1. G.R. No. 191424 August 7, 2013 examination: 1] negative capital of ?14.

674 million and capital adequacy ratio of negative

ALFEO D. VIVAS, ON HIS BEHALF AND ON BEHALF OF THE SHAREHOLDERS OF
EUROCREDIT COMMUNITY BANK, PETITIONER,
vs.
THE MONETARY BOARD OF THE BANGKO SENTRAL NG PILIPINAS AND THE
PHILIPPINE DEPOSIT INSURANCE CORPORATION, RESPONDENTS.
DECISION
MENDOZA, J.:
This is a petition for prohibition with prayer for the issuance of a status quo ante order or writ
of preliminary injunction ordering the respondents to desist from closing EuroCredit
Community Bank, Incorporated (ECBI) and from pursuing the receivership thereof. The
petition likewise prays that the management and operation of ECBI be restored to its Board of
Directors (BOD) and its officers.
The Facts
The Rural Bank of Faire, Incorporated (RBFI) was a duly registered rural banking institution
with principal office in Centro Sur, Sto. Niño, Cagayan. Record shows that the corporate life of
RBFI expired on May 31, 2005.1 Notwithstanding, petitioner Alfeo D. Vivas (Vivas) and his
principals acquired the controlling interest in RBFI sometime in January 2006. At the initiative
of Vivas and the new management team, an internal audit was conducted on RBFI and results
thereof highlighted the dismal operation of the rural bank. In view of those findings, certain
measures calculated to revitalize the bank were allegedly introduced.2 On December 8, 2006,
the Bangko Sentral ng Pilipinas (BSP) issued the Certificate of Authority extending the
corporate life of RBFI for another fifty (50) years. The BSP also approved the change of its
corporate name to EuroCredit Community Bank, Incorporated, as well as the increase in the
number of the members of its BOD, from five (5) to eleven (11).3
18.42%; 2] CAMEL (Capital Asset Management Earnings Liquidity) composite rating of "2" with
a Management component rating of "1"; and 3] serious supervisory concerns particularly on
activities deemed unsafe or unsound.6 Vivas claimed that the BSP took the above courses of
action due to the joint influence exerted by a certain hostile shareholder and a former BSP
examiner.7
Through its letter, dated September 30, 2008, the BSP furnished ECBI with a copy of the
Report of Examination (ROE) as of December 31, 2007. In addition, the BSP directed the bank’s
BOD and senior management to: 1] infuse fresh capital of ?22.643 million; 2] book the amount
of ?28.563 million representing unbooked valuation reserves on classified loans and other risks
assets on or before October 31, 2008; and 3] take appropriate action necessary to address
the violations/exceptions noted in the examination.8
Vivas moved for a reconsideration of Resolution No. 1255 on the grounds of non-observance
of due process and arbitrariness. The ISD II, on several instances, had invited the BOD of ECBI
to discuss matters pertaining to the placement of the bank under PCA framework and other
supervisory concerns before making the appropriate recommendations to the MB. The
proposed meeting, however, did not materialize due to postponements sought by Vivas.9
In its letter, dated February 20, 2009, the BSP directed ECBI to explain why it transferred the
majority shares of RBFI without securing the prior approval of the MB in apparent violation of
Subsection X126.2 of the Manual of Regulation for Banks (MORB).10 Still in another letter,11
dated March 31, 2009, the ISD II required ECBI to explain why it did not obtain the prior
approval of the BSP anent the establishment and operation of the bank’s sub-offices.
Also, the scheduled March 31, 2009 general examination of the books, records and general
condition of ECBI with the cut-off date of December 31, 2008, did not push through. According
to Vivas, ECBI asked for the deferment of the examination pending resolution of its appeal
before the MB. Vivas believed that he was being treated unfairly because the letter of authority
to examine allegedly contained a clause which pertained to the Anti-Money Laundering Law
and the Bank Secrecy Act.12

Pursuant to Section 28 of Republic Act (R.A.) No. 7653, otherwise known as The New Central
The MB, on the other hand, posited that ECBI unjustly refused to allow the BSP examiners
Bank Act, the Integrated Supervision Department II (ISD II) of the BSP conducted a general
from examining and inspecting its books and records, in violation of Sections 25 and 34 of R.A.
examination on ECBI with the cut-off date of December 31, 2007. Shortly after the completion
No. 7653. In its letter,13 dated May 8, 2009, the BSP informed ECBI that it was already due
of the general examination, an exit conference was held on March 27, 2008 at the BSP during
for another annual examination and that the pendency of its appeal before the MB would not
which the BSP officials and examiners apprised Vivas, the Chairman and President of ECBI, as
prevent the BSP from conducting another one as mandated by Section 28 of R.A. No. 7653.
well as the other bank officers and members of its BOD, of the advance findings noted during
the said examination. The ECBI submitted its comments on BSP’s consolidated findings and
risk asset classification through a letter, dated April 8, 2008.4 In view of ECBI’s refusal to comply with the required examination, the MB issued Resolution
No. 726,14 dated May 14, 2009, imposing monetary penalty/fine on ECBI, and referred the
matter to the Office of the Special Investigation (OSI) for the filing of appropriate legal action.
Sometime in April 2008, the examiners from the Department of Loans and Credit of the BSP
The BSP also wrote a letter,15 dated May 26, 2009, advising ECBI to comply with MB Resolution
arrived at the ECBI and cancelled the rediscounting line of the bank. Vivas appealed the
No. 771, which essentially required the bank to follow its directives. On May 28, 2009, the ISD
cancellation to BSP.5 Thereafter, the Monetary Board (MB) issued Resolution No. 1255, dated
II reiterated its demand upon the ECBI BOD to allow the BSP examiners to conduct a general
September 25, 2008, placing ECBI under Prompt Corrective Action (PCA) framework because
examination on June 3, 2009.16
of the following serious findings and supervisory concerns noted during the general

1
In its June 2, 2009 Letter-Reply,17 ECBI asked for another deferment of the examination due
to the pendency of certain unresolved issues subject of its appeal before the MB, and because
Vivas was then out of the country. The ISD II denied ECBI’s request and ordered the general
examination to proceed as previously scheduled.18
Thereafter, the MB issued Resolution No. 823,19 dated June 4, 2009, approving the issuance
of a cease and desist order against ECBI, which enjoined it from pursuing certain acts and
transactions that were considered unsafe or unsound banking practices, and from doing such
other acts or transactions constituting fraud or might result in the dissipation of its assets.
On June 10, 2009, the OSI filed with the Department of Justice (DOJ) a complaint for Estafa
Through Falsification of Commercial Documents against certain officials and employees of
ECBI. Meanwhile, the MB issued Resolution No. 1164,20 dated August 13, 2009, denying the
appeal of ECBI from Resolution No. 1255 which placed it under PCA framework. On November
18, 2009, the general examination of the books and records of ECBI with the cut-off date of
September 30, 2009, was commenced and ended in December 2009. Later, the BSP officials
and examiners met with the representatives of ECBI, including Vivas, and discussed their
findings.21 On December 7, 2009, the ISD II reminded ECBI of the non-submission of its
financial audit reports for the years 2007 and 2008 with a warning that failure to submit those
reports and the written explanation for such omission shall result in the imposition of a
monetary penalty.22 In a letter, dated February 1, 2010, the ISD II informed ECBI of MB
Resolution No. 1548 which denied its request for reconsideration of Resolution No. 726.
On March 4, 2010, the MB issued Resolution No. 27623 placing ECBI under receivership in
accordance with the recommendation of the ISD II which reads:
On the basis of the examination findings as of 30 September 2009 as reported by the
Integrated Supervision Department (ISD) II, in its memorandum dated 17 February 2010,
which findings showed that the Eurocredit Community Bank, Inc. – a Rural Bank (Eurocredit
Bank) (a) is unable to pay its liabilities as they become due in the ordinary course of business;
(b) has insufficient realizable assets to meet liabilities; (c) cannot continue in business without
involving probable losses to its depositors and creditors; and (d) has willfully violated a cease
and desist order of the Monetary Board for acts or transactions which are considered unsafe
and unsound banking practices and other acts or transactions constituting fraud or dissipation
of the assets of the institution, and considering the failure of the Board of
Directors/management of Eurocredit Bank to restore the bank’s financial health and viability
despite considerable time given to address the bank’s financial problems, and that the bank
had been accorded due process, the Board, in accordance with Section 30 of Republic Act No.
7653 (The New Central Bank Act), approved the recommendation of ISD II as follows:
To prohibit the Eurocredit Bank from doing business in the Philippines and to place its assets
and affairs under receivership; and
To designate the Philippine Deposit Insurance Corporation as Receiver of the bank.
Assailing MB Resolution No. 276, Vivas filed this petition for prohibition before this Court,
ascribing grave abuse of discretion to the MB for prohibiting ECBI from continuing its banking
business and for placing it under receivership. The petitioner presents the following
ARGUMENTS:
(a)
It is grave abuse of discretion amounting to loss of jurisdiction to apply the general law
embodied in Section 30 of the New Central Bank Act as opposed to the specific law embodied
in Sections 11 and 14 of the Rural Banks Act of 1992.
(b)
Even if it assumed that Section 30 of the New Central Bank Act is applicable, it is still the
gravest abuse of discretion amounting to lack or excess of jurisdiction to execute the law with
manifest arbitrariness, abuse of discretion, and bad faith, violation of constitutional rights and
to further execute a mandate well in excess of its parameters.
(c)
The power delegated in favor of the Bangko Sentral ng Pilipinas to place rural banks under
receiverships is unconstitutional for being a diminution or invasion of the powers of the
Supreme Court, in violation of Section 2, Article VIII of the Philippine Constitution.24
Vivas submits that the respondents committed grave abuse of discretion when they
erroneously applied Section 30 of R.A. No. 7653, instead of Sections 11 and 14 of the Rural
Bank Act of 1992 or R.A. No. 7353. He argues that despite the deficiencies, inadequacies and
oversights in the conduct of the affairs of ECBI, it has not committed any financial fraud and,
hence, its placement under receivership was unwarranted and improper. He posits that,
instead, the BSP should have taken over the management of ECBI and extended loans to the
financially distrained bank pursuant to Sections 11 and 14 of R.A. No. 7353 because the BSP’s
power is limited only to supervision and management take-over of banks.
He contends that the implementation of the questioned resolution was tainted with
arbitrariness and bad faith, stressing that ECBI was placed under receivership without due and
prior hearing in violation of his and the bank’s right to due process. He adds that respondent
PDIC actually closed ECBI even in the absence of any directive to this effect. Lastly, Vivas
assails the constitutionality of Section 30 of R.A. No. 7653 claiming that said provision vested
upon the BSP the unbridled power to close and place under receivership a hapless rural bank
instead of aiding its financial needs. He is of the view that such power goes way beyond its
constitutional limitation and has transformed the BSP to a sovereign in its own "kingdom of
banks."25
The Court’s Ruling
2
The petition must fail.
Vivas Availed of the Wrong Remedy
To begin with, Vivas availed of the wrong remedy. The MB issued Resolution No. 276, dated
March 4, 2010, in the exercise of its power under R.A. No. 7653. Under Section 30 thereof,
any act of the MB placing a bank under conservatorship, receivership or liquidation may not
be restrained or set aside except on a petition for certiorari. Pertinent portions of R.A. 7653
read:
Section 30. –
x x x x.
The actions of the Monetary Board taken under this section or under Section 29 of this Act
shall be final and executory, and 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. The petition for
certiorari may only be filed by the stockholders of record representing the majority of the
capital stock within ten (10) days from receipt by the board of directors of the institution of
the order directing receivership, liquidation or conservatorship.
x x x x. [Emphases supplied]
Prohibition is already unavailing
Granting that a petition for prohibition is allowed, it is already an ineffective remedy under the
circumstances obtaining. Prohibition or a "writ of prohibition" is that process by which a
superior court prevents inferior courts, tribunals, officers, or persons from usurping or
exercising a jurisdiction with which they have not been vested by law, and confines them to
the exercise of those powers legally conferred. Its office is to restrain subordinate courts,
tribunals or persons from exercising jurisdiction over matters not within its cognizance or
exceeding its jurisdiction in matters of which it has cognizance.26 In our jurisdiction, the rule
on prohibition is enshrined in Section 2, Rule 65 of the Rules on Civil Procedure, to wit:
Sec. 2. Petition for prohibition - When the proceedings of any tribunal, corporation, board,
officer or person, whether exercising judicial, quasi-judicial or ministerial functions, are without
or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or
excess of jurisdiction, and there is no appeal or any other plain, speedy, and adequate remedy
in the ordinary course of law, a person aggrieved thereby may file a verified petition in the
proper court, alleging the facts with certainty and praying that the judgment be rendered
commanding the respondent to desist from further proceedings in the action or matter
specified therein, or otherwise granting such incidental reliefs as the law and justice require.
x x x x.
Indeed, prohibition is a preventive remedy seeking that a judgment be rendered which would
direct the defendant to desist from continuing with the commission of an act perceived to be
illegal.27 As a rule, the proper function of a writ of prohibition is to prevent the doing of an act
which is about to be done. It is not intended to provide a remedy for acts already
accomplished.28
Though couched in imprecise terms, this petition for prohibition apparently seeks to prevent
the acts of closing of ECBI and placing it under receivership. Resolution No. 276, however, had
already been issued by the MB and the closure of ECBI and its placement under receivership
by the PDIC were already accomplished. Apparently, the remedy of prohibition is no longer
appropriate. Settled is the rule that prohibition does not lie to restrain an act that is already a
fait accompli.29
The Petition Should Have Been Filed in the CA
Even if treated as a petition for certiorari, the petition should have been filed with the CA.
Section 4 of Rule 65 reads:
Section 4. When and where petition filed. — The petition shall be filed not later than sixty (60)
days from notice of the judgment, order or resolution. In case a motion for reconsideration or
new trial is timely filed, whether such motion is required or not, the sixty (60) day period shall
be counted from notice of the denial of said motion.
The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a
lower court or of a corporation, board, officer or person, in the Regional Trial Court exercising
jurisdiction over the territorial area as defined by the Supreme Court. It may also be filed in
the Court of Appeals whether or not the same is in aid of its appellate jurisdiction, or in the
Sandiganbayan if it is in aid of its appellate jurisdiction. If it involves the acts or omissions of
a quasi-judicial agency, unless otherwise provided by law or these Rules, the petition shall be
filed in and cognizable only by the Court of Appeals. [Emphases supplied]
That the MB is a quasi-judicial agency was already settled and reiterated in the case of Bank
of Commerce v. Planters Development Bank And Bangko Sentral Ng Pilipinas.30
Doctrine of Hierarchy of Courts
Even in the absence of such provision, the petition is also dismissible because it simply ignored
the doctrine of hierarchy of courts. True, the Court, the CA and the RTC have original
concurrent jurisdiction to issue writs of certiorari, prohibition and mandamus. The concurrence
of jurisdiction, however, does not grant the party seeking any of the extraordinary writs the
absolute freedom to file a petition in any court of his choice. The petitioner has not advanced
any special or important reason which would allow a direct resort to this Court. Under the Rules
of Court, a party may directly appeal to this Court only on pure questions of law.31 In the case
at bench, there are certainly factual issues as Vivas is questioning the findings of the
investigating team.
3
Strict observance of the policy of judicial hierarchy demands that where the issuance of the
extraordinary writs is also within the competence of the CA or the RTC, the special action for
the obtainment of such writ must be presented to either court. As a rule, the Court will not
entertain direct resort to it unless the redress desired cannot be obtained in the appropriate
lower courts; or where exceptional and compelling circumstances, such as cases of national
interest and with serious implications, justify the availment of the extraordinary remedy of writ
of certiorari, prohibition, or mandamus calling for the exercise of its primary jurisdiction.32 The
judicial policy must be observed to prevent an imposition on the precious time and attention
of the Court.
The MB Committed No Grave Abuse of Discretion
In any event, no grave abuse of discretion can be attributed to the MB for the issuance of the
assailed Resolution No. 276.
Vivas insists that the circumstances of the case warrant the application of Section 11 of R.A.
No. 7353, which provides:
Sec. 11. The power to supervise the operation of any rural bank by the Monetary Board as
herein indicated shall consist in placing limits to the maximum credit allowed to any individual
borrower; in prescribing the interest rate, in determining the loan period and loan procedures,
in indicating the manner in which technical assistance shall be extended to rural banks, in
imposing a uniform accounting system and manner of keeping the accounts and records of
rural banks; in instituting periodic surveys of loan and lending procedures, audits, test-check
of cash and other transactions of the rural banks; in conducting training courses for personnel
of rural banks; and, in general, in supervising the business operations of the rural banks.
The Central Bank shall have the power to enforce the laws, orders, instructions, rules and
regulations promulgated by the Monetary Board, applicable to rural banks; to require rural
banks, their directors, officers and agents to conduct and manage the affairs of the rural banks
in a lawful and orderly manner; and, upon proof that the rural bank or its Board of Directors,
or officers are conducting and managing the affairs of the bank in a manner contrary to laws,
orders, instructions, rules and regulations promulgated by the Monetary Board or in a manner
substantially prejudicial to the interest of the Government, depositors or creditors, to take over
the management of such bank when specifically authorized to do so by the Monetary Board
after due hearing process until a new board of directors and officers are elected and qualified
without prejudice to the prosecution of the persons responsible for such violations under the
provisions of Sections 32, 33 and 34 of Republic Act No. 265, as amended.
x x x x.
The thrust of Vivas’ argument is that ECBI did not commit any financial fraud and, hence, its
placement under receivership was unwarranted and improper. He asserts that, instead, the
BSP should have taken over the management of ECBI and extended loans to the financially
distrained bank pursuant to Sections 11 and 14 of R.A. No. 7353 because the BSP’s power is
limited only to supervision and management take-over of banks, and not receivership.
Vivas argues that implementation of the questioned resolution was tainted with arbitrariness
and bad faith, stressing that ECBI was placed under receivership without due and prior hearing,
invoking Section 11 of R.A. No. 7353 which states that the BSP may take over the management
of a rural bank after due hearing.33 He adds that because R.A. No. 7353 is a special law, the
same should prevail over R.A. No. 7653 which is a general law.
The Court has taken this into account, but it appears from all over the records that ECBI was
given every opportunity to be heard and improve on its financial standing. The records disclose
that BSP officials and examiners met with the representatives of ECBI, including Vivas, and
discussed their findings.34 There were also reminders that ECBI submit its financial audit
reports for the years 2007 and 2008 with a warning that failure to submit them and a written
explanation of such omission shall result in the imposition of a monetary penalty.35 More
importantly, ECBI was heard on its motion for reconsideration. For failure of ECBI to comply,
the MB came out with Resolution No. 1548 denying its request for reconsideration of Resolution
No. 726. Having been heard on its motion for reconsideration, ECBI cannot claim that it was
deprived of its right under the Rural Bank Act.
Close Now, Hear Later
At any rate, if circumstances warrant it, the MB may forbid a bank from doing business and
place it under receivership without prior notice and hearing. Section 30 of R.A. No. 7653
provides, viz:
Sec. 30. Proceedings in Receivership and Liquidation. – Whenever, upon report of the head of
the supervising or examining department, the Monetary Board finds that a 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 assets, as determined by the Bangko Sentral, to meet
its liabilities; or
(c) cannot continue in business without involving probable losses to its depositors or
creditors; or
(d) has wilfully 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. [Emphases supplied.]
x x x x.
4
Accordingly, there is no conflict which would call for the application of the doctrine that a
special law should prevail over a general law. It must be emphasized that R.A .No. 7653 is a
later law and under said act, the power of the MB over banks, including rural banks, was
increased and expanded. The Court, in several cases, upheld the power of the MB to take over
banks without need for prior hearing. It is not necessary inasmuch as the law entrusts to the
MB the appreciation and determination of whether any or all of the statutory grounds for the
closure and receivership of the erring bank are present. The MB, under R.A. No. 7653, has
been invested with more power of closure and placement of a bank under receivership for
insolvency or illiquidity, or because the bank’s continuance in business would probably result
in the loss to depositors or creditors. In the case of Bangko Sentral Ng Pilipinas Monetary Board
v. Hon. Antonio-Valenzuela,36 the Court reiterated the doctrine of "close now, hear later,"
stating that it was justified as a measure for the protection of the public interest. Thus:
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.37
[Emphasis supplied]
In Rural Bank of Buhi, Inc. v. Court of Appeals,38 the Court also wrote that
x x x 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.39
The doctrine is founded on practical and legal considerations to obviate 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.40 Swift, adequate and determined
actions must be taken against financially distressed and mismanaged banks by government
agencies lest the public faith in the banking system deteriorate to the prejudice of the national
economy.
Accordingly, the MB can immediately implement its resolution prohibiting a banking institution
to do business in the Philippines and, thereafter, appoint the PDIC as receiver. The procedure
for the involuntary closure of a bank is summary and expeditious in nature. Such action of the
MB shall be final and executory, but may be later subjected to a judicial scrutiny via a petition
for certiorari to be filed by the stockholders of record of the bank representing a majority of
the capital stock. Obviously, this procedure is designed to protect the interest of all concerned,
that is, the depositors, creditors and stockholders, the bank itself and the general public. The
protection afforded public interest warrants the exercise of a summary closure.
In the case at bench, the ISD II submitted its memorandum, dated February 17, 2010,
containing the findings noted during the general examination conducted on ECBI with the cut-
off date of September 30, 2009. The memorandum underscored the inability of ECBI to pay
its liabilities as they would fall due in the usual course of its business, its liabilities being in
excess of the assets held. Also, it was noted that ECBI’s continued banking operation would
most probably result in the incurrence of additional losses to the prejudice of its depositors
and creditors. On top of these, it was found that ECBI had willfully violated the cease-and-
desist order of the MB issued in its June 24, 2009 Resolution, and had disregarded the BSP
rules and directives. For said reasons, the MB was forced to issue the assailed Resolution No.
276 placing ECBI under receivership. In addition, the MB stressed that it accorded ECBI ample
time and opportunity to address its monetary problem and to restore and improve its financial
health and viability but it failed to do so.
In light of the circumstances obtaining in this case, the application of the corrective measures
enunciated in Section 30 of R.A. No. 7653 was proper and justified. Management take-over
under Section 11 of R.A. No. 7353 was no longer feasible considering the financial quagmire
that engulfed ECBI showing serious conditions of insolvency and illiquidity. Besides, placing
ECBI under receivership would effectively put a stop to the further draining of its assets.
No Undue Delegation of Legislative Power
Lastly, the petitioner challenges the constitutionality of Section 30 of R.A. No. 7653, as the
legislature granted the MB a broad and unrestrained power to close and place a financially
troubled bank under receivership. He claims that the said provision was an undue delegation
of legislative power. The contention deserves scant consideration.
Preliminarily, Vivas’ attempt to assail the constitutionality of Section 30 of R.A. No. 7653
constitutes collateral attack on the said provision of law. Nothing is more settled than the rule
that the constitutionality of a statute cannot be collaterally attacked as constitutionality issues
must be pleaded directly and not collaterally.41 A collateral attack on a presumably valid law is
not permissible. Unless a law or rule is annulled in a direct proceeding, the legal presumption
of its validity stands.42
Be that as it may, there is no violation of the non-delegation of legislative power.1âwphi1 The
rationale for the constitutional proscription is that "legislative discretion as to the substantive
contents of the law cannot be delegated. What can be delegated is the discretion to determine
how the law may be enforced, not what the law shall be. The ascertainment of the latter
subject is a prerogative of the legislature. This prerogative cannot be abdicated or surrendered
by the legislature to the delegate."43
"There are two accepted tests to determine whether or not there is a valid delegation of
legislative power, viz, the completeness test and the sufficient standard test. Under the first
test, the law must be complete in all its terms and conditions when it leaves the legislature
such that when it reaches the delegate the only thing he will have to do is enforce it. Under
the sufficient standard test, there must be adequate guidelines or stations in the law to map
out the boundaries of the delegate's authority and prevent the delegation from running riot.
5
Both tests are intended to prevent a total transference of legislative authority to the delegate,
who is not allowed to step into the shoes of the legislature and exercise a power essentially
legislative."44

In this case, under the two tests, there was no undue delegation of legislative authority in the
issuance of R.A. No. 7653. To address the growing concerns in the banking industry, the
legislature has sufficiently empowered the MB to effectively monitor and supervise banks and
financial institutions and, if circumstances warrant, to forbid them to do business, to take over
their management or to place them under receivership. The legislature has clearly spelled out
the reasonable parameters of the power entrusted to the MB and assigned to it only the manner
of enforcing said power. In other words, the MB was given a wide discretion and latitude only
as to how the law should be implemented in order to attain its objective of protecting the
interest of the public, the banking industry and the economy.

WHEREFORE, the petition for prohibition is DENIED.

SO ORDERED.

6
 2. G.R. No. 135706 October 1, 2004
SPS. CESAR A. LARROBIS, JR. and VIRGINIA S. LARROBIS, petitioners,
vs.
PHILIPPINE VETERANS BANK, respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review of the decision of the Regional Trial Court (RTC), Cebu City,
Branch 24, dated April 17, 1998,1 and the order denying petitioner’s motion for reconsideration
dated August 25, 1998, raising pure questions of law.2
The following facts are uncontroverted:
On March 3, 1980, petitioner spouses contracted a monetary loan with respondent
Philippine Veterans Bank in the amount of ₱135,000.00, evidenced by a promissory
note, due and demandable on February 27, 1981, and secured by a Real Estate
Mortgage executed on their lot together with the improvements thereon.
On March 23, 1985, the respondent bank went bankrupt and was placed under
receivership/liquidation by the Central Bank from April 25, 1985 until August 1992.3
On August 23, 1985, the bank, through Francisco Go, sent the spouses a demand letter for
"accounts receivable in the total amount of ₱6,345.00 as of August 15, 1984,"4 which pertains
to the insurance premiums advanced by respondent bank over the mortgaged property of
petitioners.5
On August 23, 1995, more than fourteen years from the time the loan became due and
demandable, respondent bank filed a petition for extrajudicial foreclosure of mortgage of
petitioners’ property.6 On October 18, 1995, the property was sold in a public auction by Sheriff
Arthur Cabigon with Philippine Veterans Bank as the lone bidder.
On April 26, 1996, petitioners filed a complaint with the RTC, Cebu City, to declare the extra-
judicial foreclosure and the subsequent sale thereof to respondent bank null and void.7
In the pre-trial conference, the parties agreed to limit the issue to whether or not the period
within which the bank was placed under receivership and liquidation was a fortuitous event
which suspended the running of the ten-year prescriptive period in bringing actions.8
On April 17, 1998, the RTC rendered its decision, the fallo of which reads:
WHEREFORE, premises considered judgment is hereby rendered dismissing the
complaint for lack of merit. Likewise the compulsory counterclaim of defendant is
dismissed for being unmeritorious.9
It reasoned that:
…defendant bank was placed under receivership by the Central Bank from April 1985
until 1992. The defendant bank was given authority by the Central Bank to operate
as a private commercial bank and became fully operational only on August 3, 1992.
From April 1985 until July 1992, defendant bank was restrained from doing its
business. Doing business as construed by Justice Laurel in 222 SCRA 131 refers to:
"….a continuity of commercial dealings and arrangements and contemplates
to that extent, the performance of acts or words or the exercise of some of
the functions normally incident to and in progressive prosecution of the
purpose and object of its organization."
The defendant bank’s right to foreclose the mortgaged property prescribes in ten (10)
years but such period was interrupted when it was placed under receivership. Article
1154 of the New Civil Code to this effect provides:
"The period during which the obligee was prevented by a fortuitous event
from enforcing his right is not reckoned against him."
In the case of Provident Savings Bank vs. Court of Appeals, 222 SCRA 131, the
Supreme Court said.
"Having arrived at the conclusion that a foreclosure is part of a bank’s 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 of 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 caso fortuito from enforcing his right is not reckoned against him.
(Art. 1154, NCC) 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 the prescription is
presumed (4 Tolentino, Commentaries and Jurisprudence on the Civil Code of the
Philippines 1991 ed. pp. 18-19), consequently, when the closure of the petitioner was
set aside in 1981, the period of ten years within which to foreclose under Art. 1142
of the N.C.C. began to run 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 for foreclosure has prescribed."
7
 Even assuming that the liquidation of defendant bank did not affect its right to
foreclose the plaintiffs’ mortgaged property, the questioned extrajudicial foreclosure
was well within the ten (10) year prescriptive period. It is noteworthy to mention at
this point in time, that defendant bank through authorized Deputy Francisco Go made
the first extrajudicial demand to the plaintiffs on August 1985. Then on March 24,
1995 defendant bank through its officer-in-charge Llanto made the second
extrajudicial demand. And we all know that a written extrajudicial demand wipes out
the period that has already elapsed and starts anew the prescriptive period. (Ledesma
vs. C.A., 224 SCRA 175.)10
Petitioners filed a motion for reconsideration which the RTC denied on August 25, 1998.11 Thus,
the present petition for review where petitioners claim that the RTC erred:
I of recognized competence in banking or finance, as receiver to immediately take
…IN RULING THAT THE PERIOD WITHIN WHICH RESPONDENT BANK WAS PUT UNDER
RECEIVERSHIP AND LIQUIDATION WAS A FORTUITOUS EVENT THAT INTERRUPTED
THE RUNNING OF THE PRESCRIPTIVE PERIOD.
II
…IN RULING THAT THE WRITTEN EXTRA-JUDICIAL DEMAND MADE BY RESPONDENT
ON PETITIONERS WIPED OUT THE PERIOD THAT HAD ALREADY ELAPSED.
III
…IN DENYING PETITIONERS’ MOTION FOR RECONSIDERATION OF ITS HEREIN
ASSAILED DECISION.12
Petitioners argue that: since the extra-judicial foreclosure of the real estate mortgage was
effected by the bank on October 18, 1995, which was fourteen years from the date the
obligation became due on February 27, 1981, said foreclosure and the subsequent sale at
public auction should be set aside and declared null and void ab initio since they are already
barred by prescription; the court a quo erred in sustaining the respondent’s theory that its
having been placed under receivership by the Central Bank between April 1985 and August
1992 was a fortuitous event that interrupted the running of the prescriptive period;13 the court
a quo’s reliance on the case of Provident Savings Bank vs. Court of Appeals14 is misplaced
since they have different sets of facts; in the present case, a liquidator was duly appointed for
respondent bank and there was no judgment or court order that would legally or physically
hinder or prohibit it from foreclosing petitioners’ property; despite the absence of such legal
or physical hindrance, respondent bank’s receiver or liquidator failed to foreclose petitioners’
property and therefore such inaction should bind respondent bank;15 foreclosure of mortgages
is part of the receiver’s/liquidator’s duty of administering the bank’s assets for the benefit of
its depositors and creditors, thus, the ten-year prescriptive period which started on February
27, 1981, was not interrupted by the time during which the respondent bank was placed under
receivership; and the Monetary Board’s prohibition from doing business should not be
construed as barring any and all business dealings and transactions by the bank, otherwise,
the specific mandate to foreclose mortgages under Sec. 29 of R.A. No. 265 as amended by
Executive Order No. 65 would be rendered nugatory.16 Said provision reads:
Section 29. Proceedings upon Insolvency – Whenever, upon examination by the head
of the appropriate supervising or examining department or his examiners or agents
into the condition of any bank or non-bank financial intermediary performing quasi-
banking functions, it shall be disclosed that the condition of the same is one of
insolvency, or that its continuance in business would involve probable loss to its
depositors or creditors, it shall be the duty of the department head concerned
forthwith, in writing, to inform the Monetary Board of the facts. The Board may, upon
finding the statements of the department head to be true, forbid the institution to do
business in the Philippines and designate the official of the Central Bank or a person
charge its assets and liabilities, as expeditiously as possible, collect and gather all the
assets and administer the same for the benefit of its creditors, and represent the bank
personally or through counsel as he may retain in all actions or proceedings for or
against the institution, exercising all the powers necessary for these purposes
including, but not limited to, bringing and foreclosing mortgages in the name of the
bank.
Petitioners further contend that: the demand letter, dated March 24, 1995, was sent after the
ten-year prescriptive period, thus it cannot be deemed to have revived a period that has
already elapsed; it is also not one of the instances enumerated by Art. 1115 of the Civil Code
when prescription is interrupted;17 and the August 23, 1985 letter by Francisco Go demanding
₱6,345.00, refers to the insurance premium on the house of petitioners, advanced by
respondent bank, thus such demand letter referred to another obligation and could not have
the effect of interrupting the running of the prescriptive period in favor of herein petitioners
insofar as foreclosure of the mortgage is concerned.18
Petitioners then prayed that respondent bank be ordered to pay them ₱100,000.00 as moral
damages, ₱50,000.00 as exemplary damages and ₱100,000.00 as attorney’s fees.19
Respondent for its part asserts that: the period within which it was placed under receivership
and liquidation was a fortuitous event that interrupted the running of the prescriptive period
for the foreclosure of petitioners’ mortgaged property; within such period, it was specifically
restrained and immobilized from doing business which includes foreclosure proceedings; the
extra-judicial demand it made on March 24, 1995 wiped out the period that has already lapsed
and started anew the prescriptive period; respondent through its authorized deputy Francisco
Go made the first extra-judicial demand on the petitioners on August 23, 1985; while it is true
that the first demand letter of August 1985 pertained to the insurance premium advanced by
it over the mortgaged property of petitioners, the same however formed part of the latter’s
total loan obligation with respondent under the mortgage instrument and therefore constitutes
a valid extra-judicial demand made within the prescriptive period.20
8
In their Reply, petitioners reiterate their earlier arguments and add that it was respondent that
insured the mortgaged property thus it should not pass the obligation to petitioners through
the letter dated August 1985.21
To resolve this petition, two questions need to be answered: (1) Whether or not the period
within which the respondent bank was placed under receivership and liquidation proceedings
may be considered a fortuitous event which interrupted the running of the prescriptive period
in bringing actions; and (2) Whether or not the demand letter sent by respondent bank’s
representative on August 23, 1985 is sufficient to interrupt the running of the prescriptive
period.
Anent the first issue, we answer in the negative.
One characteristic of a fortuitous event, in a legal sense and consequently in relations to
contract, is that its occurrence must be such as to render it impossible for a party to fulfill his
obligation in a normal manner.22
Respondent’s claims that because of a fortuitous event, it was not able to exercise its right to
foreclose the mortgage on petitioners’ property; and that since it was banned from pursuing
its business and was placed under receivership from April 25, 1985 until August 1992, it could
not foreclose the mortgage on petitioners’ property within such period since foreclosure is
embraced in the phrase "doing business," are without merit.
While it is true that foreclosure falls within the broad definition of "doing business," that is:
…a continuity of commercial dealings and arrangements and contemplates to that
extent, the performance of acts or words or the exercise of some of the functions
normally incident to and in progressive prosecution of the purpose and object of its
organization.23
it should not be considered included, however, in the acts prohibited whenever banks are
"prohibited from doing business" during receivership and liquidation proceedings.
This we made clear in Banco Filipino Savings & Mortgage Bank vs. Monetary Board, Central
Bank of the Philippines24 where we explained that:
Section 29 of the Republic Act No. 265, as amended known as the Central Bank Act,
provides that when a bank is forbidden to do business in the Philippines and placed
under receivership, the person designated as receiver shall immediately take charge
of the bank’s assets and liabilities, as expeditiously as possible, collect and gather all
the assets and administer the same for the benefit of its creditors, and represent the
bank personally or through counsel as he may retain in all actions or proceedings for
or against the institution, exercising all the powers necessary for these purposes
including, but not limited to, bringing and foreclosing mortgages in the name of the
bank.25
This is consistent with the purpose of receivership proceedings, i.e., to receive collectibles and
preserve the assets of the bank in substitution of its former management, and prevent the
dissipation of its assets to the detriment of the creditors of the bank.26
When a bank is declared insolvent and placed under receivership, the Central Bank, through
the Monetary Board, determines whether to proceed with the liquidation or reorganization of
the financially distressed bank. A receiver, who concurrently represents the bank, then takes
control and possession of its assets for the benefit of the bank’s creditors. A liquidator
meanwhile assumes the role of the receiver upon the determination by the Monetary Board
that the bank can no longer resume business. His task is to dispose of all the assets of the
bank and effect partial payments of the bank’s obligations in accordance with legal priority. In
both receivership and liquidation proceedings, the bank retains its juridical personality
notwithstanding the closure of its business and may even be sued as its corporate existence
is assumed by the receiver or liquidator. The receiver or liquidator meanwhile acts not only for
the benefit of the bank, but for its creditors as well.27
In Provident Savings Bank vs. Court of Appeals,28 we further stated that:
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.29 (Emphasis supplied.)
It is true that we also held in said case that the period during which the bank was placed under
receivership was deemed fuerza mayor which validly interrupted the prescriptive period.30 This
is being invoked by the respondent and was used as basis by the trial court in its decision.
Contrary to the position of the respondent and court a quo however, such ruling does not find
application in the case at bar.
A close scrutiny of the Provident case, shows that the Court arrived at said conclusion, which
is an exception to the general rule, due to the peculiar circumstances of Provident Savings
Bank at the time. In said case, we stated that:
Having arrived at the conclusion that a foreclosure is part of a 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 of
the prohibition imposed by the Monetary Board against petitioner from transacting
business, until the directive of the Board was nullified in 1981.31 (Emphasis supplied.)
9
Further examination of the Central Bank case reveals that the circumstances of Provident
Savings Bank at the time were peculiar because after the Monetary Board issued MB Resolution
No. 1766 on September 15, 1972, prohibiting it from doing business in the Philippines, the
bank’s majority stockholders immediately went to the Court of First Instance of Manila, which
prompted the trial court to issue its judgment dated February 20, 1974, declaring null and void
the resolution and ordering the Central Bank to desist from liquidating Provident. The decision
was appealed to and affirmed by this Court in 1981. Thus, the Superintendent of Banks, which
was instructed to take charge of the assets of the bank in the name of the Monetary Board,
had no power to act as a receiver of the bank and carry out the obligations specified in Sec.
29 of the Central Bank Act.32
In this case, it is not disputed that Philippine Veterans Bank was placed under receivership by
the Monetary Board of the Central Bank by virtue of Resolution No. 364 on April 25, 1985,
pursuant to Section 29 of the Central Bank Act on insolvency of banks.33
which interrupted the running of the prescriptive period. Again, we answer this question in the
negative.
Prescription of actions is interrupted when they are filed before the court, when there is a
written extra-judicial demand by the creditors, and when there is any written acknowledgment
of the debt by the debtor.38
Respondent’s claim that while its first demand letter dated August 23, 1985 pertained to the
insurance premium it advanced over the mortgaged property of petitioners, the same formed
part of the latter’s total loan obligation with respondent under the mortgage instrument, and
therefore, constitutes a valid extra-judicial demand which interrupted the running of the
prescriptive period, is not plausible.
The real estate mortgage signed by the petitioners expressly states that:

Unlike Provident Savings Bank, there was no legal prohibition imposed upon herein respondent
to deter its receiver and liquidator from performing their obligations under the law. Thus, the
ruling laid down in the Provident case cannot apply in the case at bar.
There is also no truth to respondent’s claim that it could not continue doing business from the
period of April 1985 to August 1992, the time it was under receivership. As correctly pointed
out by petitioner, respondent was even able to send petitioners a demand letter, through
Francisco Go, on August 23, 1985 for "accounts receivable in the total amount of ₱6,345.00
as of August 15, 1984" for the insurance premiums advanced by respondent bank over the
mortgaged property of petitioners. How it could send a demand letter on unpaid insurance
premiums and not foreclose the mortgage during the time it was "prohibited from doing
business" was not adequately explained by respondent.
Settled is the principle that a bank is bound by the acts, or failure to act of its receiver. 34 As
we held in Philippine Veterans Bank vs. NLRC,35 a labor case which also involved respondent
bank,
… all the acts of the receiver and liquidator pertain to petitioner, both having assumed
petitioner’s corporate existence. Petitioner cannot disclaim liability by arguing that
the non-payment of MOLINA’s just wages was committed by the liquidators during
the liquidation period.36
However, the bank may go after the receiver who is liable to it for any culpable or negligent
failure to collect the assets of such bank and to safeguard its assets.37
This mortgage is constituted by the Mortgagor to secure the payment of the loan
and/or credit accommodation granted to the spouses Cesar A. Larrobis, Jr. and
Virginia S. Larrobis in the amount of ONE HUNDRED THIRTY FIVE THOUSAND
(₱135,000.00) PESOS ONLY Philippine Currency in favor of the herein Mortgagee.39
The promissory note, executed by the petitioners, also states that:
…FOR VALUE RECEIVED, I/WE, JOINTLY AND SEVERALLY, PROMISE TO PAY THE
PHILIPPINE VETERANS BANK, OR ORDER, AT ITS OFFICE AT CEBU CITY THE SUM OF
ONE HUNDRED THIRTY FIVE THOUSAND PESOS (P135,000.00), PHILIPPINE
CURRENCY WITH INTEREST AT THE RATE OF FOURTEEN PER CENT (14%) PER
ANNUM FROM THIS DATE UNTIL FULLY PAID.40
Considering that the mortgage contract and the promissory note refer only to the loan of
petitioners in the amount of ₱135,000.00, we have no reason to hold that the insurance
premiums, in the amount of ₱6,345.00, which was the subject of the August 1985 demand
letter, should be considered as pertaining to the entire obligation of petitioners.
In Quirino Gonzales Logging Concessionaire vs. Court of Appeals,41 we held that the notices of
foreclosure sent by the mortgagee to the mortgagor cannot be considered tantamount to
written extrajudicial demands, which may validly interrupt the running of the prescriptive
period, where it does not appear from the records that the notes are covered by the mortgage
contract.42

In this case, it is clear that the advanced payment of the insurance premiums is not part of
Having reached the conclusion that the period within which respondent bank was placed under
the mortgage contract and the promissory note signed by petitioners. They pertain only to the
receivership and liquidation proceedings does not constitute a fortuitous event which
amount of ₱135,000.00 which is the principal loan of petitioners plus interest. The arguments
interrupted the prescriptive period in bringing actions, we now turn to the second issue on
of respondent bank on this point must therefore fail.
whether or not the extra-judicial demand made by respondent bank, through Francisco Go, on
August 23, 1985 for the amount of ₱6,345.00, which pertained to the insurance premiums
advanced by the bank over the mortgaged property, constitutes a valid extra-judicial demand

10
As to petitioners’ claim for damages, however, we find no sufficient basis to award the same.
For moral damages to be awarded, the claimant must satisfactorily prove the existence of the
factual basis of the damage and its causal relation to defendant’s acts.43 Exemplary damages
meanwhile, which are imposed as a deterrent against or as a negative incentive to curb socially
deleterious actions, may be awarded only after the claimant has proven that he is entitled to
moral, temperate or compensatory damages.44 Finally, as to attorney’s fees, it is demanded
that there be factual, legal and equitable justification for its award.45 Since the bases for these
claims were not adequately proven by the petitioners, we find no reason to grant the same.

WHEREFORE, the decision of the Regional Trial Court, Cebu City, Branch 24, dated April 17,
1998, and the order denying petitioners’ motion for reconsideration dated August 25, 1998
are hereby REVERSED and SET ASIDE. The extra-judicial foreclosure of the real estate
mortgage on October 18, 1995, is hereby declared null and void and respondent is ordered to
return to petitioners their owner’s duplicate certificate of title.

Costs against respondent.

SO ORDERED.

11
 3. G.R. No. L-23307 June 30, 1967
DAMASO P. PEREZ and REPUBLIC BANK, ETC., ET AL., petitioners-appellants,
vs.
MONETARY BOARD, THE SUPERINTENDENT OF BANKS,
CENTRAL BANK OF THE PHILIPPINES and SECRETARY OF JUSTICE, respondents-
appellees.
AURORA R. RECTO, MIGUEL CANIZARES, LEON ANCHETA, PABLO ROMAN,
VICTORIA B. ROMAN and NORBERTO J. QUISUMBING, intervenors-appellees.
C. D. Baizas and Associates and Halili, Bolinao and Associates for petitioners-appellants.
Natalio M. Balboa, F. E. Evangelista and Severo Malvar for respondent-appellee Central Bank.
Office of the Solicitor General Arturo A. Alafriz and Solicitor C. S. Gaddi for respondent-appellee
Secretary of Justice.
N. J. Quisumbing and E. Quisumbing-Fernando for intervenors-appellees.
BENGZON, J.P., J.:
Petitioner-appellant Damaso P. Perez, for himself and in a derivative capacity on behalf of the
Republic Bank, instituted mandamus proceedings in the Court of First Instance of Manila on
June 23, 1962, against the Monetary Board, the Superintendent of Banks, the Central Bank
and the Secretary of Justice. His object was to compel these respondents to prosecute, among
others, Pablo Roman and several other Republic Bank officials for violations of the General
Banking Act (specifically secs. 76-78 and 83 thereof) and the Central Bank Act, and for
falsification of public or commercial documents in connection with certain alleged anomalous
loans amounting to P1,303,400.00 authorized by Roman and the other bank officials.
Respondents assailed, in their respective answers, the propriety of mandamus. The Secretary
of Justice claimed that it was not their specific duty to prosecute the persons denounced by
Perez. The Central Bank and its respondent officials, on the other hand, averred that they had
already done their duty under the law by referring to the special prosecutors of the Department
of Justice for criminal investigation and prosecution those cases involving the alleged
anomalous loans.1
On July 10, 1962, respondents moved for the dismissal of the petition for lack of cause of
action. Petitioners opposed. The lower court denied the motion.
Subsequently, herein intervenors-appellees, as the incumbent directors of the Board of the
Republic Bank, filed motion to intervene in the proceedings. Petitioners opposed the motion
but the lower court approved the same.
On January 20, 1964, the Monetary Board of the Central Bank passed Resolution No. 81
granting the request of Republic Bank for credit accommodations to cover the unusual
withdrawal of deposits by its depositors in view of the fact that said Bank was under
investigation then by the authorities. The grant, however, was conditioned upon the execution
by the management and controlling stockholders of the Republic Bank of a voting trust
agreement in favor of a Board of Trustees to be chosen by the latter with the approval of the
Central Bank.
Pursuant to this resolution, Pablo Roman and his family, is the controlling stockholders of
Republic Bank, executed a voting trust agreement in favor of a board of trustees composed of
former Chief Justice Ricardo Paras, Hon. Miguel Cuaderno and Mr. Felix de la Costa.
Subsequently, or on March 13, 1964, this agreement was superseded by another one with the
Philippine National Bank as the trustee.2
In view of these developments, the intervenors-appellees filed a motion to dismiss before the
lower court claiming that the ouster of Pablo Roman and his family from the management of
the Republic Bank effected by the voting trust agreement rendered the mandamus case moot
and academic. Respondents-appellees also filed motion to dismiss in which they again raised
the impropriety of mandamus. Acting upon the two motions and the oppositions thereto filed
by petitioners, the lower court granted the motions and dismissed the case. Hence, this appeal.
Appellants, contending that the ouster of Pablo Roman from Republic Bank's management and
control has not altered or rendered moot the issues in the case, argue that the remedy of
mandamus lies3 to compel respondents to prosecute the aforementioned Pablo Roman and
company. Addressing Ourselves directly to this issue raised on the propriety of the petition for
mandamus, We rule that petitioners cannot seek by mandamus to compel respondents to
prosecute criminally those alleged violators of the banking laws. Although the Central Bank
and its respondent officials may have the duty under the Central Bank Act and the General
Banking Act to cause the prosecution of those alleged violators, yet We find nothing in said
laws that imposes a clear, specific duty on the former to do the actual prosecution of the latter.
The Central Bank is a government corporation created principally to administer the monetary
and banking system of the Republic,4 not a prosecution agency5 like the fiscal's office. Being
an artificial person, The Central Bank is limited to its statutory powers and the nearest power
to which prosecution of violators of banking laws may be attributed is its power to sue and be
sued.6 But this corporate power of litigation evidently refers to civil cases only.1äwphï1.ñët
The Central Bank and its respondent officials have already done all they could, within the
confines of their powers, to cause the prosecution of those persons denounced by Perez.
Annexes 5 to 7-C CBP of respondents' answer and even petitioners' opposition to the first
motion to dismiss7 show that the cases of the alleged anomalous loans had already been
referred by the Central Bank to the special prosecutors of the Department of Justice for criminal
investigation and prosecution. For respondents to do the actual prosecuting themselves, as
petitioners would have it, would be tantamount to an ultra vires act already.
As for the Secretary of Justice, while he may have the power to prosecute — through the office
of the Solicitor General — criminal cases, yet it is settled rule that mandamus will not lie to
compel a prosecuting officer to prosecute a criminal case in court.8
Moreover, it does not appear from the law that only the Central Bank or its respondent officials
can cause the prosecution of alleged violations of banking laws. Said violations constitute a
public offense, the prosecution of which is a matter of public interest and hence, anyone —
12
even private individuals — can denounce such violations before the prosecuting authorities.
Since Perez himself could cause the filing of criminal complaints against those allegedly
involved in the anomalous loans, if any, then he has a plain, adequate and speedy remedy in
the ordinary course of law, which makes mandamus against respondents improper.

But petitioners-appellants would insist that the impropriety of mandamus could no longer be
raised before the lower court for the second time since it had already been invoked in previous
motion to dismiss which was denied. This is untenable. The lower court was not estopped from
changing its opinion while it was under its jurisdiction to do so and on the same ground of lack
of cause of action raised before, because the former order was purely interlocutory and thus
remained constantly subject to alteration, modification or reversal by it before the rendition of
final judgment on its merits.9

Wherefore, the order of dismissal appealed from is, as it is hereby, affirmed. Costs against
petitioner-appellant Perez. So ordered.1äwphï1.ñët

13
 4. [G.R. No. 161276. January 31, 2005] Therefrom, both parties interposed separate appellate recourses to the Court of Appeals.

BORLONGAN vs. REYES Respondents were the first to appeal via a petition for review, which was docketed in the Court
of Appeals as CA-G.R. SP No. 72234 and raffled off to its 17th Division.
THIRD DIVISION
For his part, petitioner, also thru a petition for review, questioned before the Court of Appeals
Gentlemen: the Ombudsman's absolution of the BSP Governor and its General Counsel from his affidavit-
complaint, and sought the imposition of a graver penalty against the herein respondents.
Docketed as CA-G.R. SP No. 72270, petitioner's appeal landed to the 5th Division of the
Quoted hereunder, for your information, is a resolution of this Court dated JAN 31 2005.
appellate court.

G.R. No. 161276 (Teodoro C. Borlongan vs. Alberto V. Reyes, Ma. Dolores B. Yuviengco,
Initially, petitioner filed a motion to consolidate the two (2) cases. Later, however, he not only
Candon B. Guerrero and Tomas S. Aure, Jr.)
withdrew said motion but even vigorously opposed the consolidation.

At bar is this petition for review on certiorari filed by petitioner Teodoro C. Borlongan,
Unconsolidated, the two (2) cases proceeded separately. And, as it turned out, the two (2)
assailing the decision dated 18 September 2003[1] of the Court of Appeals in CA-G.R. SP
divisions of the Court of Appeals rendered conflicting decisions.
No. 72234, reversing and setting aside the Orders dated 2 July 2002 and 30 July 2002 of the
Ombudsman in OMB-ADM-0-00-0867 which respectively declared herein respondents guilty of
simple neglect of duty, and denied both parties' separate motions for reconsideration. Thus, in a decision dated 13 August 2003,[4] the 5th Division modified the questioned
orders of the Ombudsman by finding the herein respondents, including the BSP Governor,
guilty of gross neglect of duty and imposing on each of them the penalty of one (1) year
In a complaint-affidavit filed with Office of the Ombudsman and thereat docketed as OMB-
suspension without pay.
ADM-0-00-0867, petitioner Teodoro C. Borlongan, former president and chief executive officer
of Union Bank, Inc. (UBI), administratively charged herein respondent officials of the Bangko
Sentral ng Pilipinas (BSP), for allegedly falsifying statement of facts in the BSP Supervision On the other hand, the 17th Division, in a decision dated 18 September
and Examination Sector (SES) reports and tendering incorrect and inaccurate reports and 2003,[5]cralawreversed and set aside the same assailed orders of the Ombudsman and
opinions to conjure false grounds for the closure of UBI and Urbancorp Development Bank and dismissed the administrative complaints against the herein respondents.
placing them under receivership, to the detriment of their shareholders, officers and
employees. Petitioner filed a motion for reconsideration, imploring the 17th Division to set aside its
September 18,2003 decision for being inconsistent with the August 13, 2003 decision of the
In an Order dated 2 July 2002,[2]cralaw the Ombudsman found respondents guilty of simple 5th Division in CA-G.R. SP No. 72270.
neglect of duty and imposed upon them the penalty of one (1) month and one (1) day
suspension without pay. In a subsequent Order dated 30 July 2002,[3]cralawthe
Ombudsman denied both parties' motions for reconsideration.

14
In a Resolution dated 17 December 2003,[6]cralaw the 17th Division denied petitioner's motion
for reconsideration, and, in the process, castigated petitioner for his refusal to have the two
(2) cases consolidated:
Without a consolidation, there is no rule of law or jurisprudence that prevents us, the 17th
Division, from deciding SP 72234 according to our own independent judgment, any more than
the 5th Division can be prevented from ruling upon SP 72270 according to their own
independent judgment.
The records show that respondent had, indeed, filed with us a motion to consolidate SP 72270
with our SP 72234. But for reasons only known to him, he withdrew the motion for
consolidation. He even said that the 5th Division had eventually denied the consolidation of the
case with us, again for reasons we do not know.
Under these circumstances, without a consolidation, both divisions will have to decide their
own cases, and any resulting conflict in the decisions on similar issues of fact and law will have
to be resolved ultimately by the Supreme Court as the supreme arbiter of all justiciable
controversies in this jurisdiction.
But for the respondent to make it appear as if we are to blame for the conflict between the
two divisions of the Court, after the respondent refused to consolidate the cases before us, is
absurd and comical. Absurd, because he is saying in so many words that we should not exercise
an independent judgment in our case anymore after the 5th Division happened to decide its
case ahead of us and comical, because he has reduced the adjudicative process into a race
between the cases. If we had only known that this was the kind of ballgame he wanted us to
observe, we would have considered our case submitted for decision a long time ago,
immediately after he filed his comment, and bar the parties from filling replies, memoranda
and other pleadings as a waste of our time. This is how things would turn out if we pursued
his line of thinking ad absurdum.
To repeat, the respondent refused to have his case in the 5th Division consolidated before us.
If he is to fault anyone now for the consequence of this non-consolidation, he should point all
his fingers to himself.
Later, or on June 14, 2004, the former 5th Division of the Court of Appeals, this time acting as
a Special Division of Five in connection with the motions for reconsideration therein pending,
came out with an Amended Decision,[7]cralawamending the earlier decision of 12 August
2003 in CA-G.R. SP No. 72270 by dismissing the administrative complaint against all the
respondents therein. Petitioner elevated the same Amended Decision to this Court via a
petition for review on certiorari in G.R. No. 163765.
In a Resolution promulgated on July 26, 2004,[8]cralaw the Court, thru its Third Division, denied
the petition in G.R. No. 163765 "for failure of the petitioner to show that a reversible error had
been committed by the appellate court". In a subsequent Resolution promulgated on October
1, 2004, the Court denied petitioner's motion for reconsideration with finality "as no substantial
arguments were raised to warrant a reconsideration thereof".
Meanwhile, on February 13, 2004, petitioner filed the instant petition for review on certiorari,
this time assailing the 18 September 2003 decision of the 17th Decision of the Court of Appeals
in CA-G.R. SP No. 72234.
Perusal of the present petition reveals that it raises substantially the same issues already
passed upon by the two (2) Divisions of the Court of Appeals and by this Court, no less, in
G.R. No. 163765.
Chanting the same tone, the recourse is unavailing.
In Philippine Retirement Authority vs. Rupa,[9]cralaw 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
15
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)
Pertinent, too, is Section 53 of Republic Act No. 8791,[10]cralaw since it underscores the
summary character of the MB's initiative of placing a bank under receivership. It provides that
in case a bank or quasi-bank notifies the BSP or publicly announces a bank holiday, or in any
manner suspends the payment of its deposit liabilities continuously for more than 30 days, the
MB may summarily and without need of prior hearing close such banking institution and place
it under receivership of the PDIC.
This authority is beyond review by the courts except on a petition for certiorari. Here, it is
worth to note even the Ombudsman found significant evidence to rationalize the decision of
the Monetary Board to place UBI under receivership.
Likewise, we agree with the appellate court's 17th Division in its ratiocination that it is illogical
to hold the respondents administratively liable for the preparation of reports that are, in their
nature, merely recommendatory and have to be acted upon by superior officials. The reports
were not the final action that creates right and duties and affects the interest and fortunes of
third parties. Courts do not interfere with any administrative measure prior to its completion
or finality, and when they do, what is actionable is not the recommendation but the decision
of the official with the competence under the law to issue it.[11]cralaw
The subject reports are only between the Monetary Board and the BSP officials who prepared
and endorsed them and may be rejected, modified or accepted by the Monetary Board. As far
as this case is concerned, the legal obligations of diligence and good faith that BSP officials
owe to the public under Section 16 of the New Central Act start with the official acts of the
Monetary Board which, rightly or wrong, are the cause of loss or injury to third parties, not
any preparatory report or recommendation.
As earlier noted, UBI's own top management, specifically Bartolome III, its chairman of the
Board, and the petitioner himself, its president, continually provided the BSP the picture of the
worsening situation of UBI in the four (4) weeks from March 20, 2000 to April 25, 2000, leading
to UBI's unilateral declaration of a bank holiday on April 25, 2000.[12]cralaw Their constant
reporting showed that UBI was "unable to pay its liabilities as they become due in the ordinary
course of business; (or that it) has insufficient realizable assets, as determined by the Bangko
Sentral, to meet its liabilities."[13]cralaw While other factors might have weighed in the analysis
of UBI's financial liquidity and in the preparation of the inevitable Supervisor and Examination
Sector (SES) reports, the MB considered the constant reports of UBI's own top management
as the best proof of its dire liquidity status.
Petitioner would have this Court review and reverse factual findings of the Court of Appeals.
This, of course, the Court cannot and will not do. Review of factual findings of the appellate
court is not a function ordinarily undertaken by this Court, the rule admitting only a few
16
exceptions recognized in decisional law. The principle is consistent with Rule 45 of the Rules
of Court which categorically provides that a petition for review on certiorari must raise "only
questions of law which must be distinctly set forth" in the petition. Even then, the review
sought will be denied if the questions raised are "too unsubstantial to require consideration"
or if the Court is not convinced of the existence of "special and important reasons" to warrant
review, of which none exists in this case.

All told, we find that no reversible error was committed by the 17th Division of Court of Appeals
when it reversed and set aside the July 2, 2002 and July 30, 2002 Orders of the Ombudsman
in OMB-ADM-0-00-0867.

WHEREFORE, the instant petition is hereby DENIED DUE COURSE.

SO ORDERED.

17
 5. G.R. No. 114870 May 26, 1995
MIGUELA R. VILLANUEVA, RICHARD R. VILLANUEVA, and MERCEDITA VILLANUEVA-
TIRADOS, petitioners,
vs.
COURT OF APPEALS, CENTRAL BANK OF THE PHILIPPINES, ILDEFONSO C. ONG, and
PHILIPPINE VETERANS BANK, respondents.
DAVIDE, JR., J.:
Do petitioners have a better right than private respondent Ildefonso Ong to purchase from the
Philippine Veterans Bank (PVB) the two parcels of land described as Lot No. 210-D-1 and Lot
No. 210-D-2 situated at Muntinglupa, Metro Manila, containing an area of 529 and 300 square
meters, respectively? This is the principal legal issue raised in this petition.
In its decision of 27 January 1994 in CA-G.R. CV No. 35890,1 the Court of Appeals held for
Ong, while the trial court, Branch 39 of the Regional Trial Court (RTC) of Manila, ruled for the
petitioners in its joint decision of 31 October 1991 in Civil Case No. 87-425502 and Sp. Proc.
No. 85-32311.3
The operative antecedent facts are set forth in the challenged decision as follows:
The disputed lots were originally owned by the spouses Celestino Villanueva and Miguela
Villanueva, acquired by the latter during her husband's sojourn in the United States since 1968.
Sometime in 1975, Miguela Villanueva sought the help of one Jose Viudez, the then Officer-in-
Charge of the PVB branch in Makati if she could obtain a loan from said bank. Jose Viudez told
Miguela Villanueva to surrender the titles of said lots as collaterals. And to further facilitate a
bigger loan, Viudez, in connivance with one Andres Sebastian, swayed Miguela Villanueva to
execute a deed of sale covering the two (2) disputed lots, which she did but without the
signature of her husband Celestino. Miguela Villanueva, however, never got the loan she was
expecting. Subsequent attempts to contact Jose Viudez proved futile, until Miguela Villanueva
thereafter found out that new titles over the two (2) lots were already issued in the name of
the PVB. It appeared upon inquiry from the Registry of Deeds that the original titles of these
lots were canceled and new ones were issued to Jose Viudez, which in turn were again canceled
and new titles issued in favor of Andres Sebastian, until finally new titles were issued in the
name of PNB [should be PVB] after the lots were foreclosed for failure to pay the loan granted
in the name of Andres Sebastian.
Miguela Villanueva sought to repurchase the lots from the PVB after being informed that the
lots were about to be sold at auction. The PVB told her that she can redeem the lots for the
price of P110,416.00. Negotiations for the repurchase of the lots nevertheless were stalled by
the filing of liquidation proceedings against the PVB on August of 1985.
Plaintiff-appellant [Ong] on the other hand expounds on his claim over the disputed lots in this
manner:
In October 1984, plaintiff-appellant offered to purchase two pieces of Land that had been
acquired by PVB through foreclosure. To back-up plaintiff-appellant's offer he deposited the
sum of P10,000.00.
In 23 November 1984, while appellant was still abroad, PVB approved his subject offer under
Board Resolution No. 10901-84. Among the conditions imposed by PVB is that: "The purchase
price shall be P110,000.00 (Less deposit of P10,000.00) payable in cash within fifteen (15)
days from receipt of approval of the offer."
In mid-April 1985, appellant returned to the country. He immediately verified the status of his
offer with the PVB, now under the control of CB, where he was informed that the same had
already been approved. On 16 April 1985, appellant formally informed CB of his desire to pay
the subject balance provided the bank should execute in his favor the corresponding deed of
conveyance. The letter was not answered.
Plaintiff-appellant sent follow-up Letters that went unheeded, the last of which was on 21 May
1987. On 26 May 1987, appellant's payment for the balance of the subject properties were
accepted by CB under Official Receipt #0816.
On 17 September 1987, plaintiff-appellant through his counsel, sent a letter to CB demanding
for the latter to execute the corresponding deed of conveyance in favor of appellant. CB did
not bother to answer the same. Hence, the instant case.
While appellant's action for specific performance against CB was pending, Miguela Villanueva
and her children filed their claims with the Liquidation court. (Appellant's Brief, pp. 3-4).4
From the pleadings, the following additional or amplificatory facts are established:
The efforts of Miguela Villanueva to reacquire the property began on 8 June 1983 when she
offered to purchase the lots for P60,000.00 with a 20%
downpayment and the balance payable in five years on a quarterly amortization basis.5
Her offer not having been accepted,6 Miguela Villanueva increased her bid to P70,000.00. It
was only at this time that she disclosed to the bank her private transactions with Jose Viudez.7
After this and her subsequent offers were rejected,8 Miguela sent her sealed bid of
P110,417.00 pursuant to the written advice of the vice president of the PVB.9
The PVB was placed under receivership pursuant to Monetary Board (MB) Resolution No. 334
dated 3 April 1985 and later, under liquidation pursuant to MB Resolution No. 612 dated 7
June 1985. Afterwards, a petition for liquidation was filed with the RTC of Manila, which was
docketed as Sp. Proc. No. 85-32311 and assigned to Branch 39 of the said court.
18
On 26 May 1987, Ong tendered the sum of P100,000.00 representing the balance of the
purchase price of the litigated lots. 10 An employee of the PVB received the amount conditioned
upon approval by the Central Bank
liquidator. 11 Ong's demand for a deed of conveyance having gone unheeded, he filed on 23
October 1987 with the RTC of Manila an action for specific performance against the Central
Bank.12 It was raffled to Branch 47 thereof. Upon learning that the PVB had been placed under
liquidation, the presiding judge of Branch 47 ordered the transfer of the case to Branch 39,
the liquidation court.13
On 15 June 1989, then Presiding Judge Enrique B. Inting issued an order allowing the purchase
of the two lots at the price of P150,000.00. 14 The Central Bank liquidator of the PVB moved
for the reconsideration of the order asserting that it is contrary to law as the disposal of the
lots should be made through public auction. 15
On 26 July 1989, Miguela Villanueva filed her claim with the liquidation court. She averred,
among others, that she is the lawful and registered owner of the subject lots which were
mortgaged in favor of the PVB thru the falsification committed by Jose Viudez, the manager of
the PVB Makati Branch, in collusion with Andres Sebastian; that upon discovering this
fraudulent transaction, she offered to purchase the property from the bank; and that she
reported the matter to the PC/INP Criminal Investigation Service Command, Camp Crame, and
after investigation, the CIS officer recommended the filing of a complaint for estafa through
falsification of public documents against Jose Viudez and Andres Sebastian. She then asked
that the lots be excluded from the assets of the PVB and be conveyed back to her. 16 Later,
in view of the death of her husband, she amended her claim to include her children, herein
petitioners Mercedita Villanueva-Tirados and Richard Villanueva. 17
On 31 October 1991, the trial court rendered judgment 18 holding that while the board
resolution approving Ong's offer may have created in his favor a vested right which may be
enforced against the PVB at the time or against the liquidator after the bank was placed under
liquidation proceedings, the said right was no longer enforceable, as he failed to exercise it
within the prescribed 15-day period. As to Miguela's claim, the court ruled that the principle of
estoppel bars her from questioning the transaction with Viudez and the subsequent
transactions because she was a co-participant thereto, though only with respect to her
undivided one-half (1/2) conjugal share in the disputed lots and her one-third (1/3) hereditary
share in the estate of her husband.
Nevertheless, the trial court allowed her to purchase the lots if only to restore their status as
conjugal properties. It further held that by reason of estoppel, the transactions having been
perpetrated by a responsible officer of the PVB, and for reasons of equity, the PVB should not
be allowed to charge interest on the price of the lots; hence, the purchase price should be the
PVB's claim as of 29 August 1984 when it considered the sealed bids, i.e., P110,416.20, which
should be borne by Miguela Villanueva alone.
The dispositive portion of the decision of the trial court reads as follows:
WHEREFORE, judgment is hereby rendered as follows:
1. Setting aside the order of this court issued on June 15, 1989 under the caption Civil Case
No. 87-42550 entitled "Ildefonso Ong vs. Central Bank of the Phils., et al.;
2. Dismissing the claim of Ildefonso Ong over the two parcels of land originally covered by TCT
No. 438073 and 366364 in the names of Miguela Villanueva and Celestino Villanueva,
respectively which are now covered by TCT No. 115631 and 115632 in the name of the PVB;
3. Declaring the Deed of Absolute Sale bearing the signature of Miguela Villanueva and the
falsified signature of Celestino [sic] Viudez under date May 6, 1975 and all transactions and
related documents executed thereafter referring to the two lots covered by the above stated
titles as null and void;
4. Ordering the Register of Deeds of Makati which has jurisdiction over the two parcels of land
in question to re-instate in his land records, TCT No. 438073 in the name of Miguela Villanueva
and TCT No. 366364 in the name of Celestino Villanueva who were the registered owners
thereof, and to cancel all subsequent titles emanating therefrom; and
5. Ordering the Liquidator to reconvey the two lots described in TCT No. 115631 and 115632
and executing the corresponding deed of conveyance of the said lots upon the payment of One
Hundred Ten Thousand Four Hundred Sixteen and 20/100 (P110,416.20) Pesos without
interest and less the amount deposited by the claimant, Miguela Villanueva in connection with
the bidding where she had participated and conducted by the PVB on August 29, 1984.
Cost against Ildefonso Ong and the PVB.
SO ORDERED. 19
Only Ong appealed the decision to the Court of Appeals. The appeal was docketed as CA-G.R.
CV No. 35890. In its decision of 27 January 1994, the Court of Appeals reversed the decision
of the trial court and ruled as follows:
WHEREFORE, premises considered, the assailed decision is hereby REVERSED and SET ASIDE,
and a new one entered ordering the disputed-lots be awarded in favor of plaintiff-appellant
Ildefonso Ong upon defendant-appellee Central Bank's execution of the corresponding deed of
sale in his favor. 20
In support thereof, the Court of Appeals declared that Ong's failure to pay the balance within
the prescribed period was excusable because the PVB neither notified him of the approval of
his bid nor answered his letters manifesting his readiness to pay the balance, for which reason
he could not have known when to reckon the 15-day period prescribed under its resolution. It
went further to suggest that the Central Bank was in estoppel because it accepted Ong's late-
payment of the balance. As to the petitioners' claim, the Court of Appeals stated:
The conclusion reached by the lower court favorable to Miguela Villanueva is, as aptly pointed
out by plaintiff-appellant, indeed confusing. While the lower court's decision declared Miguela
19
Villanueva as estopped from recovering her proportionate share and interest in the two (2)
disputed lots for being a "co-participant" in the fraudulent scheme perpetrated by Jose Viudez
and Andres Sebastian — a factual finding which We conform to and which Miguela Villanueva
does not controvert in this appeal by not filing her appellee's brief, yet it ordered the
reconveyance of the disputed lots to Miguela Villanueva as the victorious party upon her
payment of P110,416.20. Would not estoppel defeat the claim of the party estopped? If so,
which in fact must be so, would it not then be absurd or even defiant for the lower court to
finally entitle Miguela Villanueva to the disputed lots after having been precluded from assailing
their subsequent conveyance in favor of Jose Viudez by reason of her own negligence and/or
complicity therein? The intended punitive effect of estoppel would merely be a dud if this Court
leaves the lower court's conclusion unrectified. 21
Their motion for reconsideration 22 having been denied, 23 the petitioners filed this petition
for review on certiorari. 24
Subsequently, the respondent Central Bank apprised this Court that the PVB was no longer
under receivership or liquidation and that the PVB has been back in operation since 3 August
1992. It then prayed that it be dropped from this case or at least be substituted by the PVB,
which is the real party in interest. 25
In its Manifestation and Entry of Appearance, the PVB declared that it submits to the
jurisdiction of this Court and that it has no objection to its inclusion as a party respondent in
this case in lieu of the Central Bank. 26 The petitioners did not object to the substitution. 27
Later, in its Comment dated 10 October 1994, the PVB stated that it "submits to and shall
abide by whatever judgment this Honorable Supreme Tribunal may announce as to whom said
lands may be awarded without any touch of preference in favor of one or the other party
litigant in the instant
case." 28
In support of their contention that the Court of Appeals gravely erred in holding that Ong is
better entitled to purchase the disputed lots, the petitioners maintain that Ong is a disqualified
bidder, his bid of P110,000.00 being lower than the starting price of P110,417.00 and his
deposit of P10,000.00 being less than the required 10% of the bid price; that Ong failed to
pay the balance of the price within the 15-day period from notice of the approval of his bid;
and that his offer of payment is ineffective since it was conditioned on PVB's execution of the
deed of absolute sale in his favor.
On the other hand, Ong submits that his offer, though lower than Miguela ViIlanueva's bid by
P417.00, is much better, as the same is payable in cash, while Villanueva's bid is payable in
installment; that his payment could not be said to have been made after the expiration of the
15-day period because this period has not even started to run, there being no notice yet of
the approval of his offer; and that he has a legal right to compel the PVB or its liquidator to
execute the corresponding deed of conveyance.
There is no doubt that the approval of Ong's offer constitutes an acceptance, the effect of
which is to perfect the contract of sale upon notice thereof to Ong. 29 The peculiar
circumstances in this case, however, pose a legal obstacle to his claim of a better right and
deny support to the conclusion of the Court of Appeals.
Ong did not receive any notice of the approval of his offer. It was only sometime in mid-April
1985 when he returned from the United States and inquired about the status of his bid that
he came to know of the approval.
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. The reason
for this is that:
[T]he contract is not perfected except by the concurrence of two wills which exist and continue
until the moment that they occur. The contract is not yet perfected at any time before
acceptance is conveyed; hence, the disappearance of either party or his loss of capacity before
perfection prevents the contractual tie from being formed. 30
It has been said that where upon the insolvency of a bank a receiver therefor is appointed, the
assets of the bank pass beyond its control into the possession and control of the receiver whose
duty it is to administer the assets for the benefit of the creditors of the bank.31 Thus, the
appointment of a receiver operates to suspend the authority of the bank and of its directors
and officers over its property and effects, such authority being reposed in the receiver, and in
this respect, the receivership is equivalent to an injunction to restrain the bank officers from
intermeddling with the property of the bank in any way. 32
Section 29 of the Central Bank Act, as amended, provides thus:
Sec. 29. Proceedings upon insolvency. — Whenever, upon examination by the head of the
appropriate supervising or examining department or his examiners or agents into the condition
of any bank or non-bank financial intermediary performing quasi-banking functions, it shall be
disclosed that the condition of the same is one of insolvency, or that its continuance in business
would involve probable loss to its depositors or creditors, shall be the duty of the department
head concerned forthwith, in writing, to inform the Monetary Board of the facts. The Board
may, upon finding the statements of the department head to be true, forbid the institution to
do business in the Philippines and designate an official of the Central Bank or a person of
recognized competence in banking or finance as receiver to immediately take charge of its
assets and liabilities, as expeditiously as possible collect and gather all the assets and
20
administer the same for the benefit of its creditors . . . exercising all the powers necessary for SO ORDERED.
these purposes. . . .

xxx xxx xxx

The assets of an institution under receivership or liquidation shall be deemed in custodia legis
in the hands of the receiver or liquidator and shall, from the moment of such receivership or
liquidation, be exemp from any order of garnishment, levy, attachment, or execution.

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 thus:

Payment for the purchase price of the former property of Andres Sebastian per approved BR
No. 10902-84 dated 11/13/84, subject to the approval of CB liquidator. 33

This payment was disapproved on the ground that the subject property was already in custodia
legis, and hence, disposable only by public auction and subject to the approval of the
liquidation court. 34

The Court of Appeals therefore erred when it held that Ong had a better right than the
petitioners to the purchase of the disputed lots.

Considering then that only Ong appealed the decision of the trial court, the PVB and the Central
Bank, as well as the petitioners, are deemed to have fully and unqualifiedly accepted the
judgment, which thus became final as to them for their failure to appeal.

WHEREFORE, the instant petition is GRANTED and the challenged decision of the Court of
Appeals of 27 January 1994 in CA-G.R. CV No. 35890 is hereby SET ASIDE. The decision of
Branch 39 of the Regional Trial Court of Manila of 31 October 1991 in Civil Case No. 87-42550
and Sp. Proc. No. 85-32311 is hereby REINSTATED.

Respondent Philippine Veterans Bank is further directed to return to private respondent

Ildefonso C. Ong the amount of P100,000.00.

No pronouncement as to costs.

21
 6. G.R. No. 76118 March 30, 1993
THE CENTRAL BANK OF THE PHILIPPINES and RAMON V. TIAOQUI, petitioners,
vs.
COURT OF APPEALS and TRIUMPH SAVINGS BANK, respondents.
Sycip, Salazar, Hernandez & Gatmaitan for petitioners.
Quisumbing, Torres & Evangelista for Triumph Savings Bank.
BELLOSILLO, J.:
May a Monetary Board resolution placing a private bank under receivership be annulled on the
ground of lack of prior notice and hearing?
This petition seeks review of the decision of the Court of Appeals in CA G.R. S.P. No. 07867
entitled "The Central Bank of the Philippines and Ramon V. Tiaoqui vs. Hon. Jose C. de Guzman
and Triumph Savings Bank," promulgated 26 September 1986, which affirmed the twin orders
of the Regional Trial Court of Quezon City issued 11 November 19851 denying herein
petitioners' motion to dismiss Civil Case No. Q-45139, and directing petitioner Ramon V.
Tiaoqui to restore the private management of Triumph Savings Bank (TSB) to its elected board
of directors and officers, subject to Central Bank comptrollership.2
The antecedent facts: Based on examination reports submitted by the Supervision and
Examination Sector (SES), Department II, of the Central Bank (CB) "that the financial condition
of TSB is one of insolvency and its continuance in business would involve probable loss to its
depositors and creditors,"3 the Monetary Board (MB) issued on 31 May 1985 Resolution No.
596 ordering the closure of TSB, forbidding it from doing business in the Philippines, placing it
under receivership, and appointing Ramon V. Tiaoqui as receiver. Tiaoqui assumed office on 3
June 1985.4
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.5
On 1 July 1985, the trial court temporarily restrained petitioners from implementing MB
Resolution No. 596 "until further orders", thus prompting them to move for the quashal of the
restraining order (TRO) on the ground that it did not comply with said Sec. 29, i.e., that TSB
failed to show convincing proof of arbitrariness and bad faith on the part of petitioners;' and,
that TSB failed to post the requisite bond in favor of Central Bank.
On 19 July 1985, acting on the motion to quash the restraining order, the trial court granted
the relief sought and denied the application of TSB for injunction. Thereafter, Triumph Savings
Bank filed with Us a petition for certiorari under Rule 65 of the Rules of Court6 dated 25 July
1985 seeking to enjoin the continued implementation of the questioned MB resolution.
Meanwhile, on 9 August 1985; Central Bank and Ramon Tiaoqui filed a motion to dismiss the
complaint before the RTC for failure to state a cause of action, i.e., it did not allege ultimate
facts showing that the action was plainly arbitrary and made in bad faith, which are the only
grounds for the annulment of Monetary Board resolutions placing a bank under
conservatorship, and that TSB was without legal capacity to sue except through its receiver.7
On 9 September 1985, TSB filed an urgent motion in the RTC to direct receiver Ramon V.
Tiaoqui to restore TSB to its private management. On 11 November 1985, the RTC in separate
orders denied petitioners' motion to dismiss and ordered receiver Tiaoqui to restore the
management of TSB to its elected board of directors and officers, subject to CB
comptrollership.
Since the orders of the trial court rendered moot the petition for certiorari then pending before
this Court, Central Bank and Tiaoqui moved on 2 December 1985 for the dismissal of G.R. No.
71465 which We granted on 18 December 1985.8
Instead of proceeding to trial, petitioners elevated the twin orders of the RTC to the Court of
Appeals on a petition for certiorari and prohibition under Rule 65.9 On 26 September 1986,
the appellate court, upheld the orders of the trial court thus —
Petitioners' motion to dismiss was premised on two grounds, namely, that the complaint failed
to state a cause of action and that the Triumph Savings Bank was without capacity to sue
except through its appointed receiver.
Concerning the first ground, petitioners themselves admit that the Monetary Board resolution
placing the Triumph Savings Bank under the receivership of the officials of the Central Bank
was done without prior hearing, that is, without first hearing the side of the bank. They further
admit that said resolution can be the subject of judicial review and may be set aside should it
be found that the same was issued with arbitrariness and in bad faith.
The charge of lack of due process in the complaint may be taken as constitutive of allegations
of arbitrariness and bad faith. This is not of course to be taken as meaning that there must be
previous hearing before the Monetary Board may exercise its powers under Section 29 of its
Charter. Rather, judicial review of such action not being foreclosed, it would be best should
private respondent be given the chance to show and prove arbitrariness and bad faith in the
issuance of the questioned resolution, especially so in the light of the statement of private
respondent that neither the bank itself nor its officials were even informed of any charge of
violating banking laws.
In regard to lack of capacity to sue on the part of Triumph Savings Bank, we view such
argument as being specious, for if we get the drift of petitioners' argument, they mean to
22
convey the impression that only the CB appointed receiver himself may question the CB
resolution appointing him as such. This may be asking for the impossible, for it cannot be
expected that the master, the CB, will allow the receiver it has appointed to question that very
appointment. Should the argument of petitioners be given circulation, then judicial review of
actions of the CB would be effectively checked and foreclosed to the very bank officials who
may feel, as in the case at bar, that the CB action ousting them from the bank deserves to be
set aside.
xxx xxx xxx
On the questioned restoration order, this Court must say that it finds nothing whimsical,
despotic, capricious, or arbitrary in its issuance, said action only being in line and congruent
to the action of the Supreme Court in the Banco Filipino Case (G.R. No. 70054) where
management of the bank was restored to its duly elected directors and officers, but subject to
the Central Bank comptrollership.10
On 15 October 1986, Central Bank and its appointed receiver, Ramon V. Tiaoqui, filed this
petition under Rule 45 of the Rules of Court praying that the decision of the Court of Appeals
in CA-G.R. SP No. 07867 be set aside, and that the civil case pending before the RTC of Quezon
City, Civil Case No.
Q-45139, be dismissed. Petitioners allege that the Court of Appeals erred —
(1) in affirming that an insolvent bank that had been summarily closed by the Monetary Board
should be restored to its private management supposedly because such summary closure was
"arbitrary and in bad faith" and a denial of "due process";
(2) in holding that the "charge of lack of due process" for "want of prior hearing" in a complaint
to annul a Monetary Board receivership resolution under Sec. 29 of R.A. 265 "may be taken
as . . allegations of arbitrariness and bad faith"; and
(3) in holding that the owners and former officers of an insolvent bank may still act or sue in
the name and corporate capacity of such bank, even after it had been ordered closed and
placed under receivership.11
The respondents, on the other hand, allege inter alia that in the Banco Filipino case,12 We
held that CB violated the rule on administrative due process laid down in Ang Tibay vs. CIR
(69 Phil. 635) and Eastern Telecom Corp. vs. Dans, Jr. (137 SCRA 628) which requires that
prior notice and hearing be afforded to all parties in administrative proceedings. Since MB
Resolution No. 596 was adopted without TSB being previously notified and heard, according
to respondents, the same is void for want of due process; consequently, the bank's
management should be restored to its board of directors and officers.13
Petitioners claim that it is the essence of Sec. 29 of R.A. 265 that prior notice and hearing in
cases involving bank closures should not be required since in all probability a hearing would
not only cause unnecessary delay but also provide bank "insiders" and stockholders the
opportunity to further dissipate the bank's resources, create liabilities for the bank up to the
insured amount of P40,000.00, and even destroy evidence of fraud or irregularity in the bank's
operations to the prejudice of its depositors and creditors. 14 Petitioners further argue that
the legislative intent of Sec. 29 is to repose in the Monetary Board exclusive power to
determine the existence of statutory grounds for the closure and liquidation of banks, having
the required expertise and specialized competence to do so.
The first issue raised before Us is whether absence of prior notice and hearing may be
considered acts of arbitrariness and bad faith sufficient to annul a Monetary Board resolution
enjoining a bank from doing business and placing it under receivership. Otherwise stated, is
absence of prior notice and hearing constitutive of acts of arbitrariness and bad faith?
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. The fourth
paragraph,16 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.
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.
In the early case of Rural Bank of Lucena, Inc. v. Arca [1965],17 We held that a previous
hearing is nowhere required in Sec. 29 nor does the constitutional requirement of due process
demand that the correctness of the Monetary Board's resolution to stop operation and proceed
to liquidation be first adjudged before making the resolution effective. It is enough that a
subsequent judicial review be provided.
Even in Banco Filipino, 18 We reiterated that Sec. 29 of R.A. 265 does not require a previous
hearing before the Monetary Board can implement its resolution closing a bank, since its action
is subject to judicial scrutiny as provided by law.
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.
23
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.
In Rural Bank of Buhi, Inc. v. Court of Appeals,19 We stated that —
. . . 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.
We stressed in Central Bank of the Philippines v. Court of Appeals20 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.
At any rate, the bank is given full opportunity to prove arbitrariness and bad faith in placing
the bank under receivership, in which event, the resolution may be properly nullified and the
receivership lifted as the trial court may determine.
The heavy reliance of respondents on the Banco Filipino case is misplaced in view of factual
circumstances therein which are not attendant in the present case. 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.
Furthermore, the same reports showed that the total assets of Banco Filipino far exceeded its
total liabilities. Consequently, on the basis thereof, the Monetary Board had no valid reason to
liquidate the bank; perhaps it could have merely ordered its reorganization or rehabilitation, if
need be. Clearly, there was in that case a manifest arbitrariness, abuse of discretion and bad
faith in the closure of Banco Filipino by the Monetary Board. But, this is not the case before
Us. For here, what is being raised as arbitrary by private respondent is the denial of prior
notice and hearing by the Monetary Board, a matter long settled in this jurisdiction, and not
the arbitrariness which the conclusions of the Supervision and Examination Sector (SES),
Department II, of the Central Bank were reached.
Once again We refer to Rural Bank of Buhi, Inc. v. Court of Appeals,21 and reiterate Our
pronouncement therein that —
. . . 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 its continuance in business would involve probable
loss to its depositors or creditors.
24
In sum, appeal to procedural due process cannot just outweigh the evil sought to be prevented; directing petitioner RAMON V. TIAOQUI to restore the management of TRIUMPH SAVINGS
hence, We rule that Sec. 29 of R.A. 265 is a sound legislation promulgated in accordance with BANK to its elected Board of Directors and Officers, which is hereby SET ASIDE.
the Constitution in the exercise of police power of the state. Consequently, the absence of
notice and hearing is not a valid ground to annul a Monetary Board resolution placing a bank Let this case be remanded to the Regional Trial Court of Quezon City for further proceedings
under receivership. The absence of prior notice and hearing cannot be deemed acts of to determine whether the issuance of Resolution No. 596 of the Monetary Board was tainted
arbitrariness and bad faith. Thus, an MB resolution placing a bank under receivership, or with arbitrariness and bad faith and to decide the case accordingly.
conservatorship for that matter, may only be annulled after a determination has been made
by the trial court that its issuance was tainted with arbitrariness and bad faith. Until such
SO ORDERED.
determination is made, the status quo shall be maintained, i.e., the bank shall continue to be
under receivership.

As regards the second ground, to rule that only the receiver may bring suit in behalf of the
bank is, to echo the respondent appellate court, "asking for the impossible, for it cannot be
expected that the master, the CB, will allow the receiver it has appointed to question that very
appointment." Consequently, only stockholders of a bank could file an action for annulment of
a Monetary Board resolution placing the bank under receivership and prohibiting it from
continuing operations.22 In Central Bank v. Court of Appeals, 23 We explained the purpose of
the law —

. . . in requiring that only the stockholders of record representing the majority of the capital
stock may bring the action to set aside a resolution to place a bank under conservatorship is
to ensure that it be not frustrated or defeated by the incumbent Board of Directors or officers
who may immediately resort to court action to prevent its implementation or enforcement. It
is presumed that such a resolution is directed principally against acts of said Directors and
officers which place the bank in a state of continuing inability to maintain a condition of liquidity
adequate to protect the interest of depositors and creditors. Indirectly, it is likewise intended
to protect and safeguard the rights and interests of the stockholders. Common sense and
public policy dictate then that the authority to decide on whether to contest the resolution
should be lodged with the stockholders owning a majority of the shares for they are expected
to be more objective in determining whether the resolution is plainly arbitrary and issued in
bad faith.

It is observed that the complaint in this case was filed on 11 June 1985 or two (2) years prior
to 25 July 1987 when E.O. 289 was issued, to be effective sixty (60) days after its approval
(Sec. 5). The implication is that before E.O

. 289, any party in interest could institute court proceedings to question a Monetary Board
resolution placing a bank under receivership. Consequently, since the instant complaint was
filed by parties representing themselves to be officers of respondent Bank (Officer-in-Charge
and Vice President), the case before the trial court should now take its natural course.
However, after the effectivity of E.O. 289, the procedure stated therein should be followed and
observed.

PREMISES considered, the Decision of the Court of Appeals in CA-G.R. SP No. 07867 is
AFFIRMED, except insofar as it upholds the Order of the trial court of 11 November 1985

25
 7. G.R. No. L-44932 April 15, 1988
JOSE CARANDANG and BENITA CARANDANG, petitioners,
vs.
COURT OF APPEALS, RURAL BANK OF LUCENA, INC., APRONIANO MLS. MAGSINO,
CENTRAL BANK OF THE PHILIPPINES, HONESTO O. FRANCISCO, and CARLOTA P.
VALENZUEIA, respondents.
Florentino Poonin for petitioners.
The Solicitor General for public respondent.
F.E. Evangelista, Ceceron Angeles, Feliciano Asoy and Restituto Ventura for respondents.
GANCAYCO, J.:
Before Us is a petition for review of the decision of the Court of Appeals in CA-G.R. No. 58421-
R 1 dated August 16, 1976, and its Resolution of October 11, 1976, affirming the Resolution
of the then Court of First Instance of Laguna in Civil Case No. SP-1029 declaring itself to be
without jurisdiction to entertain petitioners' complaint for cancellation and nullification of the
promissory note and the deed of mortgage allegedly executed by petitioners in favor of Rural
Bank of Lucena, Inc. which said court declared earlier to be a forgery in its Decision of
September 10, 1974.
The Rural Bank of Lucena, Inc., one of the respondents herein, is a banking institution with
principal office and place of business in Lucena City. On February 2, 1962, the Central Bank of
the Philippines through the Monetary Board approved Resolution No. 122 requesting the
Solicitor General to file the necessary petition for liquidation of the Rural Bank of Lucena. On
March 31, 1962, the Solicitor General filed a petition for liquidation in the then Court of First
Instance of Manila, Branch I, docketed as Civil Case No. 50019. 2 In the Order of March 28,
1963, then Presiding Judge Francisco Arca directed the liquidator of the Central Bank to take
over the assets, books, papers and properties of the Rural Bank of Lucena, Inc.
An inventory of the assets, properties, books, etc. of the said bank was conducted and a
corresponding list was prepared. The assets include among others the uncollected loan
allegedly procured by herein petitioners in the amount of P9,513.56 inclusive of interest as of
December 31, 1971. Said loan appears to have been secured by a real estate mortgage on a
parcel of land covered by Tax Declaration No. 27410 of the City of San Pablo. The documents
of the insolvent bank show that petitioners filed an application for agricultural loan for
P5,000.00 with 9% interest per annum covered by a promissory note allegedly executed by
petitioners. According to respondent Central Bank, several demand letters were sent to
petitioners but to no avail. Thus, for failure to settle the said obligation, the designated receiver
* of the bank petitioned the Sheriff of Laguna to sell the subject property. 3
Meanwhile, on April 26, 1972, petitioners, upon Teaming of the petition for the sale of their
coconut land, flied a complaint for nullification and cancellation of the promissory note and the
mortgage deed with damages and with prayer for a temporary restraining order with the Court
of First Instance (CFI) of Laguna on the ground that the said documents were forgeries. On
May 2, 1972, said court issued an order restraining the Sheriff of San Pablo and Laguna from
conducting the public auction sale of the subject property scheduled on May 11, 1972.
On May 22, 1972, respondent Central Bank of the Philippines filed a motion for intervention
stating its legal interest in the case in that for reasons of insolvency, Rural Bank of Lucena is
under receivership of the Central Bank. On June 26, 1972, the motion was granted requiring
respondent Central Bank to file its complaint in intervention. Said respondent filed instead a
motion to dismissal s on the ground of lack of jurisdiction but it was denied. Thus said
respondent filed its answer in intervention maintaining that the CFI of Laguna has no
jurisdiction.
The issues having been joined the court a quo rendered its decision ** declaring the
promissory note in question null and void and without any effect, and made permanent the
restraining order of May 2, 1972.
On October 4, 1974, respondent Central Bank filed a motion for reconsideration of the above
decision alleging that it is contrary to law and that the evidence is insufficient to justify the
decision.
In the order of March 3, 1975, the court a quo *** set aside its decision and declared itself to
be without jurisdiction to entertain the action and dismissed the complaint and counterclaims.
From this Order petitioners appealed to the Court of Appeals. On August 16, 1976 said court
rendered a judgment declaring the documents in question null and void quoting with approval
the observations made by the first judge. 4 The appellate court, however, sustained the second
judge in the dismiss of the case on the ground of lack of jurisdiction. 5
Hence this petition.
Petitioners contend that since the land in question is within the territorial jurisdiction of Laguna,
then it is the Court of First Instance of Laguna that has jurisdiction over the case. They argue
further that the question of jurisdiction is determined by the allegations of the complaint, not
by the averments in the answer or by the evidence adduced in the trial. In support of their
contention petitioners cited Section 44(b) Judiciary Act of 1948 and Section 2(e) Rule 4 of the
Old Rules of Court **** as well as the case of Fernandez vs. De Gala Sison, and Manlapaz vs.
Pagdanganan. 6
On the other hand, respondent Central Bank contends that the pendency of the liquidation
proceedings before the Court of First Instance of Manila vested in the said court exclusive
jurisdiction over all matters pertaining to the assets, properties, funds, etc. of the Rural Bank
of Lucena, Inc. citing Section 29 ***** of Presidential Decree No. 72. It argued further that
the action for cancellation and nullification of the contract of loan is a personal action and
26
hence the jurisdiction of the Court of First Instance of Laguna is only concurrent with the
liquidation court, and that since it was the liquidation court that first acquired jurisdiction over
the subject matter of the instant case, it should retain the same to the exclusion of others.
We will first resolve the nature of the action, Section 2(a), Rule 4 of the Revised Rules of Court
provides that real actions like actions affecting title to or for recovery of possession, or for
partition or condemnation of or foreclosure of mortgage on real property shall be commenced
and tried in the province where the property or any part thereof lies. All other civil actions are
persona actions which may be commenced and tried where the defendant or any of the
defendants reside or may be found, or where the plaintiff or any of the plaintiffs reside at the
election of the plaintiff. 7
In the case of Hernandez vs. Rural Bank of Lucena, Inc., 8 this Court ruled that an action for
cancellation of real estate mortgage is a personal action. The said case was primarily an action
to compel the mortgagee bank to accept payment of the mortgage debt and to release the
mortgage. It appears that no foreclosure of mortgage took place and that the plaintiffs
remained in possession of the mortgaged lot. Hence it was ruled that the action for cancellation
of real estate mortgage is a personal action as it is not expressly included in the enumeration
found in Section 2(a) of Rule 4, and does not involve title to the mortgaged lot. 9
However, We are not convinced that the ruling in Hernandez 10 in this respect is applicable in
the case before Us considering that the subject property herein was already foreclosed
extrajudicially. If not for the timely issuance of a restraining order sought by petitioners the
same would have already been sold at a public auction sale. Moreover, it should be borne in
mind that in the action for nullification of the mortgage documents petitioners questioned the
validity of the mortgage in favor of the insolvent bank over which respondent Central Bank
claimed title seeking the collection and eventually the foreclosure of the mortgaged property.
Thus, it is a real action as the action affects the title to a property. Applying the rules on venue
of the matter, the action should be brought before the court having jurisdiction over the
territory in which the subject Property or part thereof lies which in this case should properly
be in the then Court of First Instance of Laguna. 11
On the other hand, it should be recalled that the subject property appears to be included in
the assets of the Rural Bank of Lucena, Inc., which is an insolvent bank. Under Section 29 of
the Central Bank Act 12 when the Monetary Board finds out that the insolvent bank cannot
resume business with safety to its creditors, it shall, through the Solicitor General, file a
petition in the Court of First Instance praying for the assistance and supervision of the court
in the liquidation of the bank's affairs.
In Hernandez, 13 We held that where an insolvent bank is forbidden to do business, its assets
are turned over to the Superintendent of Banks as receiver for conversion into cash and its
liquidation is undertaken with judicial intervention as far as lawful and practicable so that all
claims against the insolvent bank should be filed in the liquidation proceeding. This is intended
to prevent multiplicity of actions against the insolvent bank and that for convenience, only one
court should, if possible, pass upon all claims against the insolvent bank, where the liquidation
court should assist the Superintendent of Banks and control his operations. 14
From the foregoing discussions it appears that both courts have concurrent jurisdiction over
the subject matter. Respondent Central Bank stressed the rule that where several courts have
concurrent jurisdiction over the same case, the court which first acquired jurisdiction retains
it to the exclusion of the others.
However, this case presents a novel situation so that the accepted rule on concurrent
jurisdiction may not apply. As above stated, in petitioners' action before the court a quo
respondent Central Bank filed a motion to intervene. After the motion was granted it filed a
motion to dismiss on the ground of lack of jurisdiction, but this was denied. Respondent Central
Bank then filed an answer in intervention reiterating lack of jurisdiction and at the same time
upholding the authenticity of the mortgage documents. It participated in the trial.
Unfortunately, the mortgage documents were found by the trial court to be forgeries.
Upon respondent Central Bank's motion for reconsideration the lower court took a total turn-
about by ruling, this time, that it is without jurisdiction over the case. When petitioners
appealed to the Court of Appeals despite the argument of respondent Central Bank that the
documents in question are genuine and that the mortgage is valid the appellate court filed the
lower court s findings that the questioned documents are null and void. Nevertheless, the Court
of Appeals also affirmed the dismissal of the case on the ground of lack of jurisdiction.
The court is not persuaded that the Laguna Court is without jurisdiction over the case and that
it is the Manila Court where the Central Bank instituted the liquidation proceedings that has
jurisdiction.
Respondent Central Bank's allegation of convenience as that all suits against the insolvent
bank should be brought before the liquidation court is untenable. The action for nullification of
the mortgage deed before the liquidation court after the case was fully litigated below would
only mean more inconvenience to the parties, en waste of more money and precious time.
Indeed, it is an action in futility Respondent Central Bank was already accorded a full-dress
hearing in the Laguna court where it defended its cause. However, it failed to establish its
theory upholding the validity of the questioned documents and the genuineness of petitioners'
thumbmarks thereon.
Moreover, the role of the liquidation court which is a court of limited jurisdiction is to assist the
Central Bank in the liquidation of a certain bank. It cannot pass upon the validity of all contracts
as the mortgage deed in question in this case. This matter should be litigated before the regular
courts with general jurisdiction.
The Court of Appeals affirmed the findings of the lower court on this aspect as it held:
Upon a factual analysis of the evidence on record, this Court is by convinced that the real
estate mortgage sought to be foreclosed extra-judicially by intervenors, the supposed
thumbmarks of Jose Carandang and Benita Carandang, is a forgery (Exhs. B & 2). As seen on
the face of the mortgage deed itself, Benita Carandang was therein referred to as widow and
Jose Carandang as single. However, contradicted is the evidence that on August 31, 1959,
when the mortgage deed was supposedly executed, both Benita and Jose Carandang were
27
very much married. Obviously, their status entered on the mortgage deed was the product of
mere "guess work."
Then the testimony of both plaintiff's that thumbmarks on the mortgage deed were not their
thumbmarks stands unrefuted on the reward. The evidence moreover shows that they had not
appellant before the Notary Public Jose B. Hernandez to acknowledge said deed. Neither they
have been in Lucena City at anytime in their lives (sic). They also had not secured any loan
from the Rural Bank of Lucena. Nor have they authorized anyone to transact business for and
in their behalf.
Ironically, intervenors witnesses even supported plaintiff cause. The bank examiner, Mr.
Napoleon Cruz, admitted that he was assigned at the Rural Bank of Lucena City, Inc., as deputy
of the receiver because of numerous anomalies of said bank. In fact, he testified that all officers
of the bank were prosecuted for the anomalies. And that the filed in the City Court and Court
of First Instance of Lucena, for falsification of documents and estafa, in connection with said
bank anomalies, y numbered around fifty. Another intervenors' witness Lucena CFI Clerk of
Court and Notary Public who notarized the mortgage deed in question, Mr. Jose V. Hernandez
(sic) confirming the aforesaid revelation of Mr. Cruz, testified that there were around 60 of
falsification, or estafa thru falsification, filed in court regarding anomalous transactions in said
Rural Bank. In fact, he claimed that the witness to the real estate mortgage in question are
among those charged for the anomalies. In the atmosphere of such an anomalous surrounding,
and the vehement claims and evidence of plaintiff that the mortgage dead is a forgery, we
wonder why if it were not so, intervenors did not counteract plaintiff evidence. Not even the
witness to the deed, nor even the investigators of the bank, were presented when the
authenticity of the thumbmark in said deed were vigorously denied and filed by plaintiffs. And
the very Notary Public who no the deed did not say that plaintiff's were the ones who
acknowledged and deed or said the thumbmarks. What is more, there is no check shown or
introduced by the intervenors to indicate that the plaintiff's or anyone of them ever received,
at least something, from the mortgage. In the face of all these, the presumed regularity,
validity, or genuineness of the document is overcome. And the claim of plaintiffs that they
have not borrowed money from different Rural Bank stands valid. Quite understandably,
intervenors, in their responsive pleading, did not put up "genuineness" of the document as a
defense.
Another circumstance that plaintiffs are not actual mortgagors nor loan borrowers of defendant
Rural Bank can be gleaned from the fact that even the purported application for agricultural
loan was falsified (Exhs. a & 1). As so categorically testified by the plaintiff Jose and Benita
Carandang, they never applied for agricultural loan in said Bank. And again, no witness was
presented by intervenors to show otherwise. Then contrary to the entries in said application,
plaintifrs clearly proved that they were not regular credit customers of said bank; they have
not been in said bank or at Lucena City, even for once in their lifetime; they have no coconut
lands at Bo. Sta. Isabel, San Pablo City, and that the thumbprints in the application for
agriculture loan above were (sic) not their thumbprints.
Then even the purported report of Inspection and Credit investigation, submitted by intervenor
as part of defendant Banks (sic) record appeared to be evident falsification (Exh. 13). For
instance, instance said report, it was made to appear that plaintiffs owned a riceland at
Alaminos, Laguna, and (a) sari-sari store elsewhere, when the facto clearly show that they do
not own such properties. And neither were they ever investigated by any bank investigator in
connection with the purported loan.
Plainly, plaintiff were themselves victims of defendant bank's anomalies. The mortgage deed
being an evident forgery, there is no valid contract to speak of (Art. 1313, NCC). Consequently,
the mortgage deed become prohibitive in law (sic). It is a deed absolutely simulated or
fictitious, hence inexistent and void from the beginning. (Art. 1409 (1) & (7) (NCC). A fortiori,
it cannot and will not affect the rights of the plaintiff.
In passing, this Court is not unaware that the Cacthlosopic report of the NBI shows that (in)
so far as the promissory note is concerned, the thumbprint in the name of Benita Carandang
thereon and her sample right thumbprint were impressed by the same answer of the same
person. (Exh. "f 01; 6 a). But such finding is not decisive of the issue, not only because the
NBI examiner was not presented as witness and his report and conclusion subject to (cross)
examination, but also because of other proof to the contrary. Thus, considering the established
fact that plaintifrs are not actual mortgagors or loan borrowers of defendant bank, it is
incomprehensible why Benita's thumbmark should appear in the promissory note? (sic) What
is she to pay for when she is not a mortgagor or loan borrower? Surely, it would be the height
of injustice to require her to pay and answer for something she does not owe". pp. 110-114,
Record on Appeal. 15
The foregoing findings of facts of the appellate court are conclusive in this proceeding.
Considering that the claim to title of respondent Central Bank over petitioners' property had
been found to be null and " Pages 35-38, Rollo. void, it cannot now lawfully contend that the
property is under receivership as its property and is in custodia legis of the receivership court.
Said court is bereft of jurisdiction over this property.
WHEREFORE, the petition for review is GRANTED and the questioned decision of the Court of
Appeals in so far as it aimed the decision of dismiss of the court a quo is hereby REVERSED
and SET ASIDE, but it is aimed in all other respects. The questioned promissory note and real
estate mortage pertaining to the subject property are hereby declared null and void. No
pronouncement as to costs.
SO ORDERED.
28
 8. G.R. No. 73884 September 24, 1987
SPOUSES ROMEO LIPANA and MILAGROS LIPANA, petitioners,
vs.
DEVELOPMENT BANK OF RIZAL, respondent.
PARAS, J.:
This is a petition for review on certiorari of the August 30, 1985 Order of the Regional Trial
Court of Pasig denying petitioners' Motion to Lift Stay of Execution in Civil Case No. 50802.
During the period from 1982 to January, 1984, herein petitioners opened and maintained both
time and savings deposits with the herein respondent Development Bank of Rizal all in the
aggregate amount of P939,737.32. When some of the Time Deposit Certificates matured,
petitioners were not able to cash them but instead were issued a manager's check which was
dishonored upon presentment. Demands for the payment of both time and savings deposits
having failed, on March 14, 1984, petitioners filed with the Regional Trial Court of Pasig a
Complaint With Prayer For Issuance of a Writ of Preliminary Attachment for collection of a sum
of money with damages, docketed therein as Civil Case No. 50802 (Record, pp. 3-11).
Respondent Judge, in an Order dated March 19, 1984 (Ibid., p. 19-21), ordered the issuance
of a writ of attachment, and pursuant thereto, a writ of attachment dated March 20, 1984 was
issued in favor of the petitioners (Ibid., p. 33).
On June 27, 1984, respondent bank filed its Answer (Ibid., p. 58-61).
On July 23, 1984, petitioners filed a Motion For Judgment on the Pleadings (Ibid., pp. 68-73),
opposed by respondent bank (Ibid., pp. 74-76), but respondent judge, in a Decision dated
November 13, 1984, rendered judgment in favor of petitioners. The dispositive portion of the
said Decision, reads:
IN VIEW OF ALL THE FOREGOING, the Court renders judgment in favor of the plaintiffs,
ordering the defendant to pay the total sum of P939,737.32 plus stipulated interest; the sum
equivalent to 15% of the amount due as attorney's fees; and costs of suit.
The counterclaim is dismissed, for lack of merit.
Meanwhile, on August 10, 1984, the Monetary Board, in its Resolution No. 1009, finding that
the condition of respondent bank was one of insolvency and that its continuance in business
would result in probable loss to its depositors and creditors, decided to place it under
receivership (Rollo, p. 84).
On December 7, 1984, petitioners filed a Motion for Execution Pending Appeal (Rcd., pp. 91-
93), which was opposed by respondent bank (Ibid., p. 94-96). On December 27, 1984,
petitioners filed their Reply to the opposition (Ibid., pp. 98-101), to which respondent bank
filed its Rejoinder on January 1, 1985 (Ibid., pp. 102-105).
In an order dated January 29, 1985, respondent judge ordered the issuance of a writ of
execution (Ibid., p. 106).
On February 11, 1985, respondent bank filed a Motion for Reconsideration of order dated
January 29, 1985 and to Stay Writ of Execution (Ibid., pp. 109-110), opposed by petitioners
(Ibid., p. 111) but in an Order dated March 6, 1985, respondent judge stayed the execution
(Ibid., p. 113).
On August 7, 1985, petitioners filed a Motion to Lift Stay of Execution (Ibid., pp. 119-122),
opposed by respondent bank (Ibid., pp. 123-127), and in an Order dated August 30, 1985,
respondent judge denied the said motion (Ibid., p. 130). Hence, the instant petition (Rollo, pp.
8-17).
The Second Division of the Court, in a resolution dated May 5, 1986, resolved to require the
respondent to comment (Ibid., p. 52). In compliance therewith, respondent bank filed its
Comment on June 9, 1986 (Ibid., pp. 53-58).
The petition was given due course in a resolution dated August 11, 1986, and the parties were
required to file their respective memoranda (Ibid., p. 61). In compliance therewith, petitioners
filed their Memorandum on September 19, 1986 (Ibid., p. 63-75), while respondent bank filed
its Memorandum on September 25, 1986 (Ibid., pp. 76-83), and the case was considered
submitted for deliberation in the Resolution dated October 8, 1986 (Ibid., p. 88)
Petitioners raised the following issues:
1. Respondent judge cannot legally stay execution of judgement that has already become final
and executory;
2. The placing under receivership by the Central Bank of the respondent bank, long after the
complaint was filed removed it from the application of the doctrine in Re: Central Bank vs.
Morfe (63 SCRA 113);
3. The filing of the complaint for a sum of money With damages against respondent bank and
the subsequent attachment of its property in Pasig, Metro Manila long before the receivership
took place render inapplicable the doctrine laid down by this Honorable Supreme Court in the
said Morfe case;
4. The indefinite stay of execution without a ruling as to how long it will last, amounts to
deprivation of petitioners of their property without due process of law.
29
The instant petition is without merit.
I.
The main issue in this case is whether or not respondent judge could legally stay execution of
judgment that has already become final and executory.
The answer is in the affirmative.
The rule that once a decision becomes final and executory, it is the ministerial duty of the court
to order its execution, admits of certain exceptions as in cases of special and exceptional nature
where it becomes imperative in the higher interest of justice to direct the suspension of its
execution (Vecine vs. Geronimo, 59 O.G. 579); whenever it is necessary to accomplish the
aims of justice (Pascual vs. Tan, 85 Phil. 164); or when certain facts and circumstances
transpired after the judgment became final which could render the execution of the judgment
unjust (Cabrias vs. Adil, 135 SCRA 354).
In the instant case, the stay of the execution of judgment is warranted by the fact that
respondent bank was placed under receivership. To execute the judgment would unduly
deplete the assets of respondent bank to the obvious prejudice of other depositors and
creditors, since, as aptly stated in Central Bank of the Philippines vs. Morfe (63 SCRA 114),
after the Monetary Board has declared that a bank is insolvent and has ordered it to cease
operations, the Board becomes the trustee of its assets for the equal benefit of all the creditors,
including depositors. The assets of the insolvent banking institution are held in trust for the
equal benefit of all creditors, and after its insolvency, one cannot obtain an advantage or a
preference over another by an attachment, execution or otherwise.
Moreover, it will be noted that respondent bank was placed under receivership on August 10,
1984, and the Decision of respondent judge is dated November 13, 1984. Accordingly, in line
with the ruling in the aforesaid Morfe case, which reads:
in the said Morfe case, the effect of the judgment is only to fix the amount of the debt, and
not give priority over other depositors and creditors.
III.
Anent the contention of petitioners that the attachment of one of the properties of respondent
bank was erased by virtue of the delayed receivership is to expand the power of the Central
Bank, Suffice it to say that in the case of Central Bank of the Philippines, et al. vs. Court of
Appeals, et al. (Resolution of this Court dated September 17, 1984 in G.R. No. 33302), wherein
the original plaintiff Algue Inc. was able to obtain a writ of preliminary attachment against the
original defendant Island Savings Bank, this Court refused to recognize any preference
resulting from such attachment and ruled that after a declaration of insolvency, the remedy of
the depositors is to intervene in the liquidation proceedings.
IV.
It is also contended by the petitioners that the indefinite stay of execution without ruling as to
how long it will last, amounts to a deprivation of their property without due process of law.
Said contention, likewise, is devoid of merit. Apart from the fact that the stay of execution is
not only in accordance with law but is also supported by jurisprudence, such staying of
execution is not without a time limit. In fact, the Monetary Board, in its resolution No. 4-33
approved the liquidation of respondent bank on April 26, 1985 and ordered, among others, the
filing of a petition in the Regional Trial Court praying for assistance of said court in the
liquidation of the bank. (Rollo, p. 81). The staying of the writ of execution will be lifted after
approval by the liquidation court of the project of distribution, and the liquidator or his deputy
will authorize payments to all claimants concerned in accordance with the approved project of
distribution.
PREMISES CONSIDERED, the instant petition is hereby DISMISSED.

The circumstance that the Fidelity Savings Bank, having stopped operations since February SO ORDERED.
19, 1969, was forbidden to do business (and that ban would include the payment of time
deposits) implies that suits for the payment of such deposits were prohibited. What was directly
prohibited should not be encompassed indirectly. ...

petitioners 'complaint should have been dismissed.

II.

It is the contention of petitioners, however, that the placing under receivership of respondent
bank long after the filing of the complaint removed it from the doctrine in the said Morfe case.

This contention is untenable. The time of the filing of the complaint is immaterial. It is the
execution that win obviously prejudice the other depositors and creditors. Moreover, as stated

30