#16 The Central Bank of the Philippines (CB) and Ramon V.

Tiaoqui
vs. Court of Appeals and Triumph Savings Bank (TSB)
GR. No. 76118 30 March 1993
Topic: Monetary Board authority, due process
Ponente: J. Bellosillo
Doctrine: Section 29 does not contemplate prior notice and hearing before a
bank may be directed to stop operations and placed under receivership.
Close now
to prevent
exercise of
the general

and hear later is grounded on practical and legal consideration

unwarranted dissipation of the banks assets and as a valid
police power to protect depositors, creditors, stockholders and
public.

The absence of prior notice and hearing cannot be deemed acts of

arbitrariness and bad faith. RTC should determine such arbitrariness and bad
faith. Until such determination was made, status quo of bank be continued
under receivership remains.
A receiver may not bring suit in behalf of the bank. It is like asking for the
impossible, as stated in the lower courts decision; for it cannot be expected
that the master, the CB, will allow the receiver it had appointed to question
that very appointment.
Facts:
1. Supervision and Examination Sector (SES), Department II of CB
reported to the Monetary Board (MB) that the financial condition of TSB
is one of insolvency and its continuance in business would involve
probable loss to its depositors and creditors.
2. MB issued on 31 May 1985 Resolution No. 586 ordering closure of TSB,
forbidding it from doing business, placed under receivership and
appointed Tiaoqui as receiver.
3. Tiaoqui assumed office on 3 June 1985.
4. 11 June 1985- TSB filed complaint with RTC of QC, against CB and
Tiaoqui to annul MB Res. No. 596, prayer for injunction, challenging
constitutionality of Section 29 of The Central Bank Act, as amended or
RA No. 269 as amended insofar as CB is authorize to takeover a
banking institution even if it is not charged with violation of any law or
regulation, much less found guilty thereof.
5. 1 July 1985- RTC temporarily restrained CB from implementing MB Res.
No. 596 until further orders. CB moved to quash TRO stating that:

a. TSB failed to show convincing proof of arbitrariness and bad faith on

part of CB
b. TSB failed to post requisite bond in favor of CB
6. 19 July1985- RTC granted MTQ of CB and denied TSB for injunction. TSB
filed petition for certiorari under Rule 65 with SC.
7. 9 August 1985- CB and Tiaoqui filed motion to dismiss complaint
before RTC for failure to state cause of action, i.e. did not allege
ultimate facts showing action was arbitrary and bad faith.
8. 9 September 1985- TSB filed motion in RTC to direct Tiaoqui to restore
TSB to its private management.
9. 11 November 1985- RTC denied CB and Tiaoqui motion to dismiss and
ordered Tiaoqui to restrore management of TSB to its private
management.
10.
2 December 1985- Since RTC decision rendered petition for
certiorari of TSB moot, CB and Tiaoqui moved for its dismissal which
was granted on 18 December 1985.
11.
The twin orders of RTC were elevated by CB and Tiaoqui to CA on
a petition for certiorari and prohibition under Rule 65. CA upheld
decision of RTC.
12.
15 October 1986- CB and Tiaoqui filed petition under Rule 45 of
Rules of Court praying that CA decision be set aside. Thus this case.
Issues:
1. Whether or not absence of prior notice and hearing be considered acts
of arbitrariness and bad faith sufficient to annul MB Res. No. 596?
2. Whether or not receiver may bring suit in behalf of the bank?
Ruling:
1. No. Section 29 of RA 265- CB through MB is vested with exclusive
authority to assess, evaluate and determine the condition of any bank.
If it find such condition to be insolvent or if its continuance in business
would involve probable loss to its depositors or creditors, it can forbid
bank or non bank financial institution (NBFI) to do business in the
Philippines. It shall designate a receiver to take charge of its assets and
liabilities. If said action of MB is tainted with arbitrariness and bad
faith, filing of a case to set aside it is proper. Section 29 does not
contemplate prior notice and hearing before a bank may be directed to
stop operations and placed under receivership.
Close now and hear later is grounded on practical and legal
consideration to prevent unwarranted dissipation of the banks assets

and as a valid exercise of police power to protect depositors, creditors,

stockholders and the general public.
The absence of prior notice and hearing cannot be deemed acts of
arbitrariness and bad faith. RTC should determine such arbitrariness
and bad faith. Until such determination was made, status quo of bank
be continued under receivership remains.
2. No. It is like asking for the impossible, as stated in the lower courts
decision; for it cannot be expected that the master, the CB, will allow
the receiver it had appointed to question that very appointment.
Dispositive: Premises considered, the Decision of CA in CA-GR SP No. 07867
is affirmed, except insofar as it upholds the Order of the trial court of 11
November 1985 directing petitioner Ramon V. Tiaoqui to restore the
management of TSB to its elected Board of Directors and Officers, which is
hereby set aside.
Let this case be remanded to the RTC of QC for further proceeding to
determine whether the issuance of Resolution No. 596 of the Monetary Board
was tainted with arbitrariness and bad faith and to decide the case
accordingly.