NEW CENTRAL BANK ACT

MONETARY BOARD

TARROSA vs. SINGSON

FACTS:
Jests Armando Tarrosa filed a petition as taxpayer questioning the appointment of respondent
Gabriel Singson as Governor of the Bangko Sentral ng Pilipinas for not having been confirmed by
the Commission on Appointments.

The petition is anchored on the provisions of Sectin 6 of R.A. No. 7653, which established the
Bangko Sentral as the Central Monetary Authority of the Philippines. The said provision provides
that the appointed Governor shall be subject to the confirmation by the Commission on
Appointments.

Respondents claim that the Congress exceeded its legislative powers in requiring the confirmation
by the Commission on Appointments of the appointment of the Governor of the Bangko Sentral,
citing Section 16 of Article VII of the Constitution.

ISSUE:
Whether or not the Governor of the BSP is subject to COA’s confirmation.

RULING:
Appointment to the position of the Governor of the BSP is not one of those that need confirmation
by 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.

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VIKKI MAE J. AMORIO
BANKING LAWS
AUTHORITY; CORPORATE POWERS OF BANGKO SENTRAL; APPOINTMENT OF CONSERVATOR

CENTRAL BANK EMPLOYEES ASSOCIATION vs. BSP

FACTS:
On July 3, 1993, R.A. No. 7653 (The New Central Bank Act) took effect. It abolished the old Central
Bank of the Philippines and created a new Bangko Sentral ng Pilipinas (BSP).

Almost eight years after its effectivity, The Central Bank (now BSP) Employees Association filed a
petition against BSP and the Executive Secretary of the Office of the President, 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.

Article II, Section 15 (c) RA 7653: A compensation structure based on job evaluation studies
and wage surveys and subject to the Boards approval, shall be instituted as an integral
component of the Bank Sentrals human resource development program. Provided that the
Monetary Board shall make its own system conform as closely as possible with the principles
provided for under RA No 6758 (Salary Standardization Act). Provided, however, that
compensation and wage structure of employees whose positions fall under salary grade 19
and below shall be in accordance with the rates prescribed under RA No 6758.

The thrust of petitioner's 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).
It is contended that this classification is "a classic case of class legislation," allegedly not based on
substantial distinctions which make real differences, but solely on the SG of the BSP personnel's
position. Petitioner posits that the classification is not reasonable but arbitrary and capricious, and
violates the equal protection clause of the Constitution.

ISSUE:
Whether or not the last paragraph of Section 15(c), Article II of R.A. 7653, runs afoul of the
constitutional mandate that “no protection shall be denied the equal protection of the laws.”

RULING:
Under the present standards of equal protection, the questioned proviso bears no constitutional
infirmities.

It is settled in constitutional law that the "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. If the end-result did in fact lead to a disparity of treatment between the officers and the
rank-and-file in terms of salaries and benefits, the discrimination or distinction has a rational basis
and is not palpably, purely, and entirely arbitrary in the legislative sense.

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 priveleges conferred and
liabilities enforced. Favoritism and undue preference cannot be allowed. For the principles is that
equal protection and security shall be given to every person under circumstance which, if not
identical are analogous.

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VIKKI MAE J. AMORIO
BANKING LAWS
SUPERVISION AND EXAMINATION
BORLONGAN vs. REYES
G.R. No. 161276 January 31, 2005

FACTS:
Petitioner Teodoro Borlongan, the former president and CEO of Union Bank (UB) filed a complaint-
affidavit with the Ombudsman alleging that the respondent official of Bangko Sentral ng Pilipinas
(BSP) falsified statement of facts in the BSP Supervision and Examination Sector (SES) reports; and
they tendered incorrect and inaccurate reports and opinions to conjure false grounds for the
closure of UB and placing them under receivership.

ISSUE:
Whether or not the respondents are guilty of simple neglect of duty.

RULING:
NO, in Philippine Retirement Authority vs. Rupa, we laid down the standard definition of simple
neglect of duty, as a disregard of a duty resulting from carelessness or indifference.

Here, we find that neither gross nor simple neglect of duty characterized the acts of the
respondents. The subject SES reports prepared by respondents and submitted to the Monetary
Board were anything but haphazardly or negligently made. As it were, the reports were a
compendium of long years of monitoring by the BSP of a problem bank, and assembled over a
period of 15 hours after the respondents were instructed to do so. The data contained therein had
been patiently collected and analyzed.

Record reveals that UBI was being monitored by BSP officials for years. Respondent Dolores
Yuvienco had supervised the bank directly since 1999 as Director of DCB II UBI had since given up
its status as an expanded commercial bank and reverted to an ordinary commercial bank because it
could not meet the P3.5 billion minimum capital requirement for a universal bank.

For two (2) months prior to its closure, Urban Bank had been besieged by liquidity problems, and
its declaration of a bank holiday on April 25 only confirmed its decreasing ability to meet
obligations on time. Section 30(a) of RA 7653, otherwise known as the New Central Bank Act, is
relevant. Under that law, the Monetary Board may execute measures such those taken in this case,
summarily and without need of prior hearing:

Sec. 30. Proceedings in Receivership and Liquidation. -Whenever, upon report of the head of the
supervising and examining department, the Monetary Board finds that the Bank or quasi-bank:

(a) is unable to pay its liabilities as they become due in the ordinary course of
business: Provided, that this shall not include inability to pay caused by extraordinary demands
induced by financial panic in the banking community;

(b) has insufficient realizable asset, as determined by the Bangko Sentral to meet its liabilities; or

(c) cannot continue in business without involving probable losses to its creditors; or

(d) has willfully violated a cease and desist order under Section 37 that has become final,
involving acts or transactions which amount to fraud or a dissipation of the assets of the institution;
in which cases, the Monetary Board may summarily and without need for prior hearing forbid
the institution from doing business in the Philippines and designate the Philippine Deposit
Insurance Corporation as receiver of the Banking institution. xxx. (Emphasis supplied)

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VIKKI MAE J. AMORIO
BANKING LAWS
BANGKO SENTRAL NG PILIPINAS vs. OMB and JAMORABO
G.R. No. 201069 June 16, 2021

FACTS:
The Bangko Sentral ng Pilipinas (BSP) filed a complaint against Benjamin M. Jamorabo, former Bank
Officer in the BSP’s Supervision and Examinatin Sector (SES), for violation of Section 27(d) of R.A.
No. 7653 and BSP Office Order No. 423, series of 2002, for obtaining a loan with the Rural Bank of
Kiamba, Sarangani, Inc. (RBKSI) while he was conducting the regular examination of said bank.

The Office of the Ombudsman dismissed the complaint and held that Jamorado can no longer be
administratively sanctioned because the case against him was filed after he had retired from
government service and that full payment of the loan in question negated the existence of undue
injury.

ISSUE:
Whether or not Jamorabo has violated Section 27 (d) of R.A. 7653 and can still be held liable even if
the present complaint was filed after his retirement from government service.

RULING:
YES. Yes. Section 27(d) of R.A. No. 7653 is composed of two parts: a general rule and a proviso.

The first part of the provision states the general rule: BSP personnel are not allowed to
"[borrow] from any institution subject to supervision or examination by the Bangko Sentral
x x x unless said borrowings are adequately secured, fully disclosed to the Monetary Board,
and x x x subject[ed] to such further rules and regulations as the Monetary Board may
prescribe."

The second part, or the proviso, further qualifies this rule with a second, more specific prohibition:
"That personnel of the supervising and examining departments are prohibited from borrowing
from a bank under their supervision or examination." This qualification to the general rule is
specifically targeted at the BSP personnel who do the actual work of supervising and examining
banks, and who are absolutely prohibited from borrowing from banks under their supervision or
examination.The law provides that BSP personnel who borrow from institutions under BSP
supervision or examination without complying with the requisite former provision shall be
penalized by a fine or imprisonment, or both, at the discretion of the court.

In the case at bar, there is no dispute that: 1) Jamorabo was one of the BSP personnel assigned to
conduct the examination of RBKSI from July 5 to 22, 2006; and 2) Jamorabo, as co-maker for his
wife, took out a 200,000-peso loan from RBKSI during the examination period thereof.

However, in view of our finding that Section 27(d) is a penal provision, the repeal by R.A. No. 11211
of the absolute prohibition on borrowings by BSP supervision and examination personnel should be
given retroactive effect in favor of Jamorabo, pursuant to Article 22 of the Revised Penal Code.
Consequently, Jamorabo's loan with RBKSI can no longer be considered a per se violation of Section
27(d); rather, its compliance with the requisites of Section 27(d), as amended, must be ascertained.

The arm's length standard adopted in Section 27(d) means that BSP personnel must transact with
BSP-examined institutions in such a way that they will not be able to utilize their position to gain
undue influence with, or more favorable terms from, the target institution.

In this case, there is prima facie evidence of Jamorabo's violation of the arm's-length standard in his
dealing with RBKSI. RBKSI's general manager, Nero, positively identified Jamorabo as the prime
mover behind the loan.

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VIKKI MAE J. AMORIO
BANKING LAWS
RURAL BANK OF SAN MIGUEL vs. MONETARY BOARD
G.R. No. 150886 February 16, 2007

FACTS:
The Monetary Board issued a resolution prohibiting Rural Bank of San Miguel, Inc. (RBSM) from
doing business in the Philippines, placing it under receivership and designating Philippine Deposit
Insurance Corporation (PDIC) as receiver.

RBSM contend that there must be a current, thorough and complete examination before a bank can
be closed under Section 30 and further argued that this section must be harmonized with Sections
25 and 28, arguing that an examination is necessary and not a mere report, otherwise a decision to
close the bank is arbitrary.

ISSUE:
Whether or not Section 30 of the New Central Bank Act require a current and complete examination
of the bank before it can be closed and placed under receivership.

RULING:
NO, petitioner’s reliance in the case of Banco Filipino is misplaced.

R.A. 265. Including Section 29 thereof, was expressly repealed by RA 7653 which took effect in
1993. In RA 7653, only a “report of the head of the supervising or examining department” is
necessary.

The Court cannot look for or impose another meaning on the term “report” or to construe it as
synonymous with the term “examination” it is clear from the provisions of Section 30 that the
present law no longer requires that an examination be made before the MB can issue a closure
order.

Indeed, the court may consider the spirit and reason of the statute, where a literal meaning would
lead to absurdity, contradiction, injustice, or would defeat the clear purpose of the lawmakers.
However, these problems are not present here. Using the literal meaning of "report" does not lead
to absurdity, contradiction or injustice. Neither does it defeat the intent of the legislators. The
purpose of the law is to make the closure of a bank summary and expeditious in order to protect
public interest. This is also why prior notice and hearing are no longer required before a bank can
be closed.

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VIKKI MAE J. AMORIO
BANKING LAWS
APPOINTMENT OF CONSERVATOR ; PROCEEDING OF RECEIVERSHIP

FPIB vs. COURT OF APPEALS

FACTS:
First Philippine International Bank is a banking institution organized and existing under the laws of
the Republic of the Philippines. Petitioner Mercurio Rivera is of legal age and was, at all times
material to this case, Head-Manager of the Property Management Department of the petitioner
Bank. Respondent Carlos Ejercito is of legal age and is the assignee of original plaintiffs-appellees
Demetrio Demetria and Jose Janolo.

In this case, there was already a perfected contract between the parties but was repudiated by the
Acting Conservator who said that the transaction was “illegal” but this was made seven months
after the acceptance of the offer.

ISSUE:
Whether the bank conservator have the unilateral power to repudiate the authority of the bank
officers and/or to revoke the said contract.
RULING:
It is not disputed that the petitioner Bank was under a conservator placed by the Central Bank
during the time that the negotiation and perfection of the contract of sale took place.
While it is true that the provision empowers that the conservator has the “power to overrule or
revoke the actions of the previous management” the Court emphasized that:
While admittedly, the Central Bank law gives vast and farreaching powers to the conservator of a
bank, it must be pointed out that such powers must be related to the "(preservation of) the assets of
the bank, (the reorganization of) the management thereof and (the restoration of) its viability."
Such powers, enormous and extensive as they are, cannot extend to the post-facto repudiation of
perfected transactions, otherwise they would infringe against the non-impairment clause of the
Constitution.
Section 28-A merely gives the conservator power to revoke contracts that are, under existing
law, deemed to be defective — i.e., void, voidable, unenforceable or rescissible. Hence, the
conservator merely takes the place of a bank's board of directors.
What the said board cannot do — such as repudiating a contract validly entered into under the
doctrine of implied authority — the conservator cannot do either. Ineluctably, his power is not
unilateral and he cannot simply repudiate valid obligations of the Bank.
His authority would be only to bring court actions to assail such contracts — as he has already done
so in the instant case.
To rule otherwise would be to enable a failing bank to become solvent, at the expense of third
parties, by simply getting the conservator to unilaterally revoke all previous dealings which had
one way or another or come to be considered unfavorable to the Bank, yielding nothing to perfected
contractual rights nor vested interests of the third parties who had dealt with the Bank.

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VIKKI MAE J. AMORIO
BANKING LAWS
MIRANDA vs. PDIC
G.R. No. 169334 September 8, 2006

FACTS:
Leticia C. Miranda, withdrew substantial amounts from her account in Prime Savings Banks. But
instead of cash, she opted for a crossed cashier’s check. She deposited two check into her account in
another bank but on the same day, BSP suspended the clearing privileges of Prime Savings Bank.
The two checks of Miranda were returned to her unpaid.

Subsequently, BSP place Prime Savings under the receivership of the Philippine Deposit Insurance
Corporation (PDIC). Thus, Miranda filed for a claim of sum of money to recover her funds.

ISSUE:
Whether or not the claim is a disputed claim under Section 30 of R.A. 7653.

RULING:
YES, The power and authority of the Monetary Board to close banks and liquidate them thereafter
when public interest so requires is an exercise of the police power of the State. Police power,
however, is subject to judicial inquiry. It may not be exercised arbitrarily or unreasonably and could
be set aside if it is either capricious, discriminatory, whimsical, arbitrary, unjust, or is tantamount
to a denial of due process and equal protection clauses of the Constitution.

Petitioner's claim which involved the payment of the two cashier's checks that were not honored by
Prime Savings Bank due to its closure falls within the ambit of a claim against the assets of the
insolvent bank. The issuance of the cashier's checks by Prime Savings Bank to the petitioner created
a debtor/creditor relationship between them. This disputed claim should therefore be lodged in the
liquidation proceedings by the petitioner as creditor, since the closure of Prime Savings Bank has
rendered all claims subsisting at that time moot which can best be threshed out by the liquidation
court and not the regular courts.

It is well-settled in both law and jurisprudence that the Central Monetary Authority, through the
Monetary Board, is vested with exclusive authority to assess, evaluate and determine the condition
of any bank, and finding such condition to be one of insolvency, or that its continuance in business
would involve a probable loss to its depositors or creditors, forbid bank or non-bank financial
institution to do business in the Philippines; and shall designate an official of the BSP or other
competent person as receiver to immediately take charge of its assets and liabilities.

As clearly laid down in Ong v. Court of Appeals, the rationale behind judicial liquidation is intended
to prevent multiplicity of actions against the insolvent bank. It is a pragmatic arrangement designed
to establish due process and orderliness in the liquidation of the bank, to obviate the proliferation
of litigations and to avoid injustice and arbitrariness. The lawmaking body contemplated that for
convenience, only one court, if possible, should pass upon the claims against the insolvent bank and
that the liquidation court should assist the Superintendent of Banks and regulate his operations.

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VIKKI MAE J. AMORIO
BANKING LAWS
RURAL BANK OF BUHI vs. COURT OF APPEALS
G.R. No. L-61689 June 20, 1988

FACTS:
After examination was conducted against Rural Bank of Buhi, massive irregularities were found in
its operations consisting of loans to unknown and fictitious borrowers. Respondent Consolaction
Odra, submitted a report to the Monetary Board of the Central Bank, placing the petitioner bank
under receivership in accordance with Section 29 of Republic Act No. 265. On the basis of the said
report, the bank was placed under receivership and designated Odra as its receiver.

Imelda del Rosario, Manager of Buhi, filed a petition for injunction, assailing that the action of
herein respondent Odra in recommending the receivership over the Bank as a violation of the
provisions of Sections 28 and 29 of Republic Act No. 265 as amended, and Section 10 of Republic
Act No. 720 (The Rural Banks Act) and as being ultra vires and done with grave abuse of discretion
and in excess of jurisdiction.

ISSUE:
Whether or not due process was observed.

RULING:
Based on RA 265, there is no requirement whether express or implied, that a hearing be first
conducted before a banking institution may be placed under receivership. On the contrary, the law
is explicit as to the conditions prerequisite to the action of the Monetary Board to forbid the
institution to do business in the Philippines and to appoint a receiver to immediately take charge of
the bank's assets and liabilities. They are: (a) an examination made by the examining department of
the Central Bank; (b) report by said department to the Monetary Board; and (c) prima facie
showing that the bank is in a condition of insolvency or so situated that its continuance in business
would involve probable loss to its depositors or creditors.

It has long been established and recognized in this jurisdiction that the closure and liquidation of a
bank may be considered as an exercise of police power. Such exercise may, however, be subject to
judicial inquiry and could be set aside if found to be capricious, discriminatory, whimsical,
arbitrary, unjust or a denial of the due process and equal protection clauses of the Constitution
(Central Bank vs. Court of Appeals, 106 SCRA 155 [1981]).

The evident implication of the law, therefore, is that the appointment of a receiver may be made by
the Monetary Board without notice and hearing but its action is subject to judicial inquiry to insure
the protection of the banking institution. Stated otherwise, due process does not necessarily
require a prior hearing; a hearing or an opportunity to be heard may be subsequent to the closure.
One can just imagine the dire consequences of a prior hearing: bank runs would be the order of the
day, resulting in panic and hysteria. In the process, fortunes may be wiped out, and disillusionment
will run the gamut of the entire banking community.

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VIKKI MAE J. AMORIO
BANKING LAWS
CENTRAL BANK vs. COURT OF APPEALS
G.R. No. 76118 March 30, 1993

FACTS:
The Monetary Board issued a resolution ordering the closure of Triumph Savings Bank(TSB) based
on the examination reports submitted by the Supervision and Examination Sector (SES) of the
Central Bank that the financial condition of TSB is one of insolvency and its continuance in business
would involve probable loss to its depositors and creditors.

TSB filed a complaint against Central Bank and Tiaoqui to annul MB Resolution 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:
Whether or not absence of prior notice and hearing constitutes acts of arbitrariness and bad faith.

RULING:
No, under Sec. 29 of R.A. 265,15 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. Contrary to the notion of private respondent,
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. Plainly,
the legislature could not have intended to authorize "no prior notice and hearing" in the closure of
the bank and at the same time allow a suit to annul it on the basis of absence thereof. 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.

We ruled in Banco Filipino that the closure of the bank was arbitrary and attendant with grave
abuse of discretion, not because of the absence of prior notice and hearing, but that the Monetary
Board had no sufficient basis to arrive at a sound conclusion of insolvency to justify the closure. In
other words, the arbitrariness, bad faith and abuse of discretion were determined only after the
bank was placed under conservatorship and evidence thereon was received by the trial court. As
this Court found in that case, the Valenzuela, Aurellano and Tiaoqui Reports contained unfounded
assumptions and deductions which did not reflect the true financial condition of the bank. For
instance, the subtraction of an uncertain amount as valuation reserve from the assets of the bank
would merely result in its net worth or the unimpaired capital and surplus; it did not reflect the
total financial condition of Banco Filipino.

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VIKKI MAE J. AMORIO
BANKING LAWS
GENERAL BANK AND TRUST COMPANY vs. CB and AURELLANO
G.R. No. 152551 June 15, 2006

FACTS:
General Bank and Trust Company incurred overdrafts in its current account with the Central Bank
amounting to P54.9 million due to the all-out financial support it extended to Filcapital
Development Corporation(which is a related interest of Yujuico Family Group and the directors and
officers of GBTC).

Thereafter, Central Bank granted General Bank an emergency loan and designated Arnulfo
Aurellano as its comptroller, to fix the financial difficulties of said bank resulting from its unsound
banking practices.

Eventually, the Monetary Board issued a resolution confirming that General Bank was insolvent and
could not resume business with safety to its depositors. It also ordered its liquidation whereby all
its assets will be purchased by Lucio Tan Group.

ISSUE:
Whether or not Central Bank violated any procedural or substantive law when it ordered the
closure of General Bank and adopting the Lucio Tan Group’s bid as liquidation plan of petitioner
General Bank.

RULING:
It must be stressed that petitioner Genbank’s financial predicament did not crop up overnight, nor
is it a product of a single financial indiscretion, so to speak. The root of its problem and eventual
downfall is traceable to unsound banking practices employed by management. Mentioned in this
regard may be made of the all-out financial support given to Filcapital Development Corporation (a
related interest of the Yujuico Family Group and directors and officers of Genbank) and the
standing practice of extending DOSRI loans which, at one point, reached a peak of P172.3 million or
26% of the total loan portfolio of P666.78 million. Of the final figure, 59.4% thereof was classified as
doubtful and P0.505 million as uncollectible. And 91.7% of such DOSRI accounts were unsecured
leaving only 8% thereof secured. All these unsound practices occurred way before their resulting
crippling effects became manifest sometime in December 1976, further leading the bank to resort
to other unsound banking practices, like incurring daily overdrafts. These problems, as earlier
narrated in the assailed CA decision, were taken up by the then CB Governor with the Board of
Directors of Genbank in a meeting held on December 27, 1976. Thus, when the crucial March 23,
1977 meeting was held, there can be no doubt that petitioner Genbank was totally aware of the
predicament it has gotten itself into and the conditions which the CB had imposed to address the
situation for the protection of the depositors and the banking public. It is not as if CB sprang a
surprise on petitioner Genbank when Resolution 675 was issued on March 25, 1977 declaring
Genbank insolvent. Petitioner Genbank’s posture that it was given only two (2) days to remedy the
situation is specious at best.

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VIKKI MAE J. AMORIO
BANKING LAWS
ABASCUS REAL ESTATE DEVELOPMENT CENTER vs. THE MANILA BANKING CORPORATION
G.R. No. 162270 April 6, 2005

FACTS:
Manila Banking Corporation owns a parcel of land wherein it began constructing a 14-storey
building prior to 1984 which was however stopped when the Bangko Sentral ng Pilipinas ordered
the foreclosure of the said bank and placed it under receivership. The legality of the closure was
contested by the bank hence the liquidation was held in abeyance pending the outcome of the suit.
Manila Bank’s then acting president, the late Vicente G. Puyat scouted for possible investors who
could finance the completion of the building. A group of investors represented by Calixto Y.
Laureano offered to lease the building for ten years and to advance the cost to complete the same,
with the advanced cost to be amortized and offset against rental payments during the term of the
lease with a right to an exclusive option to purchase.

Consequently, an arrangement was made whereby the property would first be leased to Manila
Equities Corporation (MEQCO) a wholly-owned subsidiary of Manila Bank, with MEQCO thereafter
subleasing the property to Abacus Real Estate Development Center, Inc., a corporation formed by
the Laureano group. However, the Laureano group was unable to finish the construction of the
building and thereafter it assigned its rights and the exclusive option to purchase to Benjamin
Bitanga the subject land and building. Four years thereafter, Abacus manifested to Manila Bank of
its desire to exercise its exclusive option to purchase which was refused by the latter. Thus, Abacus
filed a complaint for specific performance and damages against Manila Bank. The RTC ordered
Manila Bank to sell to plaintiff the parcel of land and building which was reversed by the Court of
Appeals.

Petitioner insists that the option to purchase the lot and building in question granted to it by the
late Vicente G. Puyat, then acting president of Manila Bank, was binding upon the latter. On the
other hand, respondent has consistently maintained that the late Vicente G. Puyat had no authority
to act for and represent Manila Bank, the latter having been placed under receivership by the
Central Bank at the time of the granting of the "exclusive option to purchase.

ISSUE:
Whether or not the late acting president of Manila Bank, Vicente Puyat, has the authority to enter
into transactions in connection with the bank’s assets and property.

RULING:
No. With respondent bank having been already placed under receivership, its officers, inclusive of
its acting president, Vicente G. Puyat, were no longer authorized to transact business in connection
with the bank’s assets and property. Clearly then, the "exclusive option to purchase" granted by
Vicente G. Puyat was and still is unenforceable against Manila Bank. However, even assuming, in
gratia argumenti, that Atty. Renan Santos, Manila Bank’s receiver, approved the "exclusive option to
purchase" granted by Vicente G. Puyat, the same would still be of no force and effect. Clearly, the
receiver appointed by the Central Bank to take charge of the properties of Manila Bank only had
authority to administer the same for the benefit of its creditors. Granting or approving an "exclusive
option to purchase" is not an act of administration, but an act of strict ownership, involving, as it
does, the disposition of property of the bank. Not being an act of administration, the so-called
"approval" by Atty. Renan Santos amounts to no approval at all, a bank receiver not being
authorized to do so on his own.

Section 30 of the New Central Bank Act expressly provides that "[t]he 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…"
In all, respondent bank’s receiver was without any power to approve or ratify the "exclusive option
to purchase" granted by the late Vicente G. Puyat, who, in the first place, was himself bereft of any
authority, to bind the bank under such exclusive option. Respondent Manila Bank may not thus be
compelled to sell the land and building in question to petitioner Abacus under the terms of the
latter’s "exclusive option to purchase".

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VIKKI MAE J. AMORIO
BANKING LAWS
MIGUELA VILLANUEVA vs. COURT OF APPEALS
G.R. No. 114870 May 26, 1995

FACTS:
Spouses Villanueva were the original owners of the disputed lot which was used by Miguela
Villanueva as collateral for the latter’s loan with Philippine Veterans Bank. The officer-in-charge,
Jose Viudez convinced Miguela Villanueva to execute a deed of sale covering the disputed lots in
order to facilitate a bigger loan. The deed of sale was executed but without the signature of her
husband. On the other hand, plaintiff Ong offered to purchase the lot which PVB imposed a Php
110,000.00 purchase price and it was only upon Ong’s return in the country that he was informed
of the approval of his offer.
When Miguela never got the loan, Jose could no longer be found and new titles were already issued
in the name of PVB. Miguela offered to purchase the lots but her offers were rejected. Subsequently,
the PVB was placed under receivership. Ong then tendered Php 100,000.00 which is the balance of
the purchase price of the litigated lots and was received by an employee of the PVB upon approval
by the Central Bank liquidator. When Ong’s demand for the deed of conveyance was not heeded, an
action for specific performance was filed against the Central Bank. Judge Inting issued an order
allowing the purchase of the two lots. Meanwhile, Miguela Villanueva filed her claim with the
liquidation court alleging that she is the lawful and registered owner of the subject lots.
ISSUE:
Whether or not Ong’s offer to purchase is binding upon Philippine Veteran’s Bank.

RULING:
No. It must be recalled that the PVB was placed under receivership pursuant to the MB Resolution
of 3 April 1985 after a finding that it was insolvent, illiquid, and could not operate profitably, and
that its continuance in business would involve probable loss to its depositors and creditors. The
PVB was then prohibited from doing business in the Philippines, and the receiver appointed was
directed to "immediately take charge of its assets and liabilities, as expeditiously as possible collect
and gather all the assets and administer the same for the benefit of its creditors, exercising all the
powers necessary for these purposes."

Under Article 1323 of the Civil Code, an offer becomes ineffective upon the death, civil interdiction,
insanity, or insolvency of either party before acceptance is conveyed. In a nutshell, the insolvency of
a bank and the consequent appointment of a receiver restrict the bank's capacity to act, especially
in relation to its property, Applying Article 1323 of the Civil Code, Ong's offer to purchase the
subject lots became ineffective because the PVB became insolvent before the bank's acceptance of
the offer came to his knowledge. Hence, the purported contract of sale between them did not reach
the stage of perfection. Corollarily, he cannot invoke the resolution of the bank approving his bid as
basis for his alleged right to buy the disputed properties.

Nor may the acceptance by an employee of the PVB of Ong's payment of P100,000.00 benefit him
since the receipt of the payment was made subject to the approval by the Central Bank liquidator of
the PVB.

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MANALO vs. COURT OF APPEALS
G.R. No. 141297 October 8, 2001

FACTS:
Villanueva Enterprises, represented by its president, Therese Villanueva Vargas, obtained a loan of
three million (Php3,000,000) and one million pesos (Php1,000,000) from respondent PAIC Savings
and Mortgage Bank and the Philippine American Investments Corporation (PAIC), respectively. To
secure payment of both debts, Vargas executed in favor of the respondent and PAIC a joint first
mortgage over two parcels of land registered under her name. One of the lots is the subject of the
present case.

When S. Villanueva defaulted and failed to settle its loan obligation despite repeated demands,
respondent PAIC instituted an extrajudicial foreclosure proceedings over the mortgaged lots and
acquired the same as the highest bidder.

After the lapse of one year, the title was consolidated in PAIC’s name for failure of Vargas to
redeem.

In 1986, the Central Bank of the Philippines filed a petition for assistance in the liquidation of
respondent PAIC with the Regional Trial Court.

During this year until 1991, Vargas negotiated with PAIC, through its liquidator the Central Bank),
for the repurchase of the foreclosed property, but did not prosper.

Vargas then filed a case for annulment of mortgage and extra-judicial foreclosure sale. The court
dismissed the complaint and upheld the validity of the mortgage and foreclosure sale, the same was
upheld by the Court of Appeals.

In 1992, respondent PAIC filed a petition for the issuance of a writ of possession of the subject
property. During the pendency of the case, Vargas executed a Deed of Absolute Sale on the disputed
lot in favor of Armando Angsico. Notwithstanding this sale, Vargas, still representing herself to be
the lawful owner of the property, leased the same to petitioner Domingo R. Manalo.

Later on Vargas, assigned his rights to petitioner Manalo and in 1998, the court a quo granted the
petition of PAIC for the issuance of the Writ of Possession. Shortly after, Villanueva Enterprises and
Vargas moved for its quashal.

Petitioner, on the strength of the lease contract and deed of assignment made in his favor,
submitted a permission to file an ex-parte motion to intervene. Both motions were denied by the
court. Court of Appeals upheld the order of the lower court.

Petitioner postulates in its petition that the lower court should have dismissed the Ex-Parte petition
for Writ of Possession, on the ground that the power to hear the same rests within the exclusive
jurisdiction with the Liquidation Court of pursuant to Section 29 of Act No. 265 of The Central Bank
Act.

ISSUE:
Whether or not the jurisdiction for the issuance of the writ of possession filed by the respondent
bank is vested solely on the liquidation court.

RULING:
No. The exclusive jurisdiction of the liquidation court pertains only to the adjudication of claims
against the bank. It does not cover the reverse situation where it is the bank which files a claim
against another person or legal entity.

The pertinent portion of Section 29 states:

"x x x The liquidator designated as hereunder provided shall, by the Solicitor General, file a
petition in the Regional Trial Court reciting the proceedings which have been taken and
praying the assistance of the court in the liquidation of such institution. The court shall have
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VIKKI MAE J. AMORIO
BANKING LAWS
 jurisdiction in the same proceedings to assist in the adjudication of disputed claims
against the bank or non-bank financial intermediary performing quasi-banking functions
and the enforcement of individual liabilites of the stockholders and do all that is necessary to
preserve the assets of such institution and to implement the liquidation plan approved by the
Monetary Board. x x x"

The legal provision only finds operation in cases where there are claims against an insolvent bank.
In fine, the exclusive jurisdiction of the liquidation court pertains only to the adjudication of claims
against the bank. It does not cover the reverse situation where it is the bank which files a claim
against another person or legal entity.

The requirement that all claims against the bank be pursued in the liquidation proceedings filed by
the Central Bank is intended to prevent multiplicity of actions against the insolvent bank and
designed to establish due process and orderliness in the liquidation of the bank, to obviate the
proliferation of litigations and to avoid injustice and arbitrariness.

The Petition for the Issuance of a Writ of Possession in Civil Case No. 9011 is not in the nature of a
disputed claim against the bank. On the contrary, it is an action instituted by the respondent bank
itself for the preservation of its asset and protection of its property. It was filed upon the instance
of the respondent's liquidator in order to take possession of a tract of land over which it has
ownership claims.

To be sure, the liquidator took the proper course of action when it applied for a writ in the Pasay
City RTC. Act 3135,[27] entitled An Act to Regulate the Sale of Property Under Special Powers
Inserted In or Annexed To Real Estate Mortgages, mandates that jurisdiction over a Petition for
Writ of Possession lies with the court of the province, city, or municipality where the property
subject thereof is situated. This is sanctioned by Section 7 of the said Act, thus:

"Section 7. In any sale made under the provisions of this Act, the purchaser may petition the Court
of First Instance of the province or place where the property or any part thereof is situated, to give
him possession thereof during the redemption period, furnishing bond in an amount equivalent to
the use of the property for a period of twelve months, to indemnify the debtor in case it be shown
that the sale was made without violating the mortgage or without complying with the requirements
of this Act. x x x"[28] (emphasis supplied)

Since the land subject of this controversy is located in Pasay City, then the city's RTC should rightly
take cognizance of the case, to the exclusion of other courts.

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BANKING LAWS
ADMINISTRATIVE SANCTIONS
UCPB vs. E. GANZON
G.R. No. 168859 June30, 2009

FACTS:
From 1995 to 1998, EGI availed availed itself of credit facilities from UCPB to finance its business
expansion. To secure said credit facilities, EGI mortgaged to UCPB its condominium unit
inventories.

When the negative effects of the Asian economic crisis on the property development sector finally
caught up with the corporation in the middle of 1998, EGI started defaulting in its payment of
amortizations, thus, making all of its obligations due and demandable. Subsequently, EGI was
declared in default by UCPB.

Eventually, UCPB proceeded to foreclose some properties if EGI listed in their Memorandum of
Agreement. However, during the signing of the transaction papers for the dacion en pago, EGI
Senior Vice-President, Architect Grace S. Layug (Layug), noticed that said papers stated that the
remaining loan balance of EGI in the amount of ₱192,246,822.50 had increased to ₱226,963,905.50.
The increase was allegedly due to the addition of the transaction costs amounting to
₱34,717,083.00. EGI complained to UCPB about the increase, yet UCPB did not take any action on
the matter.

An administrative complaint was lodged against UCPB and its corporate officers for violation
alleged violation of Sections 36 and 37, Article IV of Republic Act No. 7653, in relation to Section
55.1(a) of Republic Act No. 8791, and for the commission of irregularity and unsafe or unsound
banking practice.

ISSUE:
Whether or not the Monetary Board has the power to exercise administrative sanctions.

RULING:
Undoubtedly, the BSP Monetary Board is a quasi-judicial agency exercising quasi-judicial powers or
functions. As aptly observed by the Court of Appeals, the BSP Monetary Board is an independent
central monetary authority and a body corporate with fiscal and administrative autonomy,
mandated to provide policy directions in the areas of money, banking and credit. It has power to
issue subpoena, to sue for contempt those refusing to obey the subpoena without justifiable
reason,36 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.

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

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BANKING LAWS