assets and liabilities, not all of which had been
transferred to the BSP. Pursuant to a Decision of the Court, the BSP reopened Banco Filipino and allowed it to
resume business. In its Amend-ed/Supplemental Complaint, respondent bank sought to substitute the CB-BOL
for the defunct CB and its MB. More than 10 years from the enactment of the New Central Bank Act, Banco
Filipino filed a Motion to Admit Second Amended/Supplemental Complaint in the consolidated civil cases before
the RTC. In that Second Amended/Supplemental Complaint, respondent sought to include the BSP and its MB,
the purported successor-in-interest of the old CB as addi-tional defendants.

ISSUE: Whether petitioner Bangko Sentral ng Pilipinas is a separate, distinct, and independent entity from the
defunct Central Bank of the Philippines.

RULING: Yes. Bangko Sentral ng Pilipinas and its MB have different legal personalities from those of the
defunct Central Bank and its MB: firstly, because the CB was abolished by the New Central Bank Act, and the
BSP created in its stead; and secondly, because the members of each MB are natural persons. These factors make
the BSP and its MB different from the CB and its MB. Since there are multiple parties involved, there are
requirements before the causes of action and parties can be joined, and these are: (1) the right to relief must arise
out of the same transac-tion or series of transactions and (2) there must be a question of law or fact common to
all the parties. Thus, since the BSP and its MB cannot be joined with Central Bank and its MB as par-ties, then
neither can the causes of action against them be joined.
BSP vs. Legaspi, 2 March 2016 (Authority to engage counsel)

Doctrine: Republic Act No. 7653, or the New Central Bank Act, the BSP Governor is authorized to represent the
Bangko Sentral, either personally or through counsel, including private counsel, as may be authorized by the
Monetary Board, in any legal proceedings, action or specialized legal studies.Under the same law, the BSP
Governor may also delegate his power to represent the BSP to other officers upon his own responsibility.
Facts: Petitioner BSP filed a Complaint for annulment of title, revocation of certificate and damages (with
application for TRO/writ of preliminary injunction) against Secretary Jose L. Atienza, Jr., Luningning G. De
Leon, Engr. Ramon C. Angelo, Jr., Ex-Mayor Matilde A. Legaspi and respondent Feliciano P. Legaspi before the
RTC of Malolos, Bulacan. Respondent, together with his fellow defendants, filed their Answer to the complaint.
Thereafter, the RTC, on May 13, 2008, issued an Order mandating the issuance of preliminary injunction,
enjoining defendants Engr. Ramon C. Angelo, Jr. and petitioner Feliciano P. Legaspi, and persons acting for and
in their behalf, from pursuing the construction, development and/or operation of a dumpsite or landfill in Barangay
San Mateo, Norzagaray, Bulacan, in an area allegedly covered by OCT No. P858/Free Patent No. 257917, the
property subject of the complaint.
Herein respondent Legaspi filed a Motion to Dismiss dated August 15, 2008 alleging that the RTC did not acquire
jurisdiction over the person of the petitioner BSP because the suit is unauthorized by petitioner BSP itself and
that the counsel representing petitioner BSP is not authorized and thus cannot bind the same petitioner.
Respondent Legaspi also alleged that the RTC did not acquire jurisdiction over the subject matter of the action
because the complaint is prima facie void and that an illegal representation produces no legal effect. In addition,
respondent Legaspi asserted that the complaint was initiated without the authority of the Monetary Board and that
the complaint was not prepared and signed by the Office of the Solicitor General (OSG), the statutory counsel of
government agencies.
In opposing the Motion to Dismiss, petitioner BSP argued that the complaint was filed pursuant to Monetary
Board Resolution No. 8865, dated June 17, 2004, and that the complaint was verified by Geraldine Alag, Director
of Asset Management of the BSP, who stated that she was authorized by Monetary Board Resolutions No. 805
dated June 17, 2008 and 1005 dated July 29, 2005. Petitioner BSP further claimed that it is not precluded from
being represented by a private counsel of its own choice.
Issue/s: Whether or not BSP lawfully engaged the services of [the] undersigned counsel.

Ruling: Yes, in cases involving the BSP, the Monetary Board may authorize the BSP Governor to represent it
personally or through a counsel, even a private counsel, and the authority to represent the BSP may be delegated
to any of its officers.
BSP's complaint dated April 10, 2008 was verified by Geraldine C. Alag, an officer of the BSP being the Director
of its Asset Management Department. It has been explained that this was authorized by the Monetary Board, as
per Resolution No. 865. Also submitted to this Court is the Secretary's Certificate issued by Silvina Q. Mamaril-
Roxas, Officer-in-Charge, Office of the Secretary of BSP's Monetary Board attesting to Monetary Board
Resolution No. 900.
Under Republic Act No. 7653, or the New Central Bank Act, the BSP Governor is authorized to represent the
Bangko Sentral, either personally or through counsel, including private counsel, as may be authorized by the
Monetary Board, in any legal proceedings, action or specialized legal studies. Under the same law, the BSP
Governor may also delegate his power to represent the BSP to other officers upon his own responsibility.
Tarrosa vs. Enriquez, 25 May 1994 (BSP Governor appointment)

DOCTRINE: Congress cannot by law expand the confirmation powers of the Commission on Appointments and
require confirmation of appointment of other government officials not expressly mentioned in the first sentence
of Section 16 of Article VII of the Constitution.

FACTS: Respondent Singson was appointed Governor of the Bangko Sentral by President Fidel V. Ramos,
petitioner argues that respondent Singson's appointment is null and void since it was not submitted for
confirmation to the Commission on Appointments. The petition is anchored on the provisions of Section 6 of
R.A. No. 7653 that the Governor of the Bangko Sentral shall be head of a department and his appointment shall
be subject to confirmation by the Commission on Appointments. Respondents claim that Congress exceeded its
legislative powers in requiring the confirmation by the Commission on Appointments of the appointment of the
Governor of the Bangko Sentral. They contend that an appointment to the said position is not among the
appointments which have to be confirmed by the Commission on Appointments, citing Section 16 of Article VII
of the Constitution.

ISSUE/S: Whether the appointment of Singson as Governor of the BSP is null and void for not having been
confirmed by the Commission of Appointments.

RULING: No, because the instant petition is in the nature of a quo warranto proceeding as it seeks the ouster of
respondent Singson and alleges that the latter is unlawfully holding or exercising the powers of Governor of the
Bangko Sentral. Such a special civil action can only be commenced by the Solicitor General or by a "person
claiming to be entitled to a public office or position unlawfully held or exercised by another". It is obvious that
the instant action was improvidently brought by petitioner. To uphold the action would encourage every
disgruntled citizen to resort to the courts, thereby causing incalculable mischief and hindrance to the efficient
operation of the governmental machinery. And Congress cannot by law expand the confirmation powers of the
Commission on Appointments and require confirmation of appointment of other government officials not
expressly mentioned in the first sentence of Section 16 of Article VII of the Constitution.
Rural Bank of San Miguel vs. Monetary Board, February 16, 2007 (bank examination)

DOCTRINE: Report is the only thing necessary to place a bank under receivership or liquidation. (Section 30
of RA 7653)- Examination, which was the requirement under the RA 265, is already repealed by RA 7653

FACTS: Through a resolution from the monetary board, Petitioner was prohibited by the Monetray Board (MB)
from doing business in the Philippines and was placed under receivership with PDIC, as its receiver, on the basis
of reports prepared by the PDIC, on the basis of another set of reports prepared by PDIC stating that RBSM could
not resume business with sufficient assurance of protecting the interest of its depositors, creditors and the general
public, the MB passed a Resolution directing PDIC to proceed with the liquidation of the bank under Section 30
of RA 7653.

ISSUE/S: Whether or not Section 30 of RA 7653 require a current and complete examination of the bank before
it can be closed and placed under receivership.

HELD: NO. Section 30 of RA 7653 provides that “upon report of the head of the supervising or examining
department” the Monetary Board may place a bank under receivership or liquidation. Hence, RA 7653 only
requires a "report” of the head of the supervising or examining department". Examination is no longer needed.
The Bank’s reliance on Section 29 of the old law (RA 265), which required examination, is misplaced since such
law has been repealed by the current RA 7653 (The New Central Bank).
BSP vs. Valenzuela, October 2, 2009 (report on examination)

Doctrine: Close now, hear later. Doctrine. Under the law, the sanction of closure could be imposed upon a bank
by the BSP even without notice and hearing. This is grounded on practical and legal considerations to prevent
unwarranted dissipation of the bank’s assets and as a valid exercise of police power to protect the depositors,
creditors, stockholders, and the general public.

FACTS: The Supervision and Examination Department (SED) of the Bangko Sentral ng Pilipinas (BSP)
conducted examinations of the books of the respondent banks and it found that these banks had deficiencies in
their capital. These banks were then required to undertake the remedial measures but they failed to carry out such
measures. The banks requested extension of time to comply with the remedial measures and noted that none of
them had received the Report of Examination (ROE) which finalizes the audit findings.
Thereafter, respondent banks then filed before the RTC an action to nullify the ROE and issuance of restraining
order contending that their right to due process was violated because they were not furnished with ROE. They
further contend that the sanction will result in irreparable damage to them as well as to the public.
The RTC ruled in favor of the respondent banks and this was affirmed by the CA.
BSP then files this 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 of the CA which upheld RTC’s
order in issuing writs of preliminary injunction.

ISSUE: Whether or not the writ of preliminary injunction may be issued in this case in favor of the respondent
banks?

HELD: NO. 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. But these requirements are absent in thie present
case.

As to the third requirement, the law provides that the sanction of closure could be imposed upon a bank by the
BSP even without notice and hearing. This "close now, hear later" scheme is grounded on practical and legal
considerations to prevent unwarranted dissipation of the bank’s assets and as a valid exercise of police power to
protect the depositors, creditors, stockholders, and the general public. The writ of preliminary injunction cannot,
thus, prevent the MB from taking action.

Furthermore, the issuance by the RTC of writs of preliminary injunction is an unwarranted interference with the
powers of the MB. 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."
Central Bank of the Philippines vs. Court of Appeals, 30 March 1993 (close now, hear later)
DOCTRINE: "close now and hear later" scheme is grounded on practical and legal considerations to prevent
unwarranted dissipation of the bank's assets and as a valid exercise of police power to protect the depositors,
creditors, stockholders and the general public.

FACTS: The Monetary Board (MB) issued on 31 May 1985 Resolution No. 596 ordering the closure of Triumph
Savings Bank, forbidding it from doing business in the
Philippines, placing it under receivership, and appointing Ramon V. Tiaoqui as receiver.
On 11 June 1985, TSB filed a complaint with the Regional Trial Court of Quezon City, docketed as Civil Case
No. Q-45139, against Central Bank and Ramon V. Tiaoqui to annul MB Resolution No. 596, with prayer for
injunction, challenging in the process the... constitutionality of Sec. 29 of R.A. 269, otherwise known as "The
Central Bank Act," as amended, insofar as it authorizes the Central Bank to take over a banking institution even
if it is not charged with violation of any law or regulation, much less found guilty... thereof.
ISSUE: May a Monetary Board resolution placing a private bank under receivership be annulled on the ground
of lack of prior notice and hearing?
RULING: YES, Under Sec. 29 of R.A. 265, the Central Bank, 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 probable loss to its depositors or creditors,
forbid the bank or non-bank financial institution to do business in the Philippines; and shall designate an... official
of the CB or other competent person as receiver to immediately take charge of its assets and liabilities. The fourth
paragraph, which was then in effect at the time the action was... commenced, allows the filing of a case to set
aside the actions of the Monetary Board which are tainted with arbitrariness and bad faith.
Sec. 29 does not contemplate prior notice and hearing before a bank may be directed to stop operations and placed
under receivership. When par. 4 (now par. 5, as amended by E.O. 289) provides for the filing of a case within ten
(10) days after the receiver takes charge of the assets of the bank, it is unmistakable that the assailed actions
should precede the filing of the case.
It may be emphasized that Sec. 29 does not altogether divest a bank or a non-bank financial institution placed
under receivership of the opportunity to be heard and present evidence on arbitrariness and bad faith because
within ten (10) days from the date the receiver takes charge of the assets of the bank, resort to judicial review may
be had by filing an appropriate pleading with the court. Respondent TSB did in fact avail of this remedy by filing
a complaint with the RTC of Quezon City on the 8th day following the takeover by the receiver of the bank's
assets on 3 June 1985.
This "close now and hear later" scheme is grounded on practical and legal considerations to prevent unwarranted
dissipation of the bank's assets and as a valid exercise of police power to protect the depositors, creditors,
stockholders and the general public.
Central Bank of the Philippines v. Court of Appeals 20 that -
. . . 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 (9 CJS 32). Banks are
affected with public interest because they receive funds from the general public in the form of deposits. Due to
the nature of their transactions and functions, a fiduciary relationship is created between the banking institutions
and their depositors. Therefore, banks are under the obligation to treat with meticulous care and utmost fidelity
the accounts of those who have reposed their trust and confidence in them (Simex International [Manila], Inc., v.
Court of Appeals, 183 SCRA 360 [1990]).
It is then the Government's responsibility to see to it that the financial interests of those who deal with the banks
and banking institutions, as depositors or otherwise, are protected. In this country, that task is delegated to the
Central Bank which, pursuant to its Charter (R.A. 265, as amended), is authorized to administer the monetary,
banking and credit system of the Philippines. Under both the 1973 and 1987 Constitutions, the Central Bank is
tasked with providing policy direction in the areas of money, banking and credit; corollarily, it shall have
supervision over the operations of banks (Sec. 14, Art. XV, 1973 Constitution, and Sec. 20, Art. XII, 1987
Constitution). Under its charter, the CB 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. This power has been expressly recognized by this Court. In Philippine Veterans Bank Employees Union-
NUBE v. Philippine Veterans Banks (189 SCRA 14 [1990], this Court held that:
. . . [u]nless 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. The government cannot simply cross its arms while the assets of a bank are being
depleted through mismanagement or irregularities. It is the duty of the Central Bank in such an event to step in
and salvage the remaining resources of the bank so that they may not continue to be dissipated or plundered by
those entrusted with their management.
Section 29 of R.A. 265 should be viewed in this light; otherwise, We would be subscribing to a situation where
the procedural rights invoked by private respondent would take precedence over the substantive interests of
depositors, creditors and stockholders over the assets of the bank.
Admittedly, the mere filing of a case for receivership by the Central Bank can trigger a bank run and drain its
assets in days or even hours leading to insolvency even if the bank be actually solvent. The procedure prescribed
in Sec. 29 is truly designed to protect the interest of all concerned, i.e., the depositors, creditors and stockholders,
the bank itself, and the general public, and the summary closure pales in comparison to the protection afforded
public interest.
Vivas vs. Monetary Board, 7 August 2013 (close now, hear later)

DOCTRINE: 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.

FACTS: Pursuant to Section 28 of Republic Act (R.A.) No. 7653, otherwise known as The New Central Bank
Act, the Integrated Supervision Department II (ISD II) of the BSP conducted a general examination on. The
Monetary Board (MB) issued Resolution No. 1255, dated September 25, 2008, placing ECBI under Prompt
Corrective Action (PCA) framework because of the following serious findings and supervisory concerns noted
during the general examination.
MB issued Resolution No. 823, dated June 4, 2009, approving the issuance of a cease and desist order against
ECBI. On March 4, 2010, the MB issued Resolution No. 27623 placing ECBI under receivership in accordance
with the recommendation of the ISD II which states that ECIB; 1. Is insolvent, and 2 is conducting business in
unsafe and unsound manner.

ISSUE: WON ECBI was placed under receivership without due and prior hearing in violation of his and the
bank’s right to due process, therefore invalid?

Ruling: NO, 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.
Producers Bank vs. NLRC, 15 November 1998 (conservatorship)
Apex Bancrights vs. BSP, 2 October 2017 (receivership and liquidation)
Doctrine: Verba Legis Non Est Recedendum – From the word of a statute there should be no departure. In this
case, the BSP through the Monetary Board Cannot be expected to conduct an independent investigation of the
feasibility of a bank. If the receiver determines that the institution cannot be rehabilitated or permitted to resume
business in accordance with the next preceding paragraph, the Monetary Board shall notify in writing the board
of directors of its findings and direct the receiver to proceed with the liquidation of the institution.

Facts: In July 2001, EIB, Urban Bank (UBI) and Urbancorp Investments (UII) entered into a threeway merger
to rehabiliate UBI that was under receivership. In September 2001, EIB itself, encountered financial difficulties
which prompted PDIC to extend financial assistance to it. However, EIB still failed to rehabilitate its position
and in May, 2005, financial assistance was given to them by the PDIC with the obligations to infuse the capital
by the stockholders, but unfortunately they failed to comply with BSP’s capital requirements, causing EIB
stockholders to commence the selling of the bank.
BDO expressed interest in acquiring the bank but ultimately refrained from doing the same causing EIB’s
president and chairman to voluntarily transfer control of EIB to BSP and declare a Bank Holiday on April 27,2012.
PDIC submitted its initial receivership report to the MB which contained its finding that EIB can be rehabilitated
or permitted to resume business provided that a bidding for its rehabilitation would be conducted and the
following conditions met; (A) there are qualified banks that will comply to the parameters of bank governance,
(B) all parties (incl Creditors and Stockholders) agree to the rehabilitation and payment terms of outstanding
liabilities. Unfortunately no Bid was garnered to save the bank, thus PDIC informed BSP that EIB cannot be
rehabilitated declaring EIB to be insolvent, the Monetary Board then issued a resolution to proceed with the
liquidation of EIB assets. The CA dismissed the petition, declaring that the Monetary Board did not Commit
Grave abuse in allowing the liquidation of the assets.

Issues: 1. Whether or not CA is correct in stating that the Monetary Board did not gravely abuse its discretion
where it allow PDIC to proceed with the liquidation of EIB.
Ruling: YES, the CA is correct. Sec. 30 of RA 7653 provides the ground where the Monetary Board can proceed
with the liquidation of a bank under receivership. The Receiver shall immediately gather and take charge of all
assets of the institution for the benefits of its creditors.
In an attempt to forestall liquidation, petitioners insist that the Monetary Board must first make its own
independent finding of the EIB’s status. Such position is untenable, Nothing in Sec. 30 RA 7653 requires that the
BSP make an independent determination whether a bank can be rehabilitated, the MB is simply obligated to notify
in writing the bank’s board of directors of its unfeasibility, and direct he PDIC to proceed with liquidation.
Because there was no such provision in the law that requires an independent investigation, BSP shall not be
expected to make one.
In re: Petition for Assistance in the Liquidation of the Rural Bank of Bokod (Benguet) Inc., PDIC vs. BIR,
18 December 2006 (liquidation)
DOCTRINE: Section 30 of the New Central Bank Act lays down the proceedings for receivership and liquidation
of a bank. The said provision is silent as regards the securing of a tax clearance from the BIR.
Facts: In 1986, a special examination of RBBI was conducted by the Supervision and Examination Sector (SES)
Department III of what is now the (BSP), wherein various loan irregularities were uncovered. In a letter, the SES
Department III required the RBBI management to infuse fresh capital into the bank, within 30 days from date of
the advice, and to correct all the exceptions noted. However, no concrete action was taken by the RBBI
management. A letter was sent to every member of the RBBI Board of Directors by which SES Department III
reiterated its warning that it would recommend the closure of the bank, unless the needed fresh capital was
immediately infused. Despite these notices, the SES Department III received no word from RBBI or from any of
its Directors. A memorandum and report, were submitted by the Director of the SES Department III concluding
that the RBBI remained in insolvent financial condition and it can no longer safely resume business with the
depositors, creditors, and the general public. The Monetary Board ordered the liquidation of the bank and
designated the Director of the SES Department III as liquidator. The designated BSP liquidator of RBBI caused
the filing with the RTC of a Petition for Assistance in the Liquidation of RBBI. Subsequently, the Monetary
Board transferred to herein petitioner Philippine Deposit Insurance Corporation (PDIC) the
receivership/liquidation of RBBI. During the hearing , the (BIR), manifested that PDIC should secure a tax
clearance certificate from the appropriate BIR Regional Office, pursuant to the Tax Code of 1997, before it could
proceed with the dissolution of RBBI. PDIC argues that the closure of banks under Section 30 of the New Central
Bank Act is summary in nature and procurement of tax clearance as required under the Tax Code of 1997 is not
a condition precedent thereto.

Issue: WON a bank ordered closed and placed under receivership by the Monetary Board of the BSP still needs
to secure a tax clearance certificate from the BIR before the liquidation court approves the project of distribution
of the assets of the bank.

Held: NO. Section 30 of the New Central Bank Act lays down the proceedings for receivership and liquidation
of a bank. The said provision is silent as regards the securing of a tax clearance from the BIR. The omission,
nonetheless, cannot compel this Court to apply by analogy the tax clearance requirement of the SEC, as stated in
Section 52(C) of the Tax Code of 1997 and BIR-SEC Regulations No. 1, since, again, the dissolution of a
corporation by the SEC is a totally different proceeding from the receivership and liquidation of a bank by the
BSP. This Court cannot simply replace any reference by Section 52(C) of the Tax Code of 1997 and the provisions
of the BIR-SEC Regulations No. 1 to the "SEC" with the "BSP." To do so would be to read into the law and the
regulations something that is simply not there, and would be tantamount to judicial legislation. Section 30(d) of
the New Central Bank Act gives the Monetary Board of the BSP the power to, summarily and without need for
prior hearing, forbid a bank or quasi-bank from doing business in the Philippines and designating the PDIC as
receiver of the banking institution. It bears to emphasize that: (1) the power is granted to the Monetary Board of
the BSP; and (2) what is summary in nature is the power of the Monetary Board of the BSP to forbid or stop a
bank or quasi-bank from doing further business. Section 30 gives the Monetary Board of the BSP the power to,
summarily and without need for prior hearing, forbid a bank or quasi-bank from doing business in the Philippines
and designating the PDIC as receiver of the banking institution. It bears to emphasize that: (1) the power is granted
to the Monetary Board of the BSP; and (2) what is summary in nature is the power of the Monetary Board of the
BSP to forbid or stop a bank or quasi-bank from doing further business.
Provident Savings Bank vs. Court of Appeals, 17 May 1993 (liquidation)

DOCTRINE : The prerogative of a bank to foreclose is implicit from and is even necessary to enforce collection
of secured debts under Section 36(11) and 45 of the Corporation Code, in conjunction with Section 29 of the
General Banking Act

Facts: Spouses Guarin obtained a loan from petitioner bank and as a security, executed a REM in its favor over
a parcel of land. Then petitioner bank was placed under receivership until it was set aside. Guarin signified its
willingness to pay its obligation in exchange for the mortgaged title. Petitioner bank could not release said title
as it also served as security for another loan obtained by Guarin for his corporation. Private respondent Chua
wrote petitioner bank saying that the mortgaged property was offered to him as payment of judgment he obtained
against the Guarins. The Guarins sold the property to Chua with the latter assuming the obligations. Chua tried to
pay the loan but petitioner would not release the title unless the second loan of Guarin was also settled.

Issue: Whether or not a bank being placed under receivership interrupts the prescription of actions it may institute.

Ruling: YES.
When a bank is prohibited from continuing to do business by the Central Bank and a receiver is appointed for
such bank, that bank would not be able to do new business, i.e., to grant new loans or to accept new deposits.
However, the receiver of the bank is in fact obliged to collect debts owing to the bank, which debts form part of
the assets of the bank. The receiver must assemble the assets and pay the obligation of the bank under receivership,
and take steps to prevent dissipation of such assets. Accordingly, the receiver of the bank is obliged to collect pre-
existing debts due to the bank, and in connection therewith, to foreclose mortgages securing such debts.
Having arrived at the conclusion that the foreclosure is part of bank’s business activity which could not have been
pursued by the receiver then because of the circumstances discussed in the Central Bank case, we are thus
convinced that the prescriptive period was legally interrupted by fuerza mayor in 1972 on account on the
prohibition imposed by the Monetary Board against petitioner from transacting business, until the directive of the
board was nullified in 1981. Indeed, the period during which the obligee was prevented by a casofortuito from
enforcing his right is not reckoned against him (Article 1154, New Civil Code). When prescription is interrupted,
all the benefits acquired so far from the possession cease and when prescription starts anew, it will be entirely a
new one. This concept should not be equated with suspension where the past period is included in the computation
being added to the period after prescription is resumed. Consequently, when the closure of was set aside in 1981,
the period of ten years within which to foreclose under Article 1142 of the New Civil Code began to run again
and, therefore, the action filed on August 21, 1986 to compel petitioner to release the mortgage carried with it the
mistaken notion that petitioner’s own suit foreclosure had prescribed.
Fidelity Savings and Mortgage Bank vs. Cenzon, 5 April 1990 (liquidation)
DOCTRINE : It is settled jurisprudence that a banking institution which has been declared insolvent and
subsequently ordered closed by the Central Bank of the Philippines cannot be held liable to pay interest on bank
deposits which accrued during the period when the bank is actually closed and non-operational.

FACTS: Herein private respondents are husband and wife who deposited with the defendant Fidelity Savings
Bank the amount of FIFTY THOUSAND PESOS (P50,000.00) under Savings Account No. 16-0536; that
likewise, and another FIFTY THOUSAND PESOS (P50,000.00) under Certificate of Time Deposit No. 0210;
that the aggregate amount of deposits of the petitioners with Fidelity Savings and Mortgage Bank is ONE
HUNDRED THOUSAND PESOS (P100,000.00);
On February 18, 1969, petitioner Fidelity Savings Bank was placed under insolvency. On February 19, 1969 and
up to the date that the petition for review is filed with the Supreme Court, the Superintendent of Banks has been
taking charge of the assets of defendant Fidelity Savings and Mortgage Bank In pursuant to Resolution No. 350,
as issued by the Monetary Board;
On October 10, 1969 the PDIC paid the plaintiffs the amount of TEN THOUSAND PESOS (P10,000.00) on the
aggregate deposits of P100,000.00 pursuant to Republic Act No. 5517, thereby leaving a deposit balance of
P90,000.00;
On December 9, 1969, the Monetary Board issued its Resolution No. 2124 directing the liquidation of the affairs
of defendant Fidelity Savings Bank;
On January 25, 1972, the OSG filed a "Petition for Assistance and Supervision in Liquidation" of the affairs of
Fidelity Savings and Mortgage Bank. The liquidation proceeding has not been terminated and is still pending up
to the time that the petition is filed before the Supreme Court;
On October 3, 1972, the Liquidation Court promulgated the Bank Rules and Regulations to govern the liquidation
of the affairs of defendant Fidelity Savings and Mortgage Bank;
The petitioners through their counsel, sent demand letters to respondents, demanding the immediate payment of
the aforementioned savings and time deposits;
On August 10, 1973, private respondents instituted action for a sum of money with damages against Fidelity
Savings and Mortgage Bank et.al. The case against other defendants was dismissed.

ISSUES:
1. Whether or not an insolvent bank like the Fidelity Savings and Mortgage Bank may be adjudged to pay interest
on unpaid deposits even after its closure by the Central Bank by reason of insolvency without violating the
provisions of the Civil Code on preference of credits; and
2. Whether or not an insolvent bank like the Fidelity Savings and Mortgage Bank may be adjudged to pay moral
and exemplary damages, attorney's fees and costs when the insolvency is caused by the anomalous real estate
transactions without violating the provisions of the Civil Code on preference of credits.

HELD:
On the First Issue:
It is settled jurisprudence that a banking institution which has been declared insolvent and subsequently ordered
closed by the Central Bank of the Philippines cannot be held liable to pay interest on bank deposits which accrued
during the period when the bank is actually closed and non-operational.
In this case, it is manifest that petitioner cannot be held liable for interest on bank deposits which accrued from
the time it was prohibited by the Central Bank to continue with its banking operations, that is, when Resolution
No. 350 to that effect was issued on February 18, 1969.
Cited the case of Overseas Bank of Manila vs. Court of Appeals and Tony D. Tapia, wherein the Supreme Court
ruled that:
“It should be deemed read into every contract of deposit with a bank that the obligation to pay interest on the
deposit ceases the moment the operation of the bank is completely suspended by the duly constituted authority,
the Central Bank.”
On the Second Issue
The Supreme Court likewise find the awards of moral and exemplary damages and attorney's fees to be erroneous.
Dispositive Portion:
Fidelity Savings and Mortgage Bank is declared liable to pay private respondents Timoteo and Olimpia
Santiago the sum of P90,000.00, with accrued interest until February 18, 1969. The awards for moral and
exemplary damages, and attorney's fees are DELETED.
Banco Filipino vs. BSP, June 4, 2018 (closed bank’s authority to file suits)

Doctrine: A bank which has been ordered closed by the Bangko Sentral ng Pilipinas is placed under the
receivership of the Philippine Deposit Insurance Corporation. As a consequence of the receivership, the closed
bank may sue and be sued only through its receiver, the Philippine Deposit Insurance Corporation.

Facts: In 2002, Banco Filipino suffered from heavy withdrawals, prompting it to seek the help of Bangko Sentral
asking for financial assistance of more than P3,000,000,000.00 through emergency loans and credit easement
terms. In a letter dated November 21, 2003, Bangko Sentral informed Banco Filipino that it should first comply
with certain conditions imposed by Republic Act No. 7653 before financial assistance could be extended and was
also required to submit a rehabilitation plan approved by Bangko Sentral before emergency loans could be
granted.
The parties constituted an Ad Hoc Committee composed of representatives from both parties to study and act on
the proposals and produced an Alternative Business Plan which was accepted by Banco Filipino, but was subject
to the Monetary Board’s approval. The approval was also subject to certain terms and conditions, among which
was the withdrawal or dismissal with prejudice to all pending cases filed by Banco Filipino against Bangko Sentral
and its officials. Banco Filipino did not agree with the condition to dismiss and withdraw its cases since this would
require a separate discussion.

Issue: Whether or not petitioner Banco Filipino, as a closed bank under receivership, could file this petition for
review without joining its statutory receiver, the Philippine Deposit Insurance Corporation as a party to the case.

Held: A closed bank under receivership can only sue or be sued through its receiver, the Philippine Deposit
Insurance Corporation because their relationship is fiduciary in nature. Section 30 of Republic Act No. 7653
directs that “the receiver shall immediately gather and take charge of all the assets and liabilities of the institution,
administer the same for the benefit of its creditors, and exercise the general powers of a receiver under the Revised
Rules of Court but shall not, with the exception of administrative expenditures, pay or commit any act that will
involve the transfer or disposition of any asset of the institution.”

As the fiduciary of the properties of a closed bank, the PDIC may prosecute or defend the case by or against the
said bank as a representative party while the bank will remain as the real party in interest pursuant to Section 3,
Rule 3 of the Revised Rules.
Balayan Bay Rural Bank vs. National Livelihood Development Corporation, 21 September 2015 (closed
bank’s representative)

Doctrine : “ The insolvent bank's legal personality is not dissolved by virtue of being placed under receivership
by the Monetary Board. It must be stressed here that a bank retains its juridical personality even if placed under
conservatorship; it is neither replaced nor substituted by the conservator who shall only take charge of the assets,
liabilities and the management of the institution.”
“The properties of an insolvent bank are not transferred by operation of law to the statutory receiver/liquidator
but rather these assets are just held in trust to be distributed to its creditors after the liquidation proceedings in
accordance with the rules on concurrence and preference of credits.”

Facts : It was on October 12, 2009 when NLDC filed a complaint against petitioner bank for collection of sum
of money for the latter's unpaid obligation amounting to P1,603,179.86 before the RTC of Makati City. It was
during the pendency of the case before the RTC, when the Bangko Sentral ng Pilipinas, thru the Monetary Board,
issued MIN-70-26 November 2009, placing the petitioner bank under receivership and appointed the PDIC as
receiver of the bank. NLDC filed a Motion for Substitution of Party and Set the Case for Pre-Trial invoking
Section 19, Rule 3 of the Revised Rules of Court, the NLDC claimed that by virtue of transfer of interest of the
petitioner bank to the PDIC, the latter may be substituted as party or joined with the original party. Petitioner
bank elevated the matter before the Court on question of law via this instant Petition for Review on Certiorari
arguing that the substitution is not proper. That in the instant case, the PDIC is not the real party in interest but
was merely tasked to conserve the assets of the bank for the benefit of its creditors,

Issue : Whether the substitution of PDIC as defendant or inclusion as co-defendant is contrary to law.

Ruling : The Court denied the petition.“The legal personality of the petitioner bank is not ipso facto dissolved
by insolvency; it is not divested of its capacity to sue and be sued after it was ordered by the Monetary Board to
cease operation. The law mandated, however, that the action should be brought through its statutory
liquidator/receiver which in this case is the PDIC. The authority of the PDIC to represent the insolvent bank in
legal actions emanates from the fiduciary relation created by statute which reposed upon the receiver the task of
preserving and conserving the properties of the insolvent for the benefit of its creditors.”
Cu vs. Small Business Guarantee, April 7, 2017 (liquidation)

DOCTRINE: To digress, when a bank is ordered closed by the Monetary Board; PDIC is designated as the
receiver which shall then proceed with the takeover and liquidation of the closed bank.

FACTS: SB Corp. is a government financial institution by virtue of RA 6977, mandated to provide easy access
credit to qualified MSMEs through direct lending. Golden 7 (G7) Bank, its client, was granted an increased credit
line and authorized any two of its officers, Fidel L. Cu, Allan S. Cu [Cu], Lucia C. Pascual & Norma B. Cueto,
as signatories to loan documents and postdated checks.
On 2008, G7 Bank was placed under receivership to Philippine Deposit Insurance Corporation (PDIC) which
took over the bank and consequently closed all of G7 Bank's deposit accounts with other banks including its
checking account with Land Bank of the Philippines (LBP) against which the disputed checks were issued. Upon
maturity of subject postdated checks, SB Corp. deposited the same to its account but all of them were dishonored
for reason of "Account Closed". SB Corp. to file a Complaint-Affidavit for Violation of B.P. 22. Meantime, PDIC
filed a Petition for Assistance in the Liquidation of G7 Bank. MTC and RTC dismissed the complaint against Cu
and Pascual. SB Corp. then filed a petition for review and CA reversed the decision.

ISSUES:
1. Whether or not CA erred in not dismissing the SB Corp.'s petition.
2. WON the CA erred in reversing the of the RTC.

RULING: YES. (1) SB Corp. lacked the authority to represent the State in the appeal of the criminal cases before
the CA as this authority is solely vested in the OSG. (2) The Court finds that the MeTC and RTC acted correctly
and did not gravely abuse their discretion when they ordered the dismissal of the B.P. 22 cases against Cu.
Significantly, when PDIC filed a Petition for Assistance in the Liquidation of G7 Bank with the RTC, in effect
on interest payments: "The liability of a bank to pay interest on deposits and all other obligations as of closure
shall cease upon its closure" and on final decisions against the closed bank: "The execution and enforcement of a
final decision of a court other than the liquidation court against the assets of a closed bank shall be stayed.
The petition for assistance in the liquidation of a closed bank is a special proceeding. It is a proceeding in rem
and the liquidation court has exclusive jurisdiction to adjudicate claims. That, at the time SB Corp. presented the
subject checks for deposit/encashment in October 2008, it had no right to demand payment because the underlying
obligation was not yet due and demandable from Cu and he could not be held liable for the civil obligations of
G7 covered by the subject dishonored checks on account of the Monetary Board's closure of G7 and the takeover
by PDIC. SB Corp. acted in clear bad faith because it knew at the time it deposited the subject postdated checks
that G7 Bank was already under receivership and PDIC had already taken over therefore it was legally impossible
for Cu to fund those checks on the dates indicated therein.