RURAL BANK OF SAN MIGUEL v. MONETARY BOARD

RURAL BANK OF SAN MIGUEL, INC. and HILARIO P.
withdrawal resulting for the RTC to DISMISS the said

SORIANO, in his capacity as majority stockholder in the Rural petition.
Bank of San Miguel, Inc., vs. MONETARY BOARD, BANGKO
SENTRAL NG PILIPINAS and PHILIPPINE DEPOSIT INSURANCE Upon the withdrawal petitioners filed a special civil
CORPORATION action for certiorari and prohibition in the CA.
February 16, 2007 petitioners claimed that respondents MB and BSP

committed grave abuse of discretion in issuing
GR no. 150886 PONENTE: CORONA J.
Resolution No. 105
ARTICLES: Art.9 Civil Code, RA 7653 Sec. 30 “New
CA Ruling: The petition was dismissed
Central Bank Act”, RA 265 old Law Sec. 29,
Resolution No. 105 was based on the findings and
FACTS:
recommendations of the Department of Rural Banks
Petitioner Rural Bank of San Miguel, Inc. (RBSM) was a Supervision and Examination Sector, the comptroller
domestic corporation engaged in banking. reports and the declaration of a bank holiday. Such
could be considered as substantial evidence.
It started operations in 1962 and by year 2000 had 15
branches in Bulacan. Petitioner Hilario P. Soriano Hence this petition for review on certiorari on the
claims to be the majority stockholder of its outstanding Decision and resolution of CA.
shares of stock.
It is clear that the closure of a bank may be considered
On January 21, 2000, respondent Monetary Board as an exercise of police power. The action of the MB on
(MB), the governing board of respondent Bangko this matter is final and executory.
Sentral ng Pilipinas (BSP), issued Resolution No. 105
Petitioners argue that Resolution No. 105 was bereft of
prohibiting RBSM from doing business in the
any basis considering that no complete examination
Philippines.
had been conducted before it was issued.
RESOLUTION WAS BASED ON MEMORANDUM made by
Petitioners contend that there must be a current,
Mr. Wilfredo B. Domo-ong, Director, Department of thorough and complete examination before a bank can
Rural Banks, it showed that [RBSM] be closed under Section 30 of RA 7653.
(a) is unable to pay its liabilities as they become due in In RA 7653, only a "report of the head of the supervising
the ordinary course of business; or examining department" is necessary. From the words
(b) cannot continue in business without involving used in Section 30, it is clear that RA 7653 no longer
probable losses to its depositors and creditors; that the requires that an examination be made before the MB
management of the bank had been accordingly can issue a closure order.
informed of the need to infuse additional capital to
The absence of an examination before the closure of
place the bank in a solvent financial condition and was
RBSM did not mean that there was no basis for the
given adequate time within which to make the
closure order. it is clear under RA 7653 that the basis
required infusion and that no infusion of adequate
need not arise from an examination as required in the
fresh capital was made,
old law.
the Board decided as follows: The COURT relied on the report of Mr. Domoong, the
head of the supervising or examining department, with
1. To prohibit the bank from doing business in the
the findings as stated in the Memorandum.
Philippines and to place its assets and affairs under
receivership in accordance with Section 30 of [RA 7653]; Having dispensed with the issue decisive of this case, it
2. To designate the [PDIC] as receiver of the bank. becomes unnecessary to resolve the other minor issues
raised.
Petitioner filed a a petition for certiorari and prohibition
in the Regional Trial Court (RTC) of Malolos to nullify the The petition was DENIED and to AFFIRM the decision of
resolution no. 105 However they also filed a petition of the CA
ISSUE: As early as November 18, 1998, Land Bank of the
Philippines (LBP) advised RBSM that it will terminate the
WON Section 30 of RA 7653 (also known as the New
clearing of RBSM's checks in view of the latter's
Central Bank Act) and applicable jurisprudence require a
frequent clearing losses and continuing failure to
current and complete examination of the bank before it
replenish its Special Clearing Demand Deposit with LBP.
can be closed and placed under receivership.
The BSP interceded with LBP not to terminate
(as the petitioner questioned the “examination” and the clearing arrangement of RBSM to protect the
“report” that were requisites for the application of the interests of RBSM's depositors and creditors.
RA 7653)
After a year, or on November 29, 1999, the LBP
DISPOSITON: informed the BSP of the termination of the clearing
WHEREFORE, the petition is hereby DENIED. The March facility of RBSM to take effect on December 29, 1999,
28, 2000 decision and November 13, 2001 resolution of in view of the clearing problems of RBSM.
the Court of Appeals in CA-G.R. SP No. 57112 are
AFFIRMED. On December 28, 1999, the MB approved the release of
P26.189M which is the last tranche of the P375 million
NOTES: emergency loan for the sole purpose of servicing and
Section 30 of RA 7653 provides: Proceedings in meeting the withdrawals of its depositors. Of the
Receivership and Liquidation. — P26.180M...P12.6M . . . was not used to service
withdrawals [and] remains unaccounted for as admitted
Whenever, upon report of the head of the supervising by [RBSM's Treasury Officer and Officer-in-Charge
or examining department, the Monetary Board finds of Treasury]. Instead of servicing withdrawals of
that a bank or quasi-bank: depositors, RBSM paid Forcecollect Professional
Solution, Inc. and Surecollect Professional, Inc., entities
(a) is unable to pay its liabilities as they become due in
which are owned and controlled by Hilario P. Soriano
the ordinary course of business: Provided, that this shall
and other RBSM officers.
not include inability to pay caused by extraordinary
demands induced by financial panic in the banking
On January 4, 2000, RBSM declared a bank holiday.
community;
RBSM and all of its 15 branches were closed from doing
(b) has insufficient realizable assets, as determined by
business. Alarmed and disturbed by the unilateral
the [BSP] to meet its liabilities; or
declaration of bank holiday, [BSP] wanted to examine
(c) cannot continue in business without involving
the books and records of RBSM but encountered
probable losses to its depositors or creditors; or
problems. Meanwhile, on November 10, 1999, RBSM's
(d) has willfully violated a cease and desist order under
designated comptroller, Ms. Zenaida Cabais of the BSP,
Section 37 that has become final, involving acts or
submitted to the Department of Rural Banks, BSP, a
transactions which amount to fraud or a dissipation of
Comptrollership Report on her findings on the financial
the assets of the institution; in which cases, the
condition and operations of the bank as of October 31,
Monetary Board may summarily and without need for
1999. Another set of findings was submitted by said
prior hearing forbid the institution from doing business
comptroller [and] this second report reflected the
in the Philippines and designate the Philippine Deposit
financial status of RBSM as of December 31, 1999.
Insurance Corporation as receiver of the banking
institution.
(NOT REALLY NECESSARY PERO JUST IN CASE:

CA FINDINGS)
To assist its impaired liquidity and operations, the RBSM
was granted emergency loans on different occasions in
the aggregate amount of P375M

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RURAL BANK OF SAN MIGUEL v. MONETARY BOARD

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RURAL BANK OF SAN MIGUEL, INC. and HILARIO P.

withdrawal resulting for the RTC to DISMISS the said

February 16, 2007 petitioners claimed that respondents MB and BSP

(NOT REALLY NECESSARY PERO JUST IN CASE:

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