Banking Laws

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No.115849 January 24, 1996 FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and MERCURIO RIVERA, petitioners, vs. COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO DEMETRIA, and JOSE JANOLO, respondents. DECISION PANGANIBAN, J.: In the absence of a formal deed of sale, may commitments given by bank officers in an exchange of letters and/or in a meeting with the buyers constitute a perfected and enforceable contract of sale over 101 hectares of land in Sta. Rosa, Laguna? Does the doctrine of "apparent authority" apply in this case? If so, may the Central Bank-appointed conservator of Producers Bank (now First Philippine International Bank) repudiate such "apparent authority" after said contract has been deemed perfected? During the pendency of a suit for specific performance, does the filing of a "derivative suit" by the majority shareholders and directors of the distressed bank to prevent the enforcement or implementation of the sale violate the ban against forum-shopping? Simply stated, these are the major questions brought before this Court in the instant Petition for review on certiorari under Rule 45 of the Rules of Court, to set aside the Decision promulgated January 14, 1994 of the respondent Court of Appeals1 in CA-G.R CV No. 35756 and the Resolution promulgated June 14, 1994 denying the motion for reconsideration. The dispositive portion of the said Decision reads: WHEREFORE, the decision of the lower court is MODIFIED by the elimination of the damages awarded under paragraphs 3, 4 and 6 of its dispositive portion and the reduction of the award in paragraph 5 thereof to P75,000.00, to be assessed against defendant bank. In all other aspects, said decision is hereby AFFIRMED. All references to the original plaintiffs in the decision and its dispositive portion are deemed, herein and hereafter, to legally refer to the plaintiff-appellee Carlos C. Ejercito. Costs against appellant bank. The dispositive portion of the trial court's2 decision dated July 10, 1991, on the other hand, is as follows: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows: 1. Declaring the existence of a perfected contract to buy and sell over the six (6) parcels of land situated at Don Jose, Sta. Rosa, Laguna with an area of 101 hectares, more or less, covered by and embraced in Transfer Certificates of Title Nos. T-106932 to T106937, inclusive, of the Land Records of Laguna, between the plaintiffs as buyers and the defendant Producers Bank for an agreed price of Five and One Half Million (P5,500,000.00) Pesos; 2. Ordering defendant Producers Bank of the Philippines, upon finality of this decision and receipt from the plaintiffs the amount of P5.5 Million, to execute in favor of said plaintiffs a deed of absolute sale over the aforementioned six (6) parcels of land, and to immediately deliver to the plaintiffs the owner's copies of T.C.T. Nos. T-106932 to T- 106937, inclusive, for purposes of registration of the same deed and transfer of the six (6) titles in the names of the plaintiffs; 3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. Janolo and Demetrio Demetria the sums of P200,000.00 each in moral damages; 4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of P100,000.00 as exemplary damages ; 5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of P400,000.00 for and by way of attorney's fees; 6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual and moderate damages in the amount of P20,000.00; With costs against the defendants. After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to sur-rejoinder, the petition was given due course in a Resolution dated January 18, 1995. Thence, the parties filed their respective memoranda and reply memoranda. The First Division transferred this case to the Third Division per resolution dated October 23, 1995. After carefully deliberating on the aforesaid submissions, the Court assigned the case to the undersigned ponente for the writing of this Decision. The Parties Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines; petitioner Bank, for brevity) is a banking institution organized and existing under the laws of the Republic of the Philippines. Petitioner Mercurio Rivera (petitioner Rivera, for brevity) is of legal age and was, at all times material to this case, Head-Manager of the Property Management Department of the petitioner Bank. Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the assignee of original plaintiffs-appellees Demetrio Demetria and Jose Janolo. Respondent Court of Appeals is the court which issued the Decision and Resolution sought to be set aside through this petition. The Facts The facts of this case are summarized in the respondent Court's Decision3 as follows: (1) In the course of its banking operations, the defendant Producer Bank of the Philippines acquired six parcels of land with a total area of 101 hectares located at Don Jose, Sta. Rose, Laguna, and covered by Transfer Certificates of Title Nos. T-106932 to T106937. The property used to be owned by BYME Investment and Development Corporation which had them mortgaged with the bank as collateral for a loan. The original plaintiffs, Demetrio Demetria and Jose O. Janolo, wanted to purchase the property and thus initiated negotiations for that purpose. (2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME investment's legal counsel, Jose Fajardo, met with defendant Mercurio Rivera, Manager of the Property Management Department of the defendant bank. The meeting was held pursuant to plaintiffs' plan to buy the property (TSN of Jan. 16, 1990, pp. 7-10). After the meeting, plaintiff Janolo, following the advice of defendant Rivera, made a formal purchase offer to the bank through a letter dated August 30, 1987 (Exh. "B"), as follows: August 30, 1987 The Producers Bank of the Philippines Makati, Metro Manila Attn. Mr. Mercurio Q. Rivera Manager, Property Management Dept. Gentleman: I have the honor to submit my formal offer to purchase your properties covered by titles listed hereunder located at Sta. Rosa, Laguna, with a total area of 101 hectares, more or less. TCT NO. T-106932 T-106933 T-106934 T-106935 T-106936 T-106937 AREA 113,580 sq. m. 70,899 sq. m. 52,246 sq. m. 96,768 sq. m. 187,114 sq. m. 481,481 sq. m. My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3,500,000.00) PESOS, in cash. Kindly contact me at Telephone Number 921-1344. (3) On September 1, 1987, defendant Rivera made on behalf of the bank a formal reply by letter which is hereunder quoted (Exh. "C"): September 1, 1987 JP M-P GUTIERREZ ENTERPRISES 142 Charisma St., Doña Andres II Rosario, Pasig, Metro Manila Attention: JOSE O. JANOLO Dear Sir: Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta. Rosa, Laguna (formerly owned by Byme Industrial Corp.). Please be informed however that the bank's counter-offer is at P5.5 million for more than 101 hectares on lot basis. We shall be very glad to hear your position on the on the matter. Best regards. (4) On September 17, 1987, plaintiff Janolo, responding to Rivera's aforequoted reply, wrote (Exh. "D"): September 17, 1987 Producers Bank Paseo de Roxas Makati, Metro Manila Attention: Mr. Mercurio Rivera Gentlemen: In reply to your letter regarding my proposal to purchase your 101-hectare lot located at Sta. Rosa, Laguna, I would like to amend my previous offer and I now propose to buy the said lot at P4.250 million in CASH.. Hoping that this proposal meets your satisfaction. (5) There was no reply to Janolo's foregoing letter of September 17, 1987. What took place was a meeting on September 28, 1987 between the plaintiffs and Luis Co, the Senior Vice-President of defendant bank. Rivera as well as Fajardo, the BYME lawyer, attended the meeting. Two days later, or on September 30, 1987, plaintiff Janolo sent to the bank, through Rivera, the following letter (Exh. "E"): The Producers Bank of the Philippines Paseo de Roxas, Makati Metro Manila Attention: Mr. Mercurio Rivera Re: 101 Hectares of Land in Sta. Rosa, Laguna Gentlemen: Pursuant to our discussion last 28 September 1987, we are pleased to inform you that we are accepting your offer for us to purchase the property at Sta. Rosa, Laguna, formerly owned by Byme Investment, for a total price of PESOS: FIVE MILLION FIVE HUNDRED THOUSAND (P5,500,000.00). Thank you. (6) On October 12, 1987, the conservator of the bank (which has been placed under conservatorship by the Central Bank since 1984) was replaced by an Acting Conservator in the person of defendant Leonida T. Encarnacion. On November 4, 1987, defendant Rivera wrote plaintiff Demetria the following letter (Exh. "F"): Attention: Atty. Demetrio Demetria Dear Sir: Your proposal to buy the properties the bank foreclosed from Byme investment Corp. located at Sta. Rosa, Laguna is under study yet as of this time by the newly created committee for submission to the newly designated Acting Conservator of the bank. For your information. (7) What thereafter transpired was a series of demands by the plaintiffs for compliance by the bank with what plaintiff considered as a perfected contract of sale, which demands were in one form or another refused by the bank. As detailed by the trial court in its decision, on November 17, 1987, plaintiffs through a letter to defendant Rivera (Exhibit "G") tendered payment of the amount of P5.5 million "pursuant to (our) perfected sale agreement." Defendants refused to receive both the payment and the letter. Instead, the parcels of land involved in the transaction were advertised by the bank for sale to any interested buyer (Exh, "H" and "H-1"). Plaintiffs demanded the execution by the bank of the documents on what was considered as a "perfected agreement." Thus: Mr. Mercurio Rivera Manager, Producers Bank Paseo de Roxas, Makati Metro Manila Dear Mr. Rivera: This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase your 101-hectare lot located in Sta. Rosa, Laguna, and which are covered by TCT No. T-106932 to 106937. From the documents at hand, it appears that your counter-offer dated September 1, 1987 of this same lot in the amount of P5.5 million was accepted by our client thru a letter dated September 30, 1987 and was received by you on October 5, 1987. In view of the above circumstances, we believe that an agreement has been perfected. We were also informed that despite repeated follow-up to consummate the purchase, you now refuse to honor your commitment. Instead, you have advertised for sale the same lot to others. In behalf of our client, therefore, we are making this formal demand upon you to consummate and execute the necessary actions/documentation within three (3) days from your receipt hereof. We are ready to remit the agreed amount of P5.5 million at your advice. Otherwise, we shall be constrained to file the necessary court action to protect the interest of our client. We trust that you will be guided accordingly. (8) Defendant bank, through defendant Rivera, acknowledged receipt of the foregoing letter and stated, in its communication of December 2, 1987 (Exh. "I"), that said letter has been "referred . . . to the office of our Conservator for proper disposition" However, no response came from the Acting Conservator. On December 14, 1987, the plaintiffs made a second tender of payment (Exh. "L" and "L-1"), this time through the Acting Conservator, defendant Encarnacion. Plaintiffs' letter reads: JOSE O.behalf of our client. Henry Co did not appeal the denial of his motion for intervention. with prejudice. NIDA ENCARNACION Central Bank Conservator We are sending you herewith.5 Million are unauthorized or illegal. In the course of the proceedings in the respondent Court. Henry Co and several other stockholders of the Bank. plaintiffs filed a suit for specific performance with damages against the bank. Co (the brother of Luis Co). "Private respondent opposed this motion on the ground. through counsel. on May 3. in . Makati. This is in connection with the perfected agreement consequent from your offer of P5. On July 8. 106936 and 106937 and registered under Producers Bank. during the pendency of the proceedings in the Court of Appeals. plaintiff. petitioner Rivera and conservator Encarnacion appealed to the Court of Appeals which subsequently affirmed with modification the said judgment. 106933. 1988. the "Second Case") — purportedly a "derivative suit" — with the Regional Trial Court of Makati. docketed as Civil Case No. On March 14. through counsel Angara Abello Concepcion Regala and Cruz. The Court of Appeals erred in declaring that a contract of sale was perfected between Ejercito (in substitution of Demetria and Janolo) and the bank. During the pre-trial conference in the Second Case. 92-1606. particularly his counter-offer of P5."5 Private respondent. and that there was no meeting of the minds as to the price. its Manager Rivers and Acting Conservator Encarnacion. Carlos Ejercito was substituted in place of Demetria and Janolo.5 million as our agreed purchase price of the 101-hectare lot covered by TCT Nos. It also denied a motion for reconsideration filed thereafter.: Atty. In their Petition6 and Memorandum7. III. From the trial court's decision. The defendants took the position that there was no such perfected sale because the defendant Rivera is not authorized to sell the property. Metro Manila Attn. 656). in a reply letter dated May 12. Petitioners have engaged in forum shopping. .5 Million as the purchase price of the said lots. The Court of Appeals erred in declaring that the conservator does not have the power to overrule or revoke acts of previous management. the Bank. that plaintiff's act of forum shopping justifies the dismissal of both cases. MBTC Check No. in view of the assignment of the latters' rights in the matter in litigation to said private respondent. made a final demand for compliance by the bank with its obligations under the considered perfected contract of sale (Exhibit "N"). in his memorandum. against Encarnacion. alleging that as owner of 80% of the Bank's outstanding shares of stock. (9) The foregoing letter drew no response for more than four months. 106934. On that basis. Henry L. he had a substantial interest in resisting the complaint. the defendants justified the refusal of the tenders of payment and the non-compliance with the obligations under what the plaintiffs considered to be a perfected contract of sale. The Court of Appeals erred in declaring the existence of an enforceable contract of sale between the parties. 106935. Mr. Please inform us of the date of documentation of the sale immediately. II. filed a motion to intervene in the trial court. 1992. On the other hand. The basis of the suit was that the transaction had with the bank resulted in a perfected contract of sale. averred that this motion is still pending in the Makati RTC. Branch 134. Then.PRODUCERS BANK OF THE PHILIPPINES Paseo de Roxas. On July 11. plaintiffs filed a Motion for Leave of Court to Dismiss the Case Without Prejudice. (10) On May 16. Janolo argued that the Second Case was barred by litis pendentia by virtue of the case then pending in the Court of Appeals. the trial court issued an order denying the motion to intervene on the ground that it was filed after trial had already been concluded. 258387 in the amount of P5. Kindly acknowledge receipt of our payment. The findings and conclusions of the Court of Appeals do not conform to the evidence on record. 1991. II. 1988 (Annex "4" of defendant's answer to amended complaint). 1988. the defendants through Acting Conservator Encarnacion repudiated the authority of defendant Rivera and claimed that his dealings with the plaintiffs. filed an action (hereafter. petitioners summarized their position as follows: I. IV. through counsel Sycip Salazar Hernandez and Gatmaitan. Demetria and Janolo "to declare any perfected sale of the property as unenforceable and to stop Ejercito from enforcing or implementing the sale"4 In his answer. among others. petitioners prayed for dismissal of the instant suit on the ground8 that: I. 106932. JANOLO. As recounted by the trial court (Original Record. 1991. p. or to select a more friendly venue. or where the plaintiff or any of the plaintiffs resides. 28-91 requiring that a party "must certify under oath . to avoid overcrowded dockets. (b) to the best of his knowledge." 10 On the other hand. 2) "The derivative suit is not properly a suit for and in behalf of the corporation under the circumstances". We rule for private respondent. the Bank was impleaded as a defendant. the Rules of Court. aggrieved parties. The Court of Appeals has correctly held that the conservator. forum shopping has acquired a connotation encompassing not only a choice of venues. [that] (a) he has not (t)heretofore commenced any other action or proceeding involving the same issues in the Supreme Court. In fact. involving a derivative suit filed by stockholders of petitioner Bank against the conservator and other defendants but which is the subject of a pending Motion to Dismiss Without Prejudice. according to Words and Phrases14. forum-shopping originated as a concept in private international law. but also to a choice of remedies." it "does not mean that it is one" and "(t)hat is a legal question for the courts to decide". was the said contract enforceable under the statute of frauds? 4) Did the bank conservator have the unilateral power to repudiate the authority of the bank officers and/or to revoke the said contract? 5) Did the respondent Court commit any reversible error in its findings of facts? The First Issue: Was There Forum-Shopping? In order to prevent the vexations of multiple petitions and actions.12. whereas in the "Second Case" (assuming the Bank is the real party in interest in a derivative suit). As to the first (choice of venues). for example.9 Private respondent Ejercito vigorously argues that in spite of this verification. The Issues From the foregoing positions of the parties. A passenger of a public utility vehicle involved in a . To combat these less than honorable excuses. the Court of Appeals. the Supreme Court promulgated Revised Circular No. including to secure procedural advantages. Branch 134. To be sure. the issues in this case may be summed up as follows: 1) Was there forum-shopping on the part of petitioner Bank? 2) Was there a perfected contract of sale between the parties? 3) Assuming there was. As to remedies. rights asserted and reliefs sought (as that) currently pending before the Regional Trial Court. has no authority to revoke the contract of sale. the principle of forum non conveniens was developed whereby a court.The factual findings and conclusions of the Court of Appeals are supported by the evidence on record and may no longer be questioned in this case. the issues in the two cases are so interwined that a judgement or resolution in either case will constitute res judicata in the other. III. Sec. no such action or proceeding is pending" in said courts or agencies. allow a plaintiff to commence personal actions "where the defendant or any of the defendants resides or may be found. Makati Branch 134 in the Second Case. In the Philippines. may refuse impositions on its jurisdiction where it is not the most "convenient" or available forum and the parties are not precluded from seeking remedies elsewhere. at the election of the plaintiff" (Rule 4. to annoy and harass the defendant. arising from the same set of facts. respondent Ejercito) and the bank. and litigants should be encouraged to attempt to settle their differences without imposing undue expenses and vexatious situations on the courts". where non-resident litigants are given the option to choose the forum or place wherein to bring their suit for various reasons or excuses. apart from being estopped from repudiating the agency and the contract. 2 [b]). it was plaintiff. or any other tribunal or agency. in conflicts of law cases. . 4) Petitioners did not hide the Second Case at they mentioned it in the said VERIFICATION/CERTIFICATION. 3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank president and attached to the Petition identifies the action as a "derivative suit. Black's Law Dictionary 13 says that forum shopping "occurs when a party attempts to have his action tried in a particular court or jurisdiction where he feels he will receive the most favorable judgment or verdict." Hence. To begin with. IV. The Court of Appeals correctly held that there was a perfected contract between Demetria and Janolo (substituted by.) the pendency of Civil Case No. petitioners have included a VERIFICATION/CERTIFICATION in their Petition stating "for the record(. "a litigant is open to the charge of "forum shopping" whenever he chooses a forum with slight connection to factual circumstances surrounding his suit. as it was originally understood in conflicts of laws. are given a choice of pursuing civil liabilities independently of the criminal. A violation of the said circular entails sanctions that include the summary dismissal of the multiple petitions or complaints. . 92-1606 before the Regional Trial Court of Makati. In this light. for example. petitioners explain 11 that there is no forum-shopping because: 1) In the earlier or "First Case" from which this proceeding arose. petitioners are guilty of actual forum shopping because the instant petition pending before this Court involves "identical parties or interests represented. an identity as regards parties. in the Second Case. Heirs of Orval Hughes. This was the original concept of the term forum shopping. litigants. though worded differently. 1986. the majority stockholders. xxx xxx xxx As already observed. constituted forum shopping: In the attempt to make the two actions appear to be different. 1988 disapproving the sale. or at least such parties as represent the same interests in both actions.. Forum shopping as "the filing of repetitious suits in different courts" has been condemned by Justice Andres R. however. culpa aquiliana or culpa criminal — each remedy being available independently of the others — although he cannot recover more than once. That same identity puts into operation the sanction of twin dismissals just mentioned. as in this case. criminal prosecution. which are direct contempt of court. On the other hand. amount to res adjudicata in the action under consideration: all the requisites. Commission on Audit. has no jurisdiction. Inc. the Court had prescribed it in the Interim Rules and Guidelines issued on January 11. are seeking to accomplish what the Bank itself failed to do in the original case in the trial court. et al. Eventually. we held: . This practice had not only resulted to (sic) conflicting adjudications among different courts and consequent confusion enimical (sic) to an orderly administration of justice. In other words. The application of this sanction will prevent any further delay in the settlement of the controversy which might ensue from attempts to seek reconsideration of or to appeal from the Order of the Regional Trial Court in Civil Case No. while in the complaint before the lower court petitioner seeks to enjoin the PNOC from conducting a rebidding and from selling to other parties the vessel "T/T Andres Bonifacio". "forum shopping" had acquired a different concept — which is unethical professional legal practice. which dismissed the petition upon grounds which appear persuasive. the objective or the relief being sought. will. or interests represented. "as a reprehensible manipulation of court processes and proceedings . in order to defeat administrative processes and in anticipation of an unfavorable administrative ruling and a favorable court ruling. The principle applies not only with respect to suits filed in the courts but also in connection with litigations commenced in the courts while an administrative proceeding is pending. or invoke all relevant remedies simultaneously. and that is. and. . which is the petitioner herein.vehicular accident may sue on culpa contractual. (emphasis supplied). In an earlier case 23 but with the same logic and vigor. 15 What therefore originally started both in conflicts of laws and in our domestic law as a legitimate device for solving problems has been abused and mis-used to assure scheming litigants of dubious reliefs. In brief. and the identity on the two preceding particulars is such that any judgment rendered in the other action. the Supreme Court. identity of rights or causes and identity of reliefs sought. Applying the foregoing principles in the case before us and comparing it with the Second Case. 1988 and to direct said body to approve the Memorandum of Agreement entered into by and between the PNOC and petitioner. is the same. also by Chief Justice Narvasa. 86-36563. of auter action pendant. 22. Thus. and for an extension of time for it to comply with the paragraph 1 of the memorandum of agreement and damages. 86-36563 promulgated on July 15. et al. a party seeks a favorable opinion (other than by appeal or certiorari) in another.. as a result of an adverse opinion in one forum. And even before that. Petitioner asks this Court to set aside the questioned letter-directive of the COA dated October 10. through the encouragement of their lawyers. as in this case. as well as basis thereof. there is between the action at bar and RTC Case No. where a litigant (or one representing the same interest or person) sues the same party against whom another action or actions for the alleged violation of the same right and the enforcement of the same relief is/are still pending. It had created extreme inconvenience to some of the parties to the action. . and disciplinary action against the erring lawyer. as follows: There thus exists between the action before this Court and RTC Case No. Lopez 19 . but with the same objective. In either of these situations (choice of venue or choice of remedy). this Court ruled that the filing by a party of two apparently different actions. forum shopping exists where the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in the other. This is specially so." 17 when does forum shopping take place? There is forum-shopping whenever. the defense of litis pendencia in one case is bar to the others. promulgated Circular 28-91. One can see that although the relief prayed for in the two (2) actions are ostensibly different. In Danville Maritime. the relief being founded on the same facts. the ultimate objective in both actions is the same. that is. namely. to enable the petitioner Bank to escape from the obligation to sell the property to respondent. petitioner impleaded different respondents therein — PNOC in the case before the lower court and the COA in the case before this Court and sought what seems to be different reliefs. In either case. to a degree sufficient to give rise to the ground for dismissal known as auter action pendant or lis pendens. the litigant actually shops for a forum of his action. file their actions in all available courts. Consequently. forum shopping could be cited by the other party as a ground to ask for summary dismissal of the two 20 (or more) complaints or petitions. regardless of which party is successful. and for imposition of the other sanctions. Narvasa (now Chief Justice) in Minister of Natural Resources. approval of the sale of vessel in favor of petitioner and to overturn the letter-directive of the COA of October 10. 86-36563 identity of parties. where the court in which the second suit was brought. To avoid or minimize this unethical practice of subverting justice. instead of actually making a choice of the forum of their actions. it is obvious that there exist identity of parties or interests represented. in fine. vs. vs. the complaint 21 in the Second Case seeks to declare such purported sale involving the same real property "as unenforceable as against the Bank". Very simply stated. 1983 and had struck down in several cases 16 the inveterate use of this insidious malpractice. a final judgment in one would constitute res judicata and thus would cause the dismissal of the rest. rights asserted and relief sought. And this necessitated or had given rise to the formulation of rules and canons discouraging or altogether prohibiting the practice.18 The test for determining whether a party violated the rule against forum shopping has been laid dawn in the 1986 case of Buan vs. in representation of the Bank. the original complaint in the court a quo which gave rise to the instant petition was filed by the buyer (herein private respondent and his predecessors-in-interest) against the seller (herein petitioners) to enforce the alleged perfected sale of real estate. as already mentioned. as well as identity of rights asserted and relief prayed for. replied that there is a difference in factual setting between Victronics and the present suit. the suing stockholder is regarded as a nominal party. much less are they direct parties in the assailed contract of sale.citing as authority Victronics Computers. commences a new action against the plaintiff — instead of filing a responsive pleading in the other case — setting forth therein. In the caption itself. the only sanction possible now is the dismissal of both cases with prejudice. So. Indeed. but by Henry Co et al. In such actions. the validity of the contract to purchase and sell of September 1. etc. specific denials. 91-2069 by no means negates the charge of forum-shopping as such did not exist in the first place. whether or not it had been efficaciously rescinded. as in the action before this Court. To rule otherwise would be to encourage corporate litigants to use their shareholders as fronts to circumvent the stringent rules against forum shopping. dismissible. there is undeniably an identity of interests/entity represented. Inc. In the RTC action. in this Court as well as in the Court a quo. petitioners." 25 In addition to the many cases 26 where the corporate fiction has been disregarded. or are the ones to be sued or hold the control of the corporation. whether suing as the majority in direct actions or as the minority in a derivative suit. When the acts sought to be restrained took place anyway despite the issuance by the Trial Court of a temporary restraining order. the issues were joined. for they have no direct personal interest in the matter in controversy. who not only own. they represent the same interest and entity. 1986. et al. sought to deny that the Second Case was a derivative suit. and petitioners' remedy in the premises was plain and patent: the filing of an amended and supplemental pleading in the RTC suit. The adoption of this latter recourse renders the petitioners amenable to disciplinary action and both their actions. The petitioners' claim of absence of identity simply because the PCGG had not been impleaded in the RTC suit. Regional Trial Court. it could not have chosen the forum in said case. they did not make any denial or raise any defense or counter-claim therein In the case before us however. whether they sued "derivatively" or directly.. Respondent. what is truly important to consider in determining whether forum-shopping exists or not is the vexation caused the courts and parties-litigant by a party who asks different courts and/or administrative agencies to rule on the same or related causes and/or to grant the same or substantially the same reliefs. cannot be allowed to trifle with court processes. thus the . Branch 63. or at least. quite strangely. They are not principally or even subsidiarily liable. the same essential facts and circumstances. Makati. petitioner Bank. So. (Gamboa v. a final decision in one would constitute res judicata in the other 28. and the propriety of implementing the same (by paying the pledgee banks the amount of their loans. on the other hand. hold or control over 80% of the outstanding capital stock. petitioners claim to have brought suit "for and in behalf of the Producers Bank of the Philippines" 24.) were the basic issues. the filing by the petitioners of the instant special civil action for certiorari and prohibition in this Court despite the pendency of their action in the Makati Regional Trial Court.. this is the very essence of a derivative suit: An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holdsstock in order to protect or vindicate corporate rights. as underscored in the above-quoted Court ruling. we now add the instant case. Although the plaintiffs in the Second Case (Henry L. particularly where. with the corporation as the real party in interest.. Indeed. Velhagen's and King's motion to dismiss Civil Case No. the RTC suit did not become functus oficio. vs. Indeed. the corporation itself has not been remiss in vigorously prosecuting or defending corporate causes and in using and applying remedies available to it. Finally. Petitioner also tried to seek refuge in the corporate fiction that the personality Of the Bank is separate and distinct from its shareholders. obtaining the release of the pledged shares. too. The Lawyers who filed the Second Case are not before us. not by the minority shareholders. et al. Thus. special and affirmative defenses or even counterclaims. giving unto themselves the very remedies they repeated in the Second Case. by praying for affirmative reliefs and interposing counter–claims in their responsive pleadings. the achievement or perfection of a monopoly or generally the perpetration of knavery or crime. they are not suing in their personal capacities.) are not name parties in the First Case. as the other sanctions cannot be imposed because petitioners' present counsel entered their appearance only during the proceedings in this Court. Co. whenever the officials of the corporation refuse to sue. causes of action and reliefs sought.. reasoning that it was brought. Both actions unquestionably involve the same transactions. then they really represent the Bank. "because it (the Bank) was the defendant in the (first) case while it was the plaintiff in the other (Second Case)". 47 [1979]. In the face of the damaging admissions taken from the complaint in the Second Case.e. and the suit did not involve certain acts which transpired after its commencement. and declare herewith that the corporate veil cannot be used to shield an otherwise blatant violation of the prohibition against forum-shopping. In the former. in the process creating the possibility of conflicting decisions being rendered by the different fora upon the same issue. But the rulings of this Court are consistent: "When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing obligation. emphasis supplied).In other words. Victoriano. the allegations of the complaint in the Second Case show that the stockholders are bringing a "derivative suit". 90 SCRA 40. In this case. but also constitute the majority in the Board of Directors of petitioner Bank. is specious. In the instant case before us. That being so. petitioner Bank argued that there cannot be any forum shopping. is a species of forum-shopping. In other words. the relief was the same: the prevention of such implementation and/or the restoration of the status quo ante. so as to include the PCGG as defendant and seek nullification of the acts sought to be enjoined but nonetheless done. the veil with which the law covers and isolates the corporation from the members or stockholders who compose it will be lifted to allow for its consideration merely as an aggregation of individuals. the petitioners became plaintiffs themselves in the original case. Ultimately. Shareholders. even assuming arguendo that there is identity of parties. of interests represented. as causes of action. The foregoing conclusion finding the existence of forum-shopping notwithstanding. i. etc. It remained an effective vehicle for obtention of relief. the defendants did not file any responsive pleading in the first case. for reasons known only to him. there is also identity of parties. namely. and the Petition's VERIFICATION/CERTIFICATION contained sufficient allegations as to the pendency of the Second Case to show good faith in observing Circular 28-91. petitioners filed a responsive pleading to the complaint — as a result of which. as in this case. 27 where Court held: The rule has not been extended to a defendant who. the circumvention of statutes. this is exactly the problem: a decision recognizing the perfection and directing the enforcement of the contract of sale will directly conflict with a possible decision in the Second Case barring the parties front enforcing or implementing the said sale. (emphasis supplied) Petitioner pointed out that since it was merely the defendant in the original case. because: Firstly. The remedy was certainly not the institution of another action in another forum based on essentially the same facts. and Secondly. Having said that. and market value. dealt with and talked to the right person. a perfected contract of sale as the ultimate issue. both Co and Entereso openly admit that they seldom attend the meetings of the Committee. But he would refer it to the committee and he would relay the decision of the committee to me. The letter was for the attention of Mercurio Rivera who was tasked to convey and accept such offers. I present it to the Committee. Not point blank although it came from him. the agenda was the price of the property. as determined by the Committee and approved by the Conservator. and the bank Committee.5 Million price was not discussed by the Committee and that price. claim that the offer of the plaintiff was never discussed by the Committee.) But he said he would refer the matter to the committee and he would relay the decision to me and he did just like that. 27-28): Q: When you went to the Producers Bank and talked with Mr. and considering further the discussion of price at the meeting of August resulting in a formal offer of P3. that what Rivera states as the bank's action on the matter is not in fact so. As advised by Rivera. sir. under the established facts. did you ask him point-blank his authority to sell any property? A: No. sir. "E"). we have to execute the deed of sale and it is the Conservator that sign the deed of sale. Tersely put. to accept offers and to present the offer to the Committee before which the said official is authorized to discuss information relative to price determination. As correctly characterized by the trial court. In the same vein. It is likewise beyond cavil that the bank intended to sell the property.5 Million was. 1987. pp.5 Million for more than 101 hectares on lot basis. this is not credible. total claim of the bank. as well as before this Court. (W)hen I asked him how long it would take because he was saying that the matter of pricing will be passed upon by the committee. Rivera informed plaintiffs by letter that "the bank's counter-offer is at P5. From the facts. Thus (TSN of July 30. Holding that a valid contract has been established. as it now does. as members of the Past Due Committee of the bank. the appraised value at the time the property is being offered for sale and then the information which are relative to the evaluation of the bank to buy which the Committee considers and it is the Committee that evaluate as against the exposure of the bank and it is also the Committee that submit to the Conservator for final approval and once approved. Necessarily. 1990. which testimony was relied upon by both the bank and by Rivera in their appeal briefs. I provide the Committee with necessary information about the property such as original loan of the borrower. the official and definitive price at which the bank was selling the property. Rivera. too. At any rate. Considering an aspect of the official duty of Rivera as some sort of intermediary between the plaintiffs-buyers with their proposed buying price on one hand. on the basis of the facts established. bid price during the foreclosure. The plaintiffs. the official in charge of the negotiation.5 Million in cash. having been made to understand by Rivera. A — He did not say that he had the authority (.) as litigants are admonished to strictly follow the rules against forum-shopping and not to trifle with court proceedings and processes They are warned that a repetition of the same will be dealt with more severely. that the price will be submitted for approval by the bank and that the bank's decision will be relayed to plaintiffs. the Committee referred to was the Past Due Committee of which Luis Co was the Head. on September 1. pp. bid price during foreclosure. with Jose Entereso as one of the members. Mercurio Rivera. to accept offer. the bank was looking for buyers of the property. And when I asked him how long it will take for the committee to decide and he said the committee meets every week. as clearly worded in Rivera's letter (Exh. the price of P5. Necessarily. Jose Entereso. in effect what he was saying he was not the one who was to decide. And Rivera confirmed his authority when he talked with the plaintiff in August 1987.rudiments of due process prevent us from motu propio imposing disciplinary measures against them in this Decision. the official bank price. The procedure in the sale of acquired assets as well as the nature and scope of the authority of Rivera on the matter is clearly delineated in the testimony of Rivera himself. respondent Court stated: There is no dispute that the object of the transaction is that property owned by the defendant bank as acquired assets consisting of six (6) parcels of land specifically identified under Transfer Certificates of Title Nos. If I am not mistaken Wednesday and in about two week's (sic) time. the bank placed its official. Q — Please answer the question. it being inherent in his authority. I have to entertain offer. in a position of authority to accept offers to buy and negotiate the sale by having the offer officially acted upon by the bank. As testified to by the Bank's Deputy Conservator. It is definite that the plaintiffs wanted to purchase the property and it was precisely for this purpose that they met with defendant Rivera. total claim of the bank. 19-20): A: The procedure runs this way: Acquired assets was turned over to me and then I published it in the form of an interoffice memorandum distributed to all branches that these are acquired assets for sale. Manager of the Property Management Department of the defendant bank. that the P5. The bank cannot turn around and later say. The testimony of plaintiff Demetria is clear on this point (TSN of May 31. I was instructed to advertise acquired assets for sale so on that basis. the Conservator and ultimately the bank itself with the set price on the other.5 Million in cash. et al. formal offer and upon having been offered. the plaintiffs made a formal offer by a letter dated August 20. the doctrine . What transpired after the meeting of early August 1987 are consistent with the authority and the duties of Rivera and the bank's internal procedure in the matter of the sale of bank's assets. "Parenthetically. It is a familiar doctrine. in early August 1987. as will be discussed shortly. at that meeting of August 1987 regarding their purpose of buying the property. and plaintiffs were dealing with the bank official authorized to entertain offers.1990. It is important to note that negotiations on the price had started in early August and the plaintiffs had already offered an amount as purchase price. can be had. Rivera is the officer from whom official information regarding the price. therefore. Both Co ad Entereso. The Second Issue: Was The Contract Perfected? The respondent Court correctly treated the question of whether or not there was. There were averments by defendants below. The testimonies of Luis Co and Jose Entereso on this point are at best equivocal and considering the gratuitous and self-serving character of these declarations. the bank's submission on this point does not inspire belief. However. let it be emphasized that this petition should be dismissed not merely because of forum-shopping but also because of the substantive issues raised." such counter-offer price had been determined by the Past Due Committee and approved by the Conservator after Rivera had duly presented plaintiffs' offer for discussion by the Committee of such matters as original loan of borrower. there can be no other logical conclusion than that when. petitioners themselves (and particularly Henry Co. 1987 stating that they would buy at the price of P3. T-106932 to T-106937. . GSIS. as against any one who has in good faith dealt with the corporation through such agent.25 million revised offer of Janolo.. and covered by Transfer Certificates of Title Nos. Accordingly. such findings merit serious consideration by this Court. as a rule. (2) Object certain which is the subject matter of the contract. pp. (c) Rivera received the buyers' letter dated August 30. They also delve into the contractual elements of consent and cause. 30 July 1990. in the particular case. 114). A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of dealings of the officers in their representative capacity but not for acts outside the scape of their authority (9 C. (e) Rivera received the letter dated September 17. and thus holds him out to the public as possessing power to do those acts. confirmed that the P5. the Bank referred to Rivera as the officer acting for the Bank in relation to parties interested in buying assets owned/acquired by the Bank. more or less. to do acts within the scope of an apparent authority. This is basic. to which the Bank counter-offered P5. p. In fact. there are questions of law which could be drawn from the factual findings of the respondent Court. No. Since there was no counter-offer by the Bank. was laid out in Prudential Bank vs. a major shareholder and officer of the Bank. The authority of a corporate officer in dealing with third persons may be actual or apparent. (f) Rivera. Laguna with an aggregate area of about 101 hectares. We have perused the evidence but cannot find fault with the said Court's findings of fact. p. By his own admission. p. 1990. Manager of the Property Management Department of the Bank".5 million (TSN. 1987 offering P3. particularly where. T-106932 to T-106937. From the evidence found by respondent Court. 1990. Rivera was the officer mentioned in the Bank's advertisements offering for sale the property in question (cf. April 26. 1987 offering to sell the property for P5. Court of Appeals. or any other agent. and in addition to the foregoing disquisitions by the Court of Appeals. January 16. April 26. pp. TSN. The agent's apparent representation yields to the principal's true representation and the contract is considered as entered into between the principal and the third person (citing National Food Authority vs. Co. not reviewable. 3) states that Rivera was "at all times material to this case. 1994. he estopped from denying his authority (Francisco v.are. (3) Cause of the obligation which is established. p. 11). 204 NW 818. At said meeting. p. said courts carefully and meticulously discussed their findings. Petitioners allege that "there is no counter-offer made by the Bank. however. 1987 containing the buyers' proposal to buy the property for P4. 1990.J.S. 583-584. In fact. there was nothing for Ejercito (in substitution of Demetria and Janolo) to accept. Rivera was already the person in charge of the Bank's acquired assets (TSN. Intermediate Appellate Court. 1990. 34-35). in a petition under Rule 45 such as this. Application of these principles is especially necessary because banks have a fiduciary relationship with the public and their stability depends on the confidence of the people in their honesty and efficiency. 103957. 94 SCRA 357. the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other person." 30 They disputed the factual basis of the respondent Court's findings that there was an offer made by Janolo for P3. This evidence includes the following: (a) The petition itself in par. Court of Appeals31. with special reference to banks.5 million (TSN. 2. July 30. a dispute on the first and third requisites. 369-370. 1990. A bank holding out its officers and agents as worthy of confidence will not be permitted to profit by the frauds they may thus be enabled to perpetrate in the apparent scope of their employment.5 million was confirmed by Rivera (TSN. Prudential Bank v. 1990. 8-9). for his own ultimate benefit (McIntosh v. the land was definitely being sold by the Bank. 18). 184 SCRA 166). July 30. January 16. . There is. Dakota Trust Co. it is obvious that petitioner Rivera has apparent or implied authority to act for the Bank in the matter of selling its acquired assets. (b) As observed by respondent Court. a banking corporation is liable to innocent third persons where the representation is made in the course of its business by an agent acting within the general scope of his authority even though.5 million (TSN.R. (h) In its newspaper advertisements and announcements. p. let us review the question of Rivera's authority to act and petitioner's allegations that the P5. 1993)." There is no dispute on requisite no. p. in a telephone conversation.25 million (TSN. where it was held that: Conformably. 16-17).3 million (TSN. Exhs.11). Court of Appeals. PNB v. Rosa. 12). G. April 26. The mere fact that respondent Court (and the trial court as well) chose to believe the evidence presented by respondent more than that presented by petitioners is not by itself a reversible error. as in this case. 29 Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract as follows: "(1) Consent of the contracting parties.5 million counter-offer was extinguished by the P4. confirmed Rivera's statement as to the finality of the Bank's counter-offer of P5. June 14. II-i (p. Here. during which the Bank's offer of P5. Verily. The doctrine of "apparent authority". The object of the questioned contract consists of the six (6) parcels of land in Sta. resulting in prejudice to their depositors. 417). nor will it be permitted to shirk its responsibility for such frauds even though no benefit may accrue to the bank therefrom (10 Am Jur 2d.5 million. 40 ALR 1021).5 million. Such faith will be eroded where banks do not exercise strict care in the selection and supervision of its employees. Be that as it may. we have declared in countless decisions that the principal is liable for obligations contracted by the agent.of ostensible authority. (g) Rivera arranged the meeting between the buyers and Luis Co on September 28. 1990. 21. 52 ND 752. p. (d) Rivera signed the letter dated September 1. August 6. and any supposed counter-offer which Rivera (or Co) may have made is unauthorized. "S" and "S-1"). pp. And during the initial meeting between the buyers and Rivera. 7 SCRA 577. 35). that if a corporation knowingly permits one of its officers. the corporation will.5 million was the final price of the Bank (TSN. errors of fact — if there be any . the latter suggested that the buyers' offer should be no less than P3. the bank's letter of September 1. November 14. assuming arguendo that the counter-offer of P4. Ramos vs."38 However. the Court. as found by the respondent Court which reviewed the testimonies on this point. formal contracts of sale. . in themselves. Luis Co's reiteration of the said P5. No. 12) had already made a factual finding that the buyers had no notice of Rivera's actual authority prior to the sale. theories. Of course. 1987 meeting "was meant to have the offerors improve on their position of P5. clearly characterizes the repudiation as nothing more than a last-minute attempt on the Bank's part to get out of a binding contractual obligation. This is the conclusion consistent with human experience. 1987 letter accepting this revived offer. the above-cited authorities and precedents cannot apply in the instant case because. 1319 of the Civil Code 36 and related Supreme Court rulings starting with Beaumont vs. 1987 meeting revived the said offer. August 30. 1987. The Third Issue: Is the Contract Enforceable? The petition alleged42: Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5. 14) stated: . vs. But the Court of Appeals in its Decision (p. 1987. the factual findings of the respondent Court point to an implied admission on the part of the petitioners that the written offer made on September 1. Petitioners insist that the respondent Court should have believed the testimonies of Rivera and Co that the September 28.5 million was raised for the first time on appeal and should thus be disregarded. vs. Anchuelo vs. It also bears noting that this issue of extinguishment of the Bank's offer of P5. R. private respondent was not given an opportunity in the trial court to controvert the same through opposing evidence. . . al. are not. Petitioners also alleged that Demetria's and Janolo's P4. But we passed upon the issue anyway. issues of fact and arguments not adequately brought to the attention of the trial court need not be. Gevero vs.32. G. the evidence of actual authority is immaterial insofar as the liability of a corporation is concerned 33.5 million. this is a matter of due process. Prieto 37. 77029.25 million extinguished the offer of P5. Such delay. 1987. in charge of acquired assets is borne out by similar circumstances surrounding his dealings with buyers. are inherently weak as they consist of Rivera's self-serving testimony and various inter-office memoranda that purport to show his limited actual authority.5 million as confirmed and reiterated to Demetria and Atty. To be sure. (Please see article 1403[2]. and ordinarily will not be. million. 1987 begins with"(p)ursuant to our discussion last 28 September 1987 . This Court in several decisions has repeatedly adhered to the principle that points of law. the existence of which is borne out by the respondent Court's findings. as being "unauthorized and illegal" came only on May 12. considered by a reviewing court.25 million counter-offer in the letter dated September 17. 74243. truth and good faith. both the trial court and the Court of Appeals found petitioners' testimonial evidence "not credible". 175 SCRA 70 [1989]. one of whose members (Atty. et. CA. Note that the said letter of September 30.5 million price during the September 28. since the issue is apparent authority. . the respondent Court in its Decision (p. what was "accepted" by Janolo in his letter dated September 30. through Conservator Encarnacion. pp.5 million 34 . on the basis of the evidence already in the record and as appreciated by the lower courts. Art. they should be charged with actual knowledge of Rivera's limited authority. However. Hence.They disputed the respondent Court's finding that "there was a meeting of minds when on 30 September 1987 Demetria and Janolo through Annex "L" (letter dated September 30. 1986. and we repeat that. justice and due process (Dihiansan vs. Dulos Realty & Development Corp. It is settled jurisprudence that an issue which was neither averred in the complaint nor raised during the trial in the court below cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play. Luis Co and Rivera "confirmed that the P5. of Rivera's authority and action.R. as the acceptance in said letter was absolute and unqualified. and the absence of any circumstance which might have justifiably prevented the Bank from acting earlier. respondent has proven that Demetria and Janolo merely associated with a loose aggrupation of lawyers (not a professional partnership). These pieces of evidence.5 million price has been passed upon by the Committee and could no longer be lowered (TSN of April 27. . 1988 or more than seven (7) months after Janolo' acceptance. on the other hand. 1990). 157 SCRA 425 [1988].In the very recent case of Limketkai Sons Milling. They are however clear embodiments of the fact that a contract of sale . 1987) "accepted" Rivera's counter offer of P5. 1987 extinguished the Bank's offer of P5.I.5 million. In fact. IAC.40 . and we find no basis for changing this finding of fact. through Justice Jose A. Susana Parker) acted in said criminal cases. Petitioners also argued that since Demetria and Janolo were experienced lawyers and their "law firm" had once acted for the Bank in three criminal cases.5 million under Annex "J" (letter dated September 17. 1987 was the Bank's offer of P5. CA. however. of which private respondent cannot be charged with knowledge. 145 SCRA 592). 147 SCRA 434 [1987]. 1987 on the official price and the plaintiffs' acceptance of the price on September 30.41 Since the issue was not raised in the pleadings as an affirmative defense. We note that the Bank's repudiation. IAC. Jose Fajardo by Rivera and Co during their meeting on September 28. Melo. Indeed. IAC. Civil Code. And by virtue of the September 30. citing the late Justice Paras35. 34-35)"39. 1990. memorandum or writing subscribed by the Bank to evidence such contract. Indeed. Court of Appeals. the contract produced thereby would be unenforceable by action — there being no note.) Upon the other hand. petitioners attempted to repudiate Rivera's apparent authority through documents and testimony which seek to establish Rivera's actual authority. affirmed the doctrine of apparent authority as it held that the apparent authority of the officer of the Bank of P. we see no reason to disturb the lower courts' (both the RTC and the CA) common finding that private respondents' evidence is more in keeping with truth and logic — that during the meeting on September 28. 1987 was carried through during the meeting of September 28. 153 SCRA 713 [1987]. Inc. the inevitable conclusion is simply that there was a perfected contract of sale. Taken together. and it was this verbal offer that Demetria and Janolo accepted with their letter of 30 September 1987. 1987)". IAC. as they cannot be raised for the first time on appeal (Santos vs.5. particularly the latter's counteroffer of P5. there was a meeting of the minds.5 million during the meeting of 28 September 1987. In any event. the Bank has not shown that they acted as its counsel in respect to any acquired assets. . 1987. if only to avoid deciding the case on purely procedural grounds. 1987. A Yes. [Direct testimony of Atty. 1987 but from Janolo's August 20. these letters constitute sufficient memoranda — since they include the names of the parties. at pp. Luis Co of the defendant Bank? A We went straight to the point because he being a busy person. What the bank expects which was contrary to what Mr. 26 April 1990.5 million was the defendant's bank (sic) final offer? A He said in a day or two. I told him if the amount of P5. referred to in No. the offer of the bank which is P5. Co in his Office in Producers Bank Building during this meeting? A Mr. Demetria. We agree that. constitute in law a sufficient memorandum of a perfected contract of sale. Still.5 million. sir.was perfected between the parties. Luis Co whether the price could be reduced. the statute of frauds will not apply by reason of the failure of petitioners to object to oral testimony proving petitioner Bank's counter-offer of P5. are ratified by the failure to object to the presentation of oral evidence to prove the same. did you and your partner accede on (sic) the counter offer by the bank? A Yes. Fajardo and I. Luis Co? A I said that we are going to give him our answer in a few days and he said that was it.5 million is a plenty — and the silence of petitioners all throughout the presentation makes the evidence binding on them thus. pursuant to Article 1405 of the Civil Code: Art. Demetria asked Mr. Hence. Mercurio [Rivera] was with us at the time at his office. But let it be assumed arguendo that the counter-offer during the meeting on September 28. 1987 letter. 1987 did constitute a "new" offer which was accepted by Janolo on September 30. the terms and conditions of the contract. what transpired during this meeting with Luis Co of the Producers Bank? A Atty. Mercurio Rivera is the final price and that is the price they intends (sic) to have. he will make final acceptance. Co himself. 1987. 1990. 2 of article 1403. Stated simply. Luis Co said that the amount cited by Mr. Q What is the response of Mr. Atty.] .5 million. xxx xxx xxx Q Now. As private respondent pointed out in his Memorandum. at pp. [Direct testimony of Atty. Luis Co.5 million pesos and Mr. Q What is the reaction of the plaintiff Demetria to Luis Co's statement (sic) that the defendant Rivera's counter-offer of 5. Q What price? A The 5. TSN. 1987. And he told me that is the final offer of the bank P5. taken together. sir. January 16. sir. taken together with plaintiffs' letter dated September 30. Q What was your response to the answer of Mr.5 million and we should indicate our position as soon as possible. Luis Co?. Q What do you mean?. the banks' letter of September 1. sir. 18-21. Atty. Mr. oral testimony on the reaffirmation of the counter-offer of P5. Co you are referring to? A Mr. sir. we did. Rivera. Demetria told me to accompany him we were able to meet Luis Co at the Bank.] Q What transpired during that meeting between you and Mr. Demetria. Q For the record. 34-36. Fajardo and I and Mr. sir. A He said he will wait for the position of Atty.? Two days thereafter we sent our acceptance to the bank which offer we accepted. Rivera stated. petitioners — by such utter failure to object — are deemed to have waived any defects of the contract under the statute of frauds. I think it was September 28. TSN. 1405. Q After this meeting with Mr. will you tell this Court who was with Mr. such contract being binding in whatever form it may have been entered into (case citations omitted). or by the acceptance of benefits under them. Q By Mr. Jose Fajardo. Luis Co. 1987 and I was again present because Atty.5 million could still be reduced and he said that was already passed upon by the committee. the price and a description of the property as the object of the contract. your Honor please. The respondent Court could have added that the written communications commenced not only from September 1. sir. A That is the amount they want. Contracts infringing the Statute of Frauds. What can you say to that statement that the amount of P5. on the basis of a report submitted by the appropriate supervising or examining department. 1988 is reproduced hereunder: May 12.5 million was reached by the Committee? A It was not discussed by the Committee but it was discussed initially by Luis Co and the group of Atty. Rosa. only the Board of Directors/Conservator may authorize the sale of any property of the corportion/bank. Pascua detailed the functions of Property Management Department (PMD) staff and officers (Annex A. It is not disputed that the petitioner Bank was under a conservator placed by the Central Bank of the Philippines during the time that the negotiation and perfection of the contract of sale took place. therefore. your lawyer-clients did not deal with the authorized officers of the bank. petition) which unilaterally repudiated — not the contract — but the authority of Rivera to make a binding offer — and which unarguably came months after the perfection of the contract. 68. which everyone knows cannot bind the Bank's Board or Conservator. Our records do not show that Mr. As already stated earlier.] The Fourth Issue: May the Conservator Revoke the Perfected and Enforceable Contract. pp. [Direct testimony of Mercurio Rivera. Demetrio Demetria. We are. there is absolutely no evidence that the Conservator. What petitioners are really referring to is the letter of Conservator Encarnacion. Apparently. 14-15. Very truly yours. We deny that Producers Bank has ever made a legal counter-offer to any of your clients nor perfected a "contract to sell and buy" with any of them for the following reasons. Rivera was authorized by the old board or by any of the bank conservators (starting January. Metro-Manila Dear Atty. 1986 addressed to and approved by former Acting Conservator Mr. Makati. and the management of that institution. 28-A of the Central Bank Act (Rep. We believe that this is more than sufficient legal justification for refusing said alleged tender. and such other powers as the Monetary Board shall deem necessary. Zarate Zarate Carandang Perlas & Ass."43 In the second place. as the same is patently violative of corporate and banking laws. TSN. and restore its viability. what took place were just preliminary discussions/consultations between him and your clients. We also have no personal interest in any of the properties of the Bank. In the "Inter-Office Memorandum" dated April 25. Rustia. 1987 (Annex V. power or right to make any alleged counter-offer. 1988 Atty. "cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play. In short. this issue of the Conservator's alleged authority to revoke or repudiate the perfected contract of sale was raised for the first time in this Petition — as this was not litigated in the trial court or Court of Appeals.). In the first place. any provision of law to the contrary notwithstanding. 1987 meeting. 265. Petitioners energetically contended that the conservator has the power to revoke or overrule actions of the management or the board of directors of a bank.5 million was reached by the Committee and it is not within his power to reduce this amount. He shall have the power to overrule or revoke the actions of the previous management and board of directors of the bank or non-bank financial intermediary performing quasi-banking functions. who took over from Romey after the sale was perfected on September 30. under Sec. the Monetary Board may appoint a conservator to take charge of the assets. All our acts are official. . Andres I. the Monetary Board finds that a bank or a non-bank financial intermediary performing quasi-banking functions is in a state of continuing inability or unwillingness to maintain a state of liquidity deemed adequate to protect the interest of depositors and creditors.. Janolo and Demetria regarding the six (6) parcels of land located at Sta. Zarate: This pertains to your letter dated May 5. Suite 323 Rufino Building Ayala Avenue. Moreover. the amount of P5. justice and due process. Noe C.Q According to Atty. 1988 on behalf of Attys. Said letter dated May 12. Laguna. 23 and 36 of the Corporation Code of the Philippines (Bates Pambansa Blg. Mercurio Rivera or any of his subordinates has no authority. as amended). liabilities. under Section 28-A of Republic Act No. you will immediately read that Manager Mr. legal and in accordance with law. actually repudiated or overruled said contract of sale. Demetrio Demetria and Atty. Pajardo (sic) in that September 28. never objected to the sale of the property to Demetria and Janolo. 1984) to sell the aforesaid property to any of your clients. issues not raised and/or ventilated in the trial court. Act No. Rest assured that we have nothing personal against your clients. at the time the contract was perfected. 30 July 1990. collect all monies and debts due said institution and exercise all powers necessary to preserve the assets of the institution.) and Sec. sir. let alone in the Court of Appeals. reorganize the management thereof. The Bank's acting conservator at the time. 265 (otherwise known as the Central Bank Act) as follows: Whenever. Rodolfo Romey. Producers Bank Senior Manager Perfecto M. Please be advised accordingly. constrained to refuse any tender of payment by your clients. the findings of both the trial court and the appellate court on the matter coincide. (the reorganization of) the management thereof and (the restoration of) its viability. 144-145. 48 is equally applicable to the present case: We see no valid reason to discard the factual conclusions of the appellate court. the official and definitive price at which the bank was selling the property. "E"). No. The first point was clearly passed upon by the Court of Appeals 50. . the Central Bank law gives vast and far-reaching powers to the conservator of a bank. After a careful study of the case at bench. The Supreme Court is not a trier of facts.5 Million was. Court of Appeals. Tersely put. A contrary understanding of the law would simply not be permitted by the Constitution. December 17. adduced by the parties. when the judgment is premised on a misapprehension of facts.R. we held: The resolution of this petition invites us to closely scrutinize the facts of the case. De la Merced. Jr. its findings of the fact being conclusive " [Chan vs. thus: There can be no other logical conclusion than that when.] Likewise. "Barring. "such counter-offer price had been determined by the Past Due Committee and approved by the Conservator after Rivera had duly presented plaintiffs' offer for discussion by the Committee . His authority would be only to bring court actions to assail such contracts — as he has already done so in the instant case. As held in the recent case of Chua Tiong Tay vs. deemed to be defective — i. G. while admittedly. R. (p. but a meeting on the already determined price of P5.5 million" Hence. such as here. .5 Million for more than 101 hectares on lot basis. (I)t is not the function of this Court to assess and evaluate all over again the evidence.(Sgd. mistaken or impossible. a showing that the findings complained of are totally devoid of support in the record. 1966. Court of Appeals and Goldrock Construction and Development Corp. In the same vein. 127 SCRA 596). L-16394. . To rule otherwise would be to enable a failing bank to become solvent. as well as the Court of Appeals. No. 121 SCRA 865. June 30. G. 1988. L-27488. 45. assailed the respondent Court's Decision as "fraught with findings and conclusions which were not only contrary to the evidence on record but have no bases at all. (emphasis supplied) Petitioners. we find none of the above grounds present to justify the re-evaluation of the findings of fact made by the courts below.. Court of Appeals 49. No. the price of P5. February 20. under existing law. The Supreme Court's jurisdiction is limited to reviewing errors of law that may have been committed by the lower court. therefore. findings of fact by the Court of Appeals are not reviewable by the Supreme Court. Court of Appeals. the ruling of this Court in the recent case of South Sea Surety and Insurance Company Inc. The rule regarding questions of fact being raised with this Court in a petition for certiorari under Rule 45 of the Revised Rules of Court has been stated in Remalante vs. Corona vs. The Fifth Issue: Were There Reversible Errors of Facts? Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court. Court of Appeals 46. particularly where. Hernandez. No. et al. . . In Andres vs.R. G. it must be pointed out that such powers must be related to the "(preservation of) the assets of the bank. 47: The Court has consistently held that the factual findings of the trial court. L-24426. citing Philippine National Bank vs. Manufacturers Hanover & Trust Corporation. "The jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals is limited to reviewing and revising the errors of law imputed to it. relating to the sufficiency of evidence and the credibility of witnesses presented. his power is not unilateral and he cannot simply repudiate valid obligations of the Bank. yielding nothing to perfected contractual rights nor vested interests of the third parties who had dealt with the Bank. 1984. we held: . at the expense of third parties. how can it delegate such non-existent powers to the conservator under Section 28-A of said law? Obviously. Section 28-A merely gives the conservator power to revoke contracts that are. or that they are so glaringly erroneous as to constitute serious abuse of discretion. after Rivera presented the same for discussion" and (2) "the meeting with Co was not to scale down the price and start negotiations anew. R. Encarnacion LEONIDA T.R. the conservator merely takes the place of a bank's board of directors. as clearly worded in Rivera's letter (Exh. unenforceable or rescissible. . surmises or conjectures. for this Court is not expected or required to examine or contrast the oral and documentary evidence submitted by the parties" [Santa Ana. however. thus: The rule in this jurisdiction is that only questions of law may be raised in a petition for certiorari under Rule 45 of the Revised Rules of Court. when the findings went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee. What the said board cannot do — such as repudiating a contract validly entered into under the doctrine of implied authority — the conservator cannot do either. G. This Court has emphatically declared that "it is not the function of the Supreme Court to analyze or weigh such evidence all over again. . Court of Appeals. otherwise they would infringe against the non-impairment clause of the Constitution 44. . reiterating a long line of decisions]. April 28. Among the exceptional circumstances where a reassessment of facts found by the lower courts is allowed are when the conclusion is a finding grounded entirely on speculation. Court of Appeals. L-62482. Tibe. void. when the inference made is manifestly absurd. on September 1. voidable. are final and conclusive and may not be reviewed on appeal. Hon. such findings must stand. 58 SCRA 89. Baniqued vs. G. Neither by common sense. by simply getting the conservator to unilaterally revoke all previous dealings which had one way or another or come to be considered unfavorable to the Bank. CA Decision) xxx xxx xxx .e. Hence. petitioners are asking us to review and reverse such factual findings." Such powers. No. R. enormous and extensive as they are.) Leonida T. 18 SCRA 973] [at pp. July 25." specifically the findings that (1) the "Bank's counter-offer price of P5. February 25. 158 SCRA 138. Ineluctably. 59514. . EDCARNACION Acting Conservator In the third place. 33 SCRA 737. 1970. its jurisdiction being limited to reviewing errors of law that might have been committed by the lower court" (Tiongco v. therefore. vs. This Court so held that it is not the function of the Supreme Court to analyze or weigh such evidence all over again. cannot extend to the post-facto repudiation of perfected transactions.5 million had been determined by the past due committee and approved by conservator Romey. in Bernardo vs. 11. 1974. 1983. No. when there is grave abuse of discretion in the appreciation of facts. under the established fact. If the legislature itself cannot revoke an existing valid contract. Rivera informed plaintiffs by letter that "the bank's counter-offer is at P5. G. testimonial and documentary. . vs. L-47531. 1987. . Indeed. We have studied both the records and the CA Decision and we find no such exceptions in this case. as many people depend on (it) for investments. We are not unmindful of the tenacious plea that the petitioner Bank is operating abnormally under a government-appointed conservator and "there is need to rehabilitate the Bank in order to get it back on its feet . magnitude and vigor by which the parties through their respective eloquent counsel. In fine.5 million was reasonable. The assailed Decision is AFFIRMED. if produced. but petitioners' evidence was deemed insufficient by both the trial court and the respondent Court. As pointed out by plaintiff. the price agreed upon of P5.. which required the determination of questions of fact." To become credible and unequivocal. As of June 1987. While the Supreme Court is not a trier of facts and as a rule we are not required to look into the factual bases of respondent Court's decisions and resolutions. the appellate court patiently traversed and dissected the issues presented before it. 15. SO ORDERED.5 million and the conservator's powers to repudiate contracts entered into by the Bank's officers] — which per se could justify the dismissal of the present case. This we cannot do. deposits and well as employment. petitioner Bank is REPRIMANDED for engaging in forum-shopping and WARNED that a repetition of the same or similar acts will be dealt with more severely. argued their positions before this Court. On the contrary. at the same time. it is equally true that at the time of the transaction in 1987. the bank official refused it and confirmed that the P5. conclusions of fact of a trial judge — as affirmed by the Court of Appeals — are conclusive upon this Court. the findings of the said Court are supported by a preponderance of competent and credible evidence. the extinguishment of the Bank's offer of P5. To rule in favor of the Bank simply because the property in question has algebraically accelerated in price during the long period of litigation is to reward lawlessness and delays in the fulfillment of binding contracts. pp. it was respondent's submissions that were believed and became bases of the conclusions arrived at." 53 While we do not deny our sympathy for this distressed bank. we did so just the same. 1987 between the plaintiffs. the senior vice-president of the bank. like respect for perfected contracts. The inferences and conclusions are seasonably based on evidence duly identified in the Decision. the bank's submissions on this point do not inspire belief. . The respondent Court did not believe the evidence of the petitioners on this point. during the meeting of September 28. and there were (other) offers to buy the subject properties for a substantial amount of money. where the topic was the possible lowering of the price.5 million 54. lending credibility and dependability to its findings. CA Decision). . there are two procedural issues involved forum-shopping and the raising of issues for the first time on appeal [viz. particularly where. Moreover. WHEREFORE. . the Court hereby DENIES the petition.5 Million price had been passed upon by the Committee and could no longer be lowered (TSN of April 27. while the subject properties may currently command a much higher price. . considering that the Bank acquired these properties at a foreclosure sale for no more than P3. This Court cannot just gloss over private respondent's submission that. petitioners should have presented then Conservator Rodolfo Romey to testify on their behalf. which must be upheld under the rule of law and blind justice. non-impairment of obligations and sanctions against forum-shopping. to enable it to escape its binding obligation and to reap the benefits of the increase in land values. Certainly. In summary. . To be sure. the trial court and the appellate court were in common agreement thereon. absent any serious abuse or evident lack of basis or capriciousness of any kind. Under the rules on evidence 51. Indeed. The best that can be said in favor of petitioners on this point is that the factual findings of respondent Court did not correspond to petitioners' claims. We did not limit ourselves thereto. 34-35) (p.023 billion . if only to find out whether there is reason to disturb any of its factual findings. but were closer to the evidence as presented in the trial court by private respondent. characterizing it as "not credible" and "at best equivocal and considering the gratuitous and self-serving character of these declarations. Epilogue. finding no reversible error in the questioned Decision and Resolution. But this alone is no reason to reverse or ignore such factual findings. Rivera and Luis Co. as he would have been in the best position to establish their thesis. But the petitioners are now asking this Court to disturb these findings to fit the conclusion they are espousing. The second point was squarely raised in the Court of Appeals. as in this case. Costs against petitioners. 1990. the Court cannot stamp its imprimatur on such outrageous proposition. and instead. the Court cannot emotionally close its eyes to overriding considerations of substantive and procedural law.. there are settled exceptions where the Supreme Court may disregard findings of fact by the Court of Appeals 52. The argument deserves scant consideration. for we are only too aware of the depth. because the trial court is in a better position to observe the demeanor of the witnesses and their courtroom manner as well as to examine the real evidence presented. such suppression gives rise to the presumption that his testimony would have been adverse. but delved as well into the substantive issues — the perfection of the contract of sale and its enforceability. it is quite evident that the legal conclusions arrived at from the findings of fact by the lower courts are valid and correct. the Bank's overdraft with the Central Bank had already reached P1. That the Bank procrastinated and refused to honor its commitment to sell cannot now be used by it to promote its own advantage. . 1992 order granting the Stockholders/ Investors' claim. Vitaliano N. Nañagas. he granted the Union's Motion for issuance of a writ of Execution. 1992 he filed a Notice of Appeal from the orders of September 16. however. he filed a Motion for Reconsideration and Clarification of the order. likewise filed claims for the payment of investment in the PaBC allegedly in the form of shares of stocks amounting to US$2. ANG KEONG LAN and E. and cash equivalent of Sick Leave Benefit due its members as employees of PaBC. is a special proceeding or an ordinary civil action. 1992. 1992. MENDOZA. DEPUTY SHERIFF RAMON ENRIQUEZ and ANG ENG JOO. a petition entitled "Petition for Assistance in the Liquidation of Pacific Banking Corporation. On March 13. petitioner. J. They alleged that their claim constituted foreign exchange capital investment entitled to preference in payment under the Foreign Investments Law. vs. after which creditors filed their claims with the court. 1992 he moved for reconsideration. another Notice of Appeal was filed by the Office of the Solicitor General in behalf of Nañagas. a new Liquidator. G. No. 112991 March 20. 1991.: These cases have been consolidated because the principal question involved is the same: whether a petition for liquidation under §29 of Rep. 1991. 1991. and its officers and members. he filed a Notice of Appeal and a Motion for Additional Time to Submit Record on Appeal. Proceedings in the CB and the RTC On July 5. Christmas bonus. 112991. i. but his motion was denied by the court on October 2. 1995 PACIFIC BANKING CORPORATION EMPLOYEES ORGANIZATION. filed a complaint-in-intervention seeking payment of holiday pay. The judge declared his September 13. 1992. 109373.R. The Fifth and the Fourteenth Divisions of the Court of Appeals reached opposite results on this question and consequently applied different periods for appealing. 1992. COURT OF APPEALS. On May 17.531. 4 President of the Philippine Deposit Insurance Corporation (PDIC). VERIDIANO II. Ang Int'l. This order was received by the Liquidator on December 9. PAULA S. petitioner in G. 1991. 13th month pay differential. The following day. otherwise known as the Central Bank Act." 3 The petition was approved. He received the order denying his Motion for Reconsideration on October 5. constituted 11% of the total subscribed capital stock of the PaBC. the judge directed the execution of his September 11. 699 of its Monetary Board.. In its order dated September 13. 1992. 7 The Liquidator received the order on September 16. 5 The Liquidator received a copy of the order on September 16. No. .. JUDGE REGINO T. A few months later.J.Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. 1985. SY. respondents. 1989 the Pacific Banking Corporation Employees Organization (Union for short). 1991 6 but in effect denied the Liquidator's motion for reconsideration.e. PAUG. respondent judge disallowed the Liquidator's Notice of Appeal on the ground that it was late. 1986. respondents. 1992. the judge ordered the Notice of Appeal stricken off the record on the ground that it had been filed without authority of the Central Bank and beyond 15 days. 1992.J ANG INT'L. No. the Central Bank filed with the Regional Trial Court of Manila Branch 31. LTD.R. Ang Keong Lan and E. consisting of 154. it was placed under liquidation 1 and a Liquidator was appointed. As in the case of the Union. the judge modified his September 13. as Liquidator of Pacific Banking Corporation. GONZALO C. the Pacific Banking Corporation (PaBC) was placed under receivership by the Central Bank of the Philippines pursuant to Resolution No. 1991 order and subsequent orders to be final and executory and denied reconsideration. THE HONORABLE COURT OF APPEALS and VITALIANO N. 1991. petitioners. Act No. In his order of February 10. 109373 March 20. On March 27. In his order dated September 11. 1992. was appointed by the Central Bank. On December 23.18. 1991. respondent judge of the RTC directed the Liquidator to pay private respondents the total amount of their claim as preferred creditors.462 common shares. 2 On April 7. On September 30. 1995 THE PRESIDENT OF THE PHILIPPINE DEPOSIT INSURANCE CORPORATION. 1991. On October 14. In his order of October 28. 1991. December 10.. represented by their Attorney-in-fact. HON. The shares of stocks. as Liquidator of the Pacific Banking Corporation .R. vs. NAÑAGAS II. On October 16. 265. The facts are as follows: I. private respondents in G. No.R. 1992 and October 2.632. the trial court ordered payment of the principal claims of the Union. salary increase differential. more than 15 days after receipt of the decision. In his order of December 6. 3. to which the cases were separately raffled. 09373) the Fifth Division 8 held in the case of the Union that the proceeding before the trial court was a special proceeding and. the notice of appeal was filed late.R. The Court of Appeals erred in concluding that the case is a special proceeding governed by Rules 72 to 109 of the Revised Rules of Court.II. 129 provides: §39. No record on appeal shall be required to take an appeal. The two Divisions of the Court of Appeals. The Court of Appeals acted without jurisdiction over the subject matter or nature of the suit. This section shall not apply in appeals in special proceedings and in other cases wherein multiple appeals are allowed under applicable provisions of the Rules of Court. Accordingly. however. SP No. if a liquidation proceeding is an ordinary action. that in habeas corpus cases the period for appeal shall be forty-eight (48) hours from the notice of the judgment appealed from. deducting the period during which his motion for reconsideration was pending.632. 265 is in the nature of a special proceeding. judgments.R. resolution. 109373 the Union contends that: 1. award. 27751 (now G. 112991 the Liquidator contends that: 1.18 is not in the nature of foreign investment as it is understood in law. The claim of private respondents in the amount of US$22. The Court of Appeals erred seriously in concluding that the notice of appeal filed by Nañagas was filed on time. Otherwise.R. Private respondents are not creditors of PaBC but are plain stockholders whose right to receive payment as such would accrue only after all the creditors of the insolvent bank have been paid. then the period of appeal is 30 days and the party appealing must. Since the notice of appeal of the Liquidator was filed on the 30th day of his receipt of the decision granting the Union's claims. the entire record shall be transmitted with all the pages prominently numbered consecutively. the period for appealing from any decision or final order rendered therein is 30 days. No. — The period for appeal from final orders. Act No.R. On the other hand. If it is. First. No. the period for appealing from any decision or final order rendered therein is 15 days and that since the Liquidator's appeal notice was filed on the 23rd day of his receipt of the order appealed from. 2. 5. The Court of Appeals erred seriously in declaring that the second notice of appeal filed on December 23. set aside the orders of the lower court and directed the latter to give due course to the appeal of the Liquidator and set the Record on Appeal he had filed for hearing. 1992 in CA-G. therefore. the principal question in these cases is whether a petition for liquidation under §29 of Rep. or decisions of any court in all cases shall be fifteen (15) days counted from the notice of the final order. 1991 by the Solicitor General is a superfluity. 4. awards. 2. On the other hand. The Petition for Assistance in the Liquidation of the Pacific Banking Corporation s a Special Proceeding case and/or one which allows multiple appeals. rendered conflicting rulings. the Fourteenth Division 9 ruled in CA-G. As stated in the beginning.531. judgment or decision appealed from: Provided. No. SP No. file with the trial court a record on appeal in order to perfect his appeal. 5. The issuance of a writ of execution against the assets of PaBC was made with grave abuse of discretion. Present Proceedings The Union and the Liquidator then separately filed petitions before this Court. BP Blg. resolutions. 29351 (now G. The claim of private respondents has not been clearly established and proved. Prohibition and Mandamus in the Court of Appeals to set aside the orders of the trial court denying his appeal from the orders granting the claims of Union and of the Stockholders/Investors. Therefore. the appeal was brought on time. The Fifth Division. together with an index of the contents thereof. in G. the Fourteenth Division dismissed the Liquidator's petition. therefore.R. Proceedings in the Court of Appeals The Liquidator filed separate Petitions for Certiorari. Appeals. In lieu thereof. In G. in addition to a notice of appeal. 3. The petitions in these cases must be dismissed. the period of appeal is 15 days from notice of the decision or final order appealed from. The Court of Appeals gravely erred in taking cognizance of the petition for certiorari filed by Nañagas who was without any legal authority to file it. 1993. in which case the period of appeal is 30 days and not 15 days from receipt of the order/judgment appealed from. No. . on December 16. 4. III. In its decision of November 17.R. 112991) in the case of the Stockholders/Investors that a liquidation proceeding is an ordinary action. The insolvency of the bank had already been previously determined by the Central Bank in accordance with Section 9 of the CB Act before the petition was filed. resolution or award appealed from. like an ordinary action. a person who claims no interest thereon may file an action for interpleader to compel the claimants to "interplead" and litigate their several claims among themselves. (Section I Rule 63). the petition for assistance of the court in the liquidation of an asset of a bank is not "one to establish the status or right of a party or a particular fact." On the other hand. the period of appeals shall be thirty (30) days. by which the party prosecutes another for the enforcement or protection of a right.The Interim Rules and Guidelines to implement BP Blg. Rule 72 of the Rules of Court. Special Proceeding Distinguished. All that needs to be done is to liquidate the assets of the bank and thus the assistance of the respondent court is sought for that purpose. This embraces Rule 41 covering appeals from the regional trial court to the Court of Appeals. or a particular fact. under Section 1 Rule 2 of the Rules of Court. . including one to establish the status or right of a party or a particular fact. a record on appeal being required. Section 2 of the same Rule states that "every other remedy including one to establish the status or right of a party or a particular fact shall be by special proceeding. must be taken within fifteen (15) days from notice of the judgment. 10 The Fourteenth Division stated: The petition filed is akin to an interpleader under Rule 63 of the Rules of Court where there are conflicting claimants or several claims upon the same subject matter. We disagree with the foregoing view of the Fourteenth Division. his remedy is to file an action. Such petition does not seek the enforcement or protection of a right nor the prevention or redress of a wrong against a party. 13 He is thus charged with insuring that the assets of the corporation are paid only to rightful claimants and in the order of payment provided by law. Where a party litigant seeks to recover property from another." To our mind. Hence. right or fact. (b) In appeals in special proceedings in accordance with Rule 109 of the Rules of Court and other cases wherein multiple appeals are allowed. xxx xxx xxx Thus. What it seeks is merely a declaration by the trial court of the corporation's insolvency so that its creditors may be able to file their claims in the settlement of the corporation's debts and obligations. or the prevention or redress of a wrong. 12 This is not the case in a liquidation proceeding where the Liquidator. — Every other remedy. Rule 109 of the Rules. Put in another way. the petition is not intended to establish the fact of insolvency of the bank. Elucidating the crucial distinction between an ordinary action and a special proceeding. Action defined. from the aforequoted definitions of an action and a special proceeding. shall be by special proceeding. as representative of the corporation. The Fourteenth Division of the Court of Appeals held that the proceeding is an ordinary action similar to an action for interpleader under Rule 63. the petition only seeks a declaration of the corporation's state of insolvency and the concomitant right of creditors and the order of payment of their claims in the disposition of the corporation's assets. while the latter is but a petition for a declaration of a status. Contrary to the rulings of the Fourteenth Division. order. 129 provides: 19." Contrary to the submission of the petitioner. an action is defined as "an ordinary suit in a court of justice by which one party prosecutes another for the enforcement or protection of a right or the prevention or redress of a wrong. the preceding rules covering ordinary civil actions which are not inconsistent with or may serve to supplement the provisions of the rule relating to such civil actions are applicable to special civil actions. an action for interpleader involves claims on a subject matter against a person who has no interest therein. except in habeas corpus cases and in the cases referred to in paragraph (b) hereof. takes charge of its assets and liabilities for the benefit of the creditors. It does not pray for affirmative relief for injury arising from a party's wrongful act or omission nor state a cause of action that can be enforced against any person. — Action means an ordinary suit in a court of justice. or the prevention or redress of a wrong while special proceeding is the act by which one seeks to establish the status or right of a party. Put in another way. liquidation proceedings do not resemble petitions for interpleader. his remedy is a special proceeding to establish the fact or status of insanity calling for an appointment of guardianship. For one. Period of Appeals. Considering this distinction. Where his purpose is to seek the appointment of a guardian for an insane. the petition only seeks a declaration of the corporation's debts and obligations. It should be pointed out that this petition filed is not among the cases categorized as a special proceeding under Section 1. Rule 2 of the Rules of Court provide: §1. may be appealed only within fifteen (15) days from notice of the judgment or order appealed from. §2. action is distinguished from special proceeding in that the former is a formal demand of a right by one against another. An interpleader is in the category of a special civil action under Rule 62 which. a petition for liquidation of an insolvent corporation should be classified a special proceeding and not an ordinary action. Chief Justice Moran states:" 11 Action is the act by which one sues another in a court of justice for the enforcement or protection of a right. — (a) All appeals. nor among the special proceedings that may be appealed under Section 1. Under Rule 62. as each claim is considered separate and distinct from the others. a record of appeal is instead required to be prepared and transmitted to the appellate court. it has been held that the Court's may interfere with the Central Bank's exercise of discretion in determining whether or not a distressed bank shall be supported or liquidated. a record on appeal being required. And the Order issued relative to a particular claim applies only to said claim. multiple appeals are allowed in proceedings for liquidation of an insolvent corporation. On the other hand. the Liquidator did not file a record on appeal with the result that he failed to perfect his appeal. Although the claims are litigated in the same proceeding. No. therefore. multiple appeals are allowed in liquidation proceedings. having been filed on the 23rd day of receipt of the order granting the claims of the Stockholders/Investors. 109373 (case of the Labor Union). The Fifth Division of the Court of Appeals correctly granted the Liquidator's Petition for Certiorari. In lieu of the original record. The Liquidator and the administrator or executor are both charged with the assets for the benefit of the claimants. correctly noted: A liquidation proceeding is a single proceeding which consists of a number of cases properly classified as "claims. As already stated a record on appeal is required under the Interim Rules and Guidelines in special proceedings and for cases where multiple appeals are allowed.e. the period to appeal therefrom should be thirty (30) days. "Petition for Assistance in the Liquidation of e. ipso facto creates a situation where multiple appeals are allowed. the liability of the corporation and the estate is not disputed.234. the order allowing or disallowing a particular claim is final order. The first phase is concerned with the approval and disapproval of claims. A liquidation proceeding is commenced by the filing of a single petition by the Solicitor General with a court of competent jurisdiction entitled. Respondent judge thus erred in disallowing the notice on appeal and denying the Liquidator's motion for extension to file a record on appeal. Court of Appeals: 15 There is no question. Without waiting for the resolution of his motion for extension. However. Necessarily the original record on appeal must remain in the trial court where other claims may still be pending. 265. No. only said claim is affected. discrimination or bad faith (Ramos v. They remain with the liquidation court. 1991. This phase may end with the declaration by the liquidation court that the claim is not proper or without basis. within 30 days of his receipt of the order granting the Union's claim. in the event that an appeal from an Order allowing or disallowing a particular claim is made. a liquidation proceeding resembles the proceeding for the settlement of state of deceased persons under Rules 73 to 91 of the Rules of Court. the Liquidator cannot question the order of the court or appeal from it. Furthermore. The reason for this is that the several claims are actually separate ones and a decision or final order with respect to any claim can be appealed. v. the Liquidator filed a notice of appeal and a motion for extension to file a record on appeal on December 10. Verily. In either case. In the latter case.292. the Fourteenth Division's decision dismissing the Liquidator's Petition for Certiorari. Upon the approval of the petition seeking the assistance of the proper court in the liquidation of a close entity. it may also end with the liquidation court allowing the claim. a record on appeal is necessary in each and every appeal made. Thus. The second phase involves the approval by the Court of the distribution plan prepared by the duly appointed liquidator. As the Fifth Division of the Court of Appeals. the Liquidator's notice of appeal was filed on time. Under the same section (§29) of the law invoked by the Union. i. Discretion has its limits and has never been held to include arbitrariness. and thereafter included Liquidator. as in the settlement of estates. 41 SCRA 567 [1971]). that the action of the monetary Board in this regard may be subject to judicial review. we find that the Fifth Division correctly granted the Liquidator's Petition for Certiorari.. as representative of the Monetary Board. by its nature. and may be appealed by the party aggrieved thereby. Act No. the order granting the claims of the Stockholders/Investors became final.g. the import of the final character of an Order of allowance or disallowance of a particular claim cannot be overemphasized. 162-164). In G.R. there was nothing else for the Liquidator to do except to comply with the order of the court. The court's concern is with the declaration of creditors and their rights and the determination of their order of payment. All claims against the insolvent are required to be filed with the liquidation court. it ushers in the final phase of the liquidation proceeding — payment of all allowed claims in accordance with the order of legal priority and the approved distribution plan." It is basically a two-phased proceeding. 1991 within the extension sought a record on appeal. The distribution plan specifies in detail the total amount available for distribution to creditors whose claim were earlier allowed. Prohibition and Mandamus and its decision should. preserves the assets of the institution. The two have a common purpose: the determination of all the assets and the payment of all the debts and liabilities of the insolvent corporation or the estate. leaving the others to proceed with their ordinary course. all money claims against the bank are required to be filed with the liquidation court. In both instances. in G. Pacific Banking Corporation. The Union claims that under §29 of Rep. Because of the Liquidator's failure to perfect his appeal. It is the operative fact that constitutes a liquidation proceeding a "case where multiple appeals are allowed by law. therefore. It contends that since the Monetary Board had previously admitted PaBC's liability to the laborers by in fact setting aside the amount of P112. the court has authority to set aside the decision of the Monetary Board "if there is a convincing proof that the action is plainly arbitrary and made in bad faith. . The Union's contention is untenable." 14 As this Court held in Rural Bank of Buhi. Prohibition and Mandamus must be affirmed albeit for a different reason. leaving the other claims unaffected.Rather. Inevitably. As already noted. (Record pp. quoting the Liquidator.. the claim shall be classified whether it is ordinary or preferred. 112991 (the case of the Stockholders/Investors). Second.R. and implements the liquidation plan approved by the Monetary Board and that. Consequently. Each claim is heard separately. 109373. In G. the treatment is individual. No. Obviously.R. Consequently. Inc. the original records of the proceeding are not elevated to the appellate court. On the other hand. The Order finally disposes of the issue of how much property is available for disposal.44 for the payment of their claims. In liquidation proceedings. the function of the trial court is not limited to assisting in the implementation of the orders of the Monetary Board. the court merely assists in adjudicating the claims of creditors. Hence. Prohibition and Mandamus. Moreover. Central Bank of the Philippines. and which may assume finality if no appeal is made therefrom. he filed on December 20. affects only the particular claims involved. be affirmed." The issuance of an Order which. In such case. 17 WHEREFORE. 265 he acts in behalf of the bank "personally or through counsel as he may retain. Estoesta informed the trial court in March 27. the decisions appealed from are AFFIRMED. 1992. C. Bidin. the Liquidator is the representative not only of the Central Bank but also of the insolvent bank.. Narvasa. No. On October 22. 109373 and G. Under §§28A-29 of Rep. in all actions or proceedings or against the corporation" and he has authority "to do whatever may be necessary for these purposes. . 1992. Finally the Union contends that the notice of appeal and motion for extension of time to file the record on appeal filed in behalf of the Central Bank was not filed by the office of the Solicitor General as counsel for the Central Bank.R. This contention has no merit. the OSG had previously authorized lawyers of the PDIC to prepare and sign pleadings in the case. No 112991. 16 Conformably thereto the Notice of Appeal and the Motion for Additional Time to submit Record on Appeal filed were jointly signed by Solicitor Reynaldo I." This authority includes the power to appeal from the decisions or final orders of the court which he believes to be contrary to the interest of the bank. Saludares in behalf of the OSG and by lawyers of the PDIC. JJ. Act No.J.In truth.R. concur. Regalado and Puno. in G. as Assistant Solicitor General Cecilio O. SO ORDERED. Evangelista for the receiver.R. that in a letter. that. and 4. as well as . 1961. Named as respondents in the petition are. Resuello. 1961. the seized documents and records were. thereby exceeding the scope of its powers and authority as granted under its charter. M. Manalo & Feliciano for respondents.. Natalio M. 1961. Sebastian Vito Tanjutco Jr. addressed to said Superintendent of Banks. that. commercial and industrial projects. RESUELLO. Resuello Ricardo D. said legal counsel rendered an opinion resolving the query in the affirmative. namely: NAME Rosendo T. in violation of Secs. E. 1962. or on March 9. the Board of Directors of the corporation adopted a set of by-laws.) that upon examination and evaluation of the same records of the corporation. that. to the said Board. Zapa Pilar G. acting upon this request. RICARDO D. that on September 19. on October 11. BIENVENIDO V. upon application of members of the Manila Police Department and an agent of the Central Bank. No. upon the return of said warrant. a memorandum dated September 10. 1961. Sycip. by virtue of the transfer of the authority. it should come under the supervision of the Monetary Board of the Central Bank. in turn. 1962. 1967 REPUBLIC OF THE PHILIPPINES. one of defendants herein. in addition to said corporation. that the next day. JOSE SEBASTIAN and VITO TANJUTCO JR. that. that. upon examination and evaluation of said documents and records. the Superintendent of Banks of the Central Bank of the Philippines asked its legal counsel an opinion on whether or not said corporation is a banking institution. duties and functions of the Secretary of Finance. placed under the custody of the Central Bank of the Philippines. That being a private credit and financial institution. in that it is soliciting and accepting deposit from the public and lending out the funds so received. 1962. Salva for petitioner. to comply with the requirements of the General Banking Act. and secondarily. Alafriz and Solicitor E. RESUELLO. petitioner. the Commission referred it to the Central Bank. the following. PILAR G." (Emphasis Supplied. the Municipal Court of Manila issued Search Warrant No. gave the former a copy of the above-mentioned opinion. PABLO TANJUTCO. Rosendo T. respondents. ARTURO SORIANO. 88 and 89 of Republic Act 337. Luna.Republic of the Philippines SUPREME COURT Manila EN BANC G. that. 1961. the Commission advised the corporation on December 5. prior thereto. 2 and 6 of Republic Act 337. RUBEN BELTRAN. Salazar. SECURITY CREDIT AND ACCEPTANCE CORPORATION. BALATBAT. pursuant to Secs. members of the intelligence division of the Central Bank and of the Manila Police Department searched the premises of the corporation and seized documents and records thereof relative to its business operations. 337). Performing banking functions. in violation of the Securities Act.2 which were filed with said Commission on April 5. C. vs. 1962. in buying and selling stocks and bonds of any corporation. within the purview of Republic Act No. finding that the corporation is: 1. sought a reconsideration of the aforementioned opinion.: This is an original quo warranto proceeding. the intelligence division of the Central Bank submitted. which. consequently such acts are ultra-vires: 3. L-20583 January 23. in line with which. which reconsideration was denied on March 16. ROSENDO T. to the Acting Deputy Governor thereof. 337. Balboa and F. on May 18. POSITION President & Chairman of the Board Director Director Director Director & Vice-President Director & Secretary-Treasurer Director & Auditor Director & Legal Counsel Director & Personnel Manager The record shows that the Articles of Incorporation of defendant corporation1 were registered with the Securities and Exchange Commission on March 27. before acting on this application. Resuello Pablo Tanjutco Arturo Soriano Ruben Beltran Bienvenido V. initiated by the Solicitor General. CONCEPCION. Balatbat Jose R. that. as alleged members of its Board of Directors and/or Executive Officers.J. with the authority of the court. 1961. the corporation had applied with the Securities and Exchange Commission for the registration and licensing of its securities under the Securities Act. 2. to dissolve the Security and Acceptance Corporation for allegedly engaging in banking operations without the authority required therefor by the General Banking Act (Republic Act No. A-1019. Bank Commissioner and the defunct Bureau of Banking. the corporation through its president. power. 139 and 140 of Republic Act 265 and Secs. Soliciting subscriptions to the corporate shares of stock and accepting deposits on account thereof. without requisite certificate of authority from the Monetary Board of the Central Bank. pursuant thereto. Soliciting and accepting savings deposits from the general public when the company's articles of incorporation authorize it only to engage primarily in financing agricultural. dated January 15. Office of the Solicitor General Arturo A. ZAPA. without prior registration and/or licensing of such shares or securing exemption therefor. and of the search and seizure made thereunder.. from performing the banking operations complained of. or of Search Warrant No. rendered. Inc. Considering the extent of its operations. Resuello and Pilar G. but. receives deposits from the public regularly. Soriano.74. Balatbat and Sebastian as proposed president. that defendants Soriano. They. Section 2 of Republic Act No.000 preferred shares of stock.of other documents and pertinent pipers obtained elsewhere. on December 6. made and/or reached by the legal counsel and the intelligence division of the Central Bank. 337. and of other pertinent laws. the corporation had established 74 branches in principal cities and towns throughout the Philippines. and upon the filing of the requisite bond. according to its statement of assets and liabilities. that during the period from March 27. auditor and legal counsel. its original capital stock of P500. the Monetary Board promulgated its Resolution No. 1961 to May 18.000 divided into 130. was increased. in consequence of the foregoing deposits with the corporation. vice-president. to P3. Recommendations: In view of all the foregoing. A-1019 of the Municipal Court of Manila.689. are directors of the corporation.98 and suffered. as of July 7. Premises considered. Beltran and Sebastian as proposed directors. as of December 31. denied that defendants Tanjutco (Pablo and Vito. a writ of preliminary injunction be issued ex parte.000 preferred shares. ruling.136. 1962 of the examination made by Examiners of this Department of the seized books and records of the Corporation is attached hereto.000 founders' shares of stock and 80. said officer assumed his functions as such receiver on September 16. the Superintendent of Banks of the Central Bank of the Philippines was appointed by this Court receiver pendente lite of defendant corporation. In their answer. of the Central Bank Act. Beltran. the corporation.00 each. defines the term. if warranted criminal action against the Persons criminally liable and/or quo warranto proceedings with preliminary injunction against the Corporation for its dissolution. Tanjutco (Pablo and Vito. acting upon said memorandum of the Superintendent of Banks. Jr. 1961. Aquilino L. including. That the Security Credit and Acceptance Corporation is performing banking functions without having first complied with the provisions of Republic Act No. Only duly authorized persons and entities may engage in the lending of funds obtained from the public through the receipts of deposits or the sale of bonds.000 founders' shares and 470.685. Illera and Pilar G. in less than one (1) year. that on November 29. . Sale of its shares of stock or subscriptions to its capital stock are offered to the public as part of its regular operations.. the Board of Directors of the corporation was composed of defendants Rosendo T. seized by the combined MPD-CB team was conducted by this Department. Inc. divided into 20. the Securities and Exchange Commission. That this case be referred to the Special Assistant to the Governor (Legal Counsel) for whatever legal actions are warranted. Resuello. Accordingly. Resuello.265. otherwise known as the General Banking Act.000 of an individual depositor may be converted into stock subscription to the capital stock of the Security Credit and Acceptance Corporation at the option of the depositor. contained in his Memorandum to the Governor dated May 23. that through a systematic and vigorous campaign undertaken by the corporation. it is recommended that the Monetary Board decide and declare: 1. 1962.29. without having first complied with the provisions of Sections 2 and 6 of Republic Act No.3 that on September 25. as well as the members of its Board of Directors and the officers of the corporation.00 each. Upon joint motion of both parties. 337. defendants admitted practically all of the allegations of fact made in the petition. this notwithstanding. The examination disclosed the following findings: a. with a prayer that. 11. 1962. on September 14. Accumulated deposits of P5.. the examination disclosed that the Security Credit and Acceptance Corporation is regularly lending funds obtained from the receipt of deposits and/or the sale of securities. 1963. that. the Superintendent of Banks. with defendants Zapa. enjoining the corporation and its branches. Resullo. Soriano. the corporation had a capital stock aggregating P1. 1962. secretarytreasurer. 1962. (Emphasis supplied. without having first complied with the provisions of said Act.273. as well as its officers and agents. on August 20.) that. Beltran. Such deposits are treated in the Corporation's financial statements as conditional subscription to capital stock. with defendants Rosendo T. Resuello had instituted Civil Case No. both with a par value of P5. Balatbat and Sebastian. during the year 1961. the corporation had filed with the Superintendent of Banks an application for conversion into a Security Savings and Mortgage Bank. 1962. defendants averred that. as well as the validity of the opinion. however. 12. Jr. that said additional officers had never assumed their respective offices because of the pendency of the approval of said application for conversion.). or obligations of any kind and all entities regularly conducting operations shall be considered as banking institutions and shall be subject to the provisions of this Act. loans are made regularly to any person by the Security Credit and Acceptance Corporation. 1962. submitted to the Monetary Board of the Central Bank a memorandum dated August 28. 52342 of the Court of First Instance of Manila against Purificacion Santos and other members of the savings plan of the . have been and still are performing the functions and activities which had been declared to constitute illegal banking operations. both of which had a par value of P5.). otherwise known as the General Banking Act. stating inter alia. Zapa. the same had managed to induce the public to open 59. Vito Tanjutco Jr. That out of the funds obtained from the public through the receipt of deposits and/or the sale of securities. a loss of P96. 1961. "banking institution" as follows: Sec. in violation of Sections 2 and 6 thereof. b. Balatbat. 1962 and in accordance with the written instructions of Governor Castillo dated May 31. the Security Credit and Acceptance Corporation. 2. 337.463 savings deposit accounts with an aggregate deposit of P1. or in Resolution No. 1095. in addition to the defendants first named above. and Pablo Tanjutco had subsequently withdrawn from the proposed mortgage and savings bank. Resuello. 1962 — or before the commencement of the present proceedings — the corporation and defendants Rosendo T. 13. evaluation and conclusions. Sebastian. 337.000. 1962. declaring that the corporation is performing banking operations. and the Superintendent of Banks of the Philippines. securities. and 2. and that a receiver be appointed pendente lite. the corporation was advised of the aforementioned resolution. Pilar G. and that. an examination of the books and records of the Security Credit and Loans Organizations. the Solicitor General commenced this quo warranto proceedings for the dissolution of the corporation. Intelligence Division. 1095 of the Monetary Board. Zapa.000. respectively. meanwhile. A copy of the Memorandum Report dated July 30. that on July 11. Pursuant to the request for assistance by the Chief. By way of affirmative allegations. The Corporation therefore is performing 'banking functions' as contemplated in Republic Act No. 1963. in support of the second alternative. that the views of the legal counsel of the Central Bank.74. p. give loans. 347. 255 U. but to an abnormal situation created by the mass demand for withdrawal of deposits. as amended on May 8. Jose R. and the receiver is. ) 328. a moneyed institute [Talmage vs. Footnotes 1 Which. Moreover. 9 C. It is so ordered. we have deemed it best to determine the merits thereof. 30. agent. 2. consequently. commercial and industrial projects. Arturo Soriano.. Indeed. despite its increased capitalization of P3. Regala. to the corporation to stop soliciting and receiving deposits. Bengzon. It is urged. however. there is. broker or attorney-in-fact. that. 577) and to deal. after filing the requisite bond. except as to one of the defendants in said case No. 115 N. with an aggregate deposit of P1. the defendants having already committed infractions and violations of the law justifying the dissolution of the corporation. or of circulation is doing a banking business. 266). that. in general. because in said case there were issues of fact which required the presentation of evidence. 667. Reyes. Zaldivar.) Accordingly.) . the Court of First Instance of Manila had appointed Jose Ma. by Zellmann Vol. the issues therein have already been joined. and that the withdrawal of deposits of members of the savings plan of the corporation was understood to be subject.. concur. that the failure of the corporation to honor the demands for withdrawal of its depositors or members of its savings plan and its former employees was due.000.J. vs.136. in notes. Ed. the legal nature of said facts or of the aforementioned acts of the corporation. 46). 18 Ann. is not in point. accordingly.B. by the suspension by debtors of the corporation of the payment of their debts thereto and by an order of the Securities and Exchange Commission dated September 26. Ricardo D. 52342. and its office equipment and appliances. Balatbat. 52342. that neither has the validity of Search Warrant No. 348] founded to facilitate the borrowing. better equipped than appellate courts for the taking of testimony and the determination of questions of fact.W. and courts of first instance are. Wherefore. of the Securities and Exchange Commission. 1962. defendant corporation has not secured the requisite authority to engage in banking. admittedly. concurrently with courts of first instance. In the case at bar.L. that. however. that acting upon a petition filed by plaintiffs in said case No.R. accordingly. It is conceded. on December 6. by the attachment of property of the corporation by its creditors. defendants deny that its transactions partake of the nature of banking operations. although but one of these functions is exercised. 1962. Pell 7 N. 1962. 65 L. the writ prayed for should be. namely. that. (57 Phil. Murray.. 728.S. Kansas City Title & Trust Co. Makalintal. 337. Ct. it should be noted that this Court is vested with original jurisdiction. For this reason. ordered dissolved. 937. Cas. (Banks & Banking. To extend credit facilities for home building and agricultural. Sanchez and Castro. as the term is used in Section 2 of the General Banking Act. bills of exchange. a bank has been defined as: . attached to said pleading. It is clear that these transactions partake of the nature of banking. State. owing to the number of persons affected thereby. it has been held that: An investment company which loans out the money of its customers. not to mismanagement or misappropriation of corporate funds. J. That the illegal transactions thus undertaken by defendant corporation warrant its dissolution is apparent from the fact that the foregoing misuser of the corporate funds and franchise affects the essence of its business. S.corporation and the City Fiscal for a declaratory relief and an injunction. In this connection. (MacLaren vs. In its reply. to hear and decide quo warranto cases and. the Superintendent of Banks and the Monetary Board above referred to have been expressed in the lawful performance of their respective duties and have not been assailed or impugned in accordance with law. JJ. 6 Ariz 215. defendant corporation has violated the law by engaging in banking without securing the administrative authority required in Republic Act No. that on December 3.. 730.689. real or personal of every kind and nature. as to time and amounts. and that its continuance inflicts injury upon the public. 41 S. for a declaratory relief is now highly improper. is a bank.000 and its deposits amounting to not less than P1. in Civil Case No. The Veraguth case cited by herein defendants. 1961. any person engaged in the business carried on by banks of deposit. showing that said defendants had been elected officers thereof.136. The main issue here is one of law. that it is willful and has been repeated 59. in consequence of a propaganda campaign therefor. Cornings Sav.463 times. A-1019 been contested as provided by law. that the only assets of the corporation now consist of accounts receivable amounting approximately to P500. (3 Seld. 135 Am. and other properties. either as principal.463 savings account deposits have been made by the public with the corporation and its 74 branches. Bienvenido V. deposits. Although. and because public interest demands an early disposition of the case. Ruben Beltran. 1962. to the financial condition of the corporation as an investment firm.74. collects the interest and charges a commission to both lender and borrower.Y.. no dispute as to the principal facts or acts performed by the corporation in the conduct of its business. upon every and all kind and classes of products. Isabela Sugar Co. as it is hereby granted and defendant corporation is. 139 Iowa 338).P. Judge Gaudencio Cloribel of said court issued a writ directing the defendants in said case No. however.. 56 P. 55.W. authorized it: "1.. mortgages and pledges. Ramirez as receiver of the corporation. and credits (State vs. that this is confirmed by the minutes of a meeting of stockholders of the corporation. . on December 12. 52342. said Ramirez qualified as such receiver. 577. 1962. 180. J. 52342 and their representatives or agents to refrain from prosecuting the plaintiff spouses and other officers of the corporation by reason of or in connection with the acceptance by the same of deposits under its savings plan. materials. and that the aforementioned petition of the corporation. Dizon. directed to administer the properties. the Intelligence Division. (Western Investment Banking Co. Zapa. of the anniversary publication of defendant corporation showed that defendants Pablo Tanjutco. and other assets of defendant corporation and wind up the affairs thereof conformably to Rules 59 and 66 of the Rules of Court. 52342 of the Court of First Instance of Manila. 243. merchandise. that this case should be remanded to the Court of First Instance of Manila upon the authority of Veraguth vs. lending and safekeeping of money (Smith vs.689. 1. goods. 731. 141 Wis.000. 826.. Bank.S. are officers and/or directors thereof. it is discretionary for us to entertain the present case or to require that the issues therein be taken up in said Civil Case No. of discount. a total of 59. Sebastian and Vito Tanjutco Jr. 210. plaintiff alleged that a photostat copy. To extend credit. which has been lent out to such persons as the corporation deemed suitable therefor. 124 N. held on September 27. The appointment of receiver herein issued pendente lite is hereby made permanent. ). and of other pertinent laws. and. in default of the payment thereof. partnerships. safekeeping.' 'trust corporation. (Emphasis supplied). or obligations of any kind. acquire. but such persons and entities shall be subject to regulation by the Monetary Board of the Central Bank. To draw. corporation or association without having first complied with the provisions of this Act in so far as it relates to commercial banking corporations. 'bank'. the officers and directors thereof shall be jointly and severally liable. and all entities regularly conducting such operations shall be considered as banking institutions and shall be subject to the provisions of this Act. savings and mortgage banks. bonds. or transact in any manner the business of any such bank. unless expressly limited by the Board of Directors: . negotiate or collect accounts or notes receivables. and associations performing banking functions in the Philippines. industry or enterprises of any person. corporation or association. corporation or association in so far as may be permitted under the laws of the Philippines. mortgage. 2. and take over. trust corporations. purchase. securities. 4. inter alia: "c) To pay for any property or rights acquired by the corporation or to discharge obligations of the corporation either wholly or partly in money or in stock.' 'trust company. building and loan associations." Republic of the Philippines SECOND DIVISION . 3 "Sec. all or any part of the rights. or building and loan association as the case may be. "Sec. or use in connection with its business title the word or words. bonds. assets and business of any person.' 'building and loan association. banking institutions. Only duly authorized persons and entities may engage in the lending of funds obtained from the public through the receipts of deposits or the sale of bonds.' or words of similar import.. are synonymous and interchangeable and specially include banks. as used in this Act. commercial banks. disbursement. trust corporation. No person. Any violation of the provisions of this section shall be punished by a fine of five hundred pesos for each day during which such violation is continued or repeated. acquired or taken over. the proper officers of the corporation shall have these powers. partnership. branches and agencies in the Philippines of foreign banks. partnership. "The Monetary Board may similarly regulate the activities of persons and entities which act as agents of banks. companies. business or property may be purchased. hereinafter called Philippine branches. or otherwise. For any violation of the provisions of this section by a corporation. that as hereinafter provided. and to undertake and assume the liabilities and obligations of such person. nevertheless in no case may the Central Bank authorize the drawing of checks against deposits not maintained in banks. provided. letters of credit and other evidence of indebtedness. accept. "d) To lend or borrow money for the corporation with or without security and for such purpose to accept or create. 6. deeds of trust and negotiable instruments or securities. collaterals and other obligations or otherwise incur indebtedness in such manner as may be ascertained by the corporation. assets. negotiable instruments. as defined in this Act.3. debentures or other securities of the corporation. secured by mortgage or pledge of property belonging to the corporation. own. 'banking. financing and/or collection services of the operation of the business. savings banks. and 6. debentures. 5. "Persons and entities which receive deposits only occasionally shall not be considered as banks. discount.." (Emphasis supplied. savings and mortgage banks. or branches or agencies thereof. sell. of the General Bank Act. The terms 'banking institution and 'bank'. corporation or association. corporation or association whose rights.' 'banker. promotion. To purchase. To issue bonds. or solicit or receive deposits of money for deposit. trust companies. shall advertise or hold itself out as being engaged in the business of such bank. To undertake the management. securities. make and issue mortgages. association or corporation not conducting the business of a commercial banking corporation. and all other corporations. assign or otherwise dispose of. or building and loan association. endorse. subsidiary imprisonment as prescribed by law. partnership. mortgage banks. 2 Empowering said Board. G."iii[3] Later. and attorney's fees equivalent to 25% of the monetary award.500. No. Dizon Construction.000.iv[4] Moreover. respondent. G.637. 2000] TEODORO BAÑAS.D8-14A and D8-2U . the latter would treat the former's account as closed and the loan fully paid.00 payable in installments. Cenen Dizon made good his promise and tendered payment to ASIA PACIFIC in an amount equivalent to two (2) monthly amortizations. in turn.00 on 25 September 1980. they nevertheless maintained that these documents were never intended by the parties to be legal. As the demand was unheeded.R.00 with usurious interests.185. and P66. 1980 up to August 25. on 21 April 1981 the trial court issued a writ of replevin against defendant C.000. ASIA PACIFIC allegedly made a verbal proposal to Cenen Dizon to surrender to it the ownership of the two (2) bulldozer crawler tractors and. C.50 at 14% interest per annum. the trial court dismissed the case against him. Dizon Construction defaulted in the payment of the remaining installments.i[1] substituted by INTERNATIONAL CORPORATE BANK now known as UNION BANK OF THE PHILIPPINES.. While defendants (herein petitioners) admitted the genuineness and due execution of the Promissory Note.50 inclusive of interests and charges. INC. however.38 representing attorney's fees. Sometime in August 1980 Teodoro Bañas executed a Promissory Note in favor of C.637. and on motion of the remaining defendants. C. only two (2) were actually turned over by defendants . Dizon Construction made the following installment payments to ASIA PACIFIC: P32. insurance premium. G. G. and to secure payment thereof. During the pendency of the case. Cenen Dizon. which he flatly refused to pay for being usurious.00 both to ASIA PACIFIC as the highest bidder. and having succeeded to all the rights and interests of International Corporate Bank in this case. registration and notarial fees.737.00 and D8-2U for P60.[G.: C. . J. petitioners.v[5] In compliance with the provisions of the Promissory Note.000.00 on 27 February 1981. D814A was sold for P120. Cenen Dizon would secure a promissory note from Teodoro Bañas with a face value of P390. Afterwards. Dizon Construction and Cenen Dizon. ASIA PACIFIC FINANCE CORPORATION. defendant Teodoro Bañas passed away. As the surviving entity after the merger. Dizon Construction.00 on 27 October 1980 and P65. G. Dizon Construction for the surrender of the bulldozer crawler tractors subject of the Deed of Chattel Mortgage. Dizon Construction whereby for value received he promised to pay to the order of C. D82U and D8H in favor of ASIA PACIFIC.ii[2] On 20 March 1981 Asia Pacific Finance Corporation (ASIA PACIFIC for short) filed a complaint for a sum of money with prayer for a writ of replevin against Teodoro Bañas. Cenen Dizon executed on 25 August 1980 a Continuing Undertaking wherein he bound himself to pay the obligation jointly and severally with C. 1981. G. Cenen Dizon supposedly agreed and accepted the offer. P32. Union Bank of the Philippines was substituted as a party in lieu of International Corporate Bank.50 at 14% interest per annum in addition to attorney's fees and costs of suit. Meanwhile.909. President.000.vi[6] On 25 September 1992 the Regional Trial Court ruled in favor of ASIA PACIFIC holding the defendants jointly and severally liable for the unpaid balance of the obligation under the Promissory Note in the amount of P87. Cenen Dizon would provide sufficient collateral to answer for the loan in case of default in payment and execute a continuing guaranty to assure continuous and prompt payment of the loan.000. Defendants claimed that since ASIA PACIFIC could not directly engage in banking business. Defendants averred that the value of the bulldozer crawler tractors was more than adequate to cover their obligation to ASIA PACIFIC. valid and binding but a mere subterfuge to conceal the loan of P390. Dizon Construction and Cenen Dizon. D8-14A. and CENEN DIZON.* C. G. On the other hand. C. service handling charges. second. G. vs. executed a Deed of Chattel Mortgage covering three (3) heavy equipment units of Caterpillar Bulldozer Crawler Tractors with Model Nos.000. G.500. Dizon.00 in installments of "P32. and. and Juliette B.which units were subsequently foreclosed by ASIA PACIFIC to satisfy the obligation. it proposed to them a scheme wherein plaintiff ASIA PACIFIC could extend a loan to them without violating banking laws: first.000. Thereafter. DIZON CONSTRUCTION. Defendants also alleged that out of the loan of P390. Of the three (3) bulldozer crawler tractors. G. lastly. ASIA PACIFIC sued Teodoro Bañas. C.vii[7] On 24 July 1996 the Court of Appeals affirmed in toto the decision of the trial court thus - * Petitioner Teodoro Bañas should not have been included in the caption of this case as his name was ordered excluded by the trial court on 23 October 1997 since he died during the pendency of the case thereat. DIZON CONSTRUCTION INC.00. But ASIA PACIFIC attempted to impose a 3% interest for every month of delay.500. C.000. ASIA PACIFIC would then make it appear that the promissory note was sold to it by Cenen Dizon with the 14% usurious interest on the loan or P54. or a total of P130.00 after ASIA PACIFIC deducted the discounted interest. C. the Deed of Chattel Mortgage and the Continuing Undertaking. International Corporate Bank merged with Union Bank of the Philippines. G. ASIA PACIFIC was substituted as party plaintiff by International Corporate Bank after the disputed Promissory Note was assigned and/or transferred by ASIA PACIFIC to International Corporate Bank. G. prompting ASIA PACIFIC to send a Statement of Account to Cenen Dizon for the unpaid balance of P267. Later. Sometime in October 1980 Cenen Dizon informed ASIA PACIFIC that he would be delayed in meeting his monthly amortization on account of business reverses and promised to pay instead in February 1981.00 defendants actually received only P329. through its corporate officers.00 every 25th day of the month starting from September 25. Dizon Construction the sum of P390.000. and CENEN DIZON in this petition for review seek the reversal of the 24 July 1996 Decision of the Court of Appeals dismissing their appeal for lack of merit and affirming in toto the decision of the trial court holding them liable to Asia Pacific Finance Corporation in the amount of P87. as well as its 21 March 1997 Resolution denying reconsideration thereof. October 18. Dizon Construction endorsed with recourse the Promissory Note to ASIA PACIFIC. 128703. Vice President and Treasurer.00 discounted and collected in advance by ASIA PACIFIC. DECISION BELLOSILLO. On the first issue. of the Central Bank Act. On petitioners' submission that the true intention of the parties was to enter into a contract of loan. hence. Sec.00 due every 25th of the month starting from September 25.000. and (b) Whether the surrender of the bulldozer crawler tractors to respondent resulted in the extinguishment of petitioners' obligation. In the instant case. Deed of Chattel Mortgage and Continuing Undertaking were not intended to be valid and binding on the parties as they were merely devices to conceal their real intention which was to enter into a contract of loan in violation of banking laws. Metro Manila. like ASIA PACIFIC. sold. If any amount due on this note is not paid at its maturity and this note is placed in the hands of an attorney for collection. the records do not show even a preponderance of evidence in favor of petitioners' claim that the Deed of Chattel Mortgage and Continuing Undertaking were never intended by the parties to be legal. 1980 up to August 25. (Sgd) Teodoro Bañas ENDORSED TO ASIA PACIFIC FINANCE CORPORATION WITH RECOURSE. petitioners insist that ASIA PACIFIC was organized as an investment house which could not engage in the lending of funds obtained from the public through receipt of deposits. Why did they not write down such an important agreement? Is it believable that seasoned businessmen such as the defendant-appellant Cenen G. correctness and due execution of which were admitted by petitioners. it is presumed that they have made the writings the only repositories and memorials of their true agreement. Only entities duly authorized by the Monetary Board of the Central Bank may engage in the lending of funds obtained from the public through the receipt of deposits of any kind.x[10] Moreover. convincing and more than merely preponderant evidence. we have examined the Promissory Note and failed to discern anything therein that would support such theory. We quote the pertinent portions of the Promissory Note FOR VALUE RECEIVED. the defendant-appellants' obligation would fully be extinguished. Dizon Construction. I/We. i. 2. well within the purview of "investing. 2 of the General Banking Act provides in part Sec. August 25. irrespective of maturity. I/We agree to pay in addition to the aggregate of the principal amount and interest due. To contradict them there must be clear.500. null and void. The pivotal issues raised are: (a) Whether the disputed transaction between petitioners and ASIA PACIFIC violated banking laws. which is a function of banking institutions. Philippine Currency in the following manner: P32. the sum of THREE HUNDRED NINETY THOUSAND ONLY (P390. such as promissory notes x x x x" Clearly. reinvesting or trading in securities" which an investment company. We have ruled often enough that it is not the function of this Court to analyze and weigh the evidence all over again. The second issue deals with a question of fact.xii[12] At .) Cenen Dizon President (Sgd. But here. Dizon VP/Treasurer Likewise. the transaction between petitioners and respondent was one involving not a loan but purchase of receivables at a discount. The courts need only rely on the faces of the written contracts to determine their true intention on the principle that when the parties have reduced their agreements in writing. C. is authorized to perform and does not constitute a violation of the General Banking Act. the funds supposedly "lent" to petitioners have not been shown to have been obtained from the public by way of deposits. the accuracy. Indubitably. Deed of Chattel Mortgage and Continuing Undertaking. issued. petitioners' assertions were based mainly on the self-serving testimony of Cenen Dizon. that is not credible. nothing but the word that comes out between the teeth supports such story.G.ix [9] securities "shall include x x x x commercial papers evidencing indebtedness of any person. The disputed Promissory Note. all the installments covered hereby and not paid as yet shall forthwith become due and payable at the option of the holder of this note with interest at the rate of 14% per annum on each unpaid installment until fully paid. If that were so then they too were parties to the illegal scheme.) Juliette B. and expressive of the real intent and agreement of the parties. par. hereby promise to pay to the order of C. transferred or in any manner conveyed to another with or without recourse. 2. in case no action is filed. as found by the trial court and the Court of Appeals. of the Revised Securities Act. DIZON CONSTRUCTION. An investment company refers to any issuer which is or holds itself out as being engaged or proposes to engage primarily in the business of investing. a sum equivalent to TEN PERCENT (10%) thereof as Attorney's fees. otherwise. Inc. Why should they now be allowed to take advantage of their own knavery to escape the liabilities that their own chicanery created? Defendant-appellants also want us to believe their story that there was an agreement between them and the plaintiff-appellee that if the former would deliver their 2 bulldozer crawler tractors to the latter. On the contrary. and not on any other independent evidence. reinvesting or trading in securities. (a).xi[11] Interestingly. as such. the sum will be equivalent to TWENTY FIVE (25%) of the said principal amount and interest due x x x x Makati. Notarial documents are evidence of the facts in clear and unequivocal manner therein expressed. and all entities regularly conducting such operations shall be considered as banking institutions and shall be subject to the provisions of this Act. Dizon and the other officers of the appellant corporation would deliver the bulldozers without a receipt of acquittance from the plaintiff-appellee x x x x In our book. the inapplicability of banking laws.. valid and binding. what is prohibited by law is for investment companies to lend funds obtained from the public through receipts of deposit.Defendant-appellants' contention that the instruments were executed merely as a subterfuge to skirt banking laws is an untenable defense. Again. Oral evidence certainly cannot prevail over the written agreements of the parties. 1981. we find the terms and conditions of the instrument clear.G. the Deed of Chattel Mortgage and Continuing Undertaking were duly acknowledged before a notary public and. hence. I/We agree that if any of the said installments is not paid as and when it respectively falls due. but also self-defeating in light of the documents presented by respondent. financial or non-financial entity. free from any ambiguity. We reject the argument. 1980. By: (Sgd. His testimony is not only unconvincing. endorsed. have in their favor the presumption of regularity. INC.e. Promissory Note. and of other pertinent laws (underscoring supplied).viii[8] As defined in Sec. its jurisdiction being limited to reviewing errors of law that might have been committed by the lower court.00). a seasoned businessman.xiv[14] which was not enough to cover the unpaid balance of P267. Costs against petitioners.637. Petitioners have undoubtedly benefited from the transaction. JJ.xiii[13] In other words. Jr. depending on whether the value of the tractors to be surrendered would equal the balance of the loan plus interests. we cannot close our eyes to the overriding considerations of the law on obligations and contracts which must be upheld and honored at all times. 1990 . It has been said that so long as such stipulation does not contravene the law.R.any rate. Upon the foregoing premise. readily consented to deliver the bulldozers to respondent without a corresponding receipt of acquittance. hence. but only a conditional one. there was no binding and perfected contract between petitioners and respondent regarding the settlement of the obligation. and even went to the extent of voluntarily turning over to respondent their heavy equipment consisting of two (2) bulldozer crawler tractors. On the amount of attorney's fees which under the Promissory Note is equivalent to 25% of the principal obligation and interests due. In fact.000. the records are bereft of any evidence of the supposed agreement. 88013 March 19.00. Construction Inc. Petitioners in fact paid a total of P130.00 in addition to the P180. SO ORDERED. and fifteen percent (15%) of the principal obligation and interests due by way of attorney's fees. all too mindful of the tenacity and vigor with which the parties. it is not. Carag during that time said if I surrender the two equipment. Indeed. the attorney's fees recoverable as between the attorney and his client regulated by the Rules of Court. Mendoza. its assailed Decision of 24 July 1996 and its Resolution of 21 March 1997 are AFFIRMED. who is the judgment creditor entitled to enforce the judgment by execution. while we empathize with petitioners.50. it is unbelievable that the parties entirely neglected to write down such an important agreement. Carag. with interest at fourteen percent (14%) per annum computed from 20 March 1981 until fully paid.637.50 accrued interests and charges as of 20 March 1981. we have a verbal agreement if I surrender the equipment it might suffice to pay off the debt so I did just that (underscoring ours). concur. Equally incredulous is the fact that petitioner Cenen Dizon. No.00 proceeds realized from the sale of the bulldozer crawler tractors at public auction. but due to financial distress occasioned by legitimate business reverses. As correctly observed by the Court of Appeals. Again. we see no valid reason to discard them. not the counsel. Quisumbing. have pursued this case for nineteen (19) years. we might finally close a deal if the equipment would come up to the balance of the loan. other than the bare allegations of petitioners. they cannot now be allowed to impugn its validity and legality to escape the fulfillment of a valid and binding obligation. Finally.. it is strictly binding upon the obligor. we did so just the same in this case if only to satisfy petitioners that we have carefully studied and evaluated the case.000. morals and public order. Barring therefore a showing that the findings complained of are totally devoid of support in the records. More so in this case where the findings of both the trial court and the appellate court coincide with each other on the matter.637. We are not persuaded.000. WHEREFORE. the attorney's fees here are in the nature of liquidated damages and the stipulation therefor is aptly called a penal clause. while we are not a trier of facts. P87.00 in three (3) installments.637. petitioners are still liable for the deficiency.50 representing the unpaid balance on the Promissory Note. Accordingly.000. all in a bona fide effort to settle their indebtedness in full. a mere conjecture in fact.00. or a total unpaid balance of P87. Deducting these amounts from the principal obligation of P390. computed from 20 March 1981 until fully paid.000. and Cenen Dizon are ordered jointly and severally to pay respondent Asia Pacific Finance Corporation. strictly speaking. through their respective counsel. the unpaid balance should earn 14% interest per annum as stipulated in the Promissory Note. or that they are so glaringly erroneous as to constitute serious abuse of discretion. to which must be added P7.G. Atty. I talked with Atty. not required as a rule to look into the factual bases of the assailed decision of the Court of Appeals. the records show that petitioners actually paid to respondent a total sum of P130.. With regard to the computation of petitioners' liability. It is the litigant. Petitioners contend that the parties already had a verbal understanding wherein ASIA PACIFIC actually agreed to consider petitioners' account closed and the principal obligation fully paid in exchange for the ownership of the two (2) bulldozer crawler tractors. Furthermore.50 for which petitioners are jointly and severally liable. who is he? A: He was the former legal counsel of APCOR. substituted by International Corporate Bank (now known as Union Bank of the Philippines). it appears that petitioners' failure to fully comply with their part of the bargain was not motivated by ill will or malice. petitioners C. no reversible error having been committed by the Court of Appeals. Carag. even the testimony of petitioner Cenen Dizon himself negates the supposed verbal understanding between the parties Q: You said and is it not a fact that you surrendered the bulldozers to APCOR by virtue of the seizure order? A: There was no seizure order.xv[15] Nevertheless. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. Rather. Buena and De Leon. And since the bulldozer crawler tractors were sold at the foreclosure sale for only P180. They were handling cases. Article 1229 of the New Civil Code specifically empowers the judge to equitably reduce the civil penalty when the principal obligation has been partly or irregularly complied with.00 leaves a balance of P80. we hold that the reduction of the attorney's fees from 25% to 15% of the unpaid principal plus interests is in order.000. So I voluntarily surrendered. I pulled them from the job site and returned them to APCOR x x x x Q: You mentioned a certain Atty. in favor of Sea-Land Services. specifically moral and exemplary damages. Check No. 1981. 1 Subsequently. for P16. It said: The essential ingredient of moral damages is proof of bad faith (De Aparicio vs. and costs. Check No. All we have to ascertain is whether the petitioner is entitled to the said damages and.SIMEX INTERNATIONAL (MANILA). and U. 1981.00. had not been credited to it. 1981.00. in what amounts. Enterprises. But the bank rectified its records. 4 In its letter dated June 20. Most of its exports are purchased by the petitioner on credit. It seems to us that the negligence of the private respondent had been brushed off rather lightly as if it were a minor infraction requiring no more than a slap on the wrist.080. The negligence of the private respondent has already been established. However.45: 7. Indeed.00. 215474 dated June 10. 1981.00.02: and 8. 1981. 215451 dated June 4. respondents. Check No. and the dishonored checks were paid after they were re-deposited.906. in favor of Malabon Longlife Trading Corporation in the amount of P42. Cubao. 215426 dated May 28.000. Check No. Quezon City. 215412 dated June 10. if so.00 and exemplary damages in the sum of P500. he ordered the defendant to pay nominal damages in the amount of P20. The parties agree on the basic facts.00 on May 25. Judge Johnico G. The petitioner was a depositor of the respondent bank and maintained a checking account in its branch at Romulo Avenue.00 attorney's fees and costs.73: 3. Don P. These circumstances negate any imputation or insinuation of malicious. 1981.000. in the amount of P27. Porcuincula for petitioner. The error was rectified on June 17. plus 25% attorney's fees. on June 15." This demand was not met.024. THE HONORABLE COURT OF APPEALS and TRADERS ROYAL BANK. 215441 dated June 5. It also withheld delivery of the order made by the petitioner. 3 Investigation disclosed that the sum of P100.00: 5. Similar letters were sent to the petitioner by the Malabon Long Life Trading. and by the G. 1981. Check No.480. It buys these products from various local suppliers and then sells them abroad. in favor of Enriqueta Bayla in the amount of P6. After trial. 215480 dated June 9.74. in favor of California Manufacturing Company. Inc.00 deposited by the petitioner on May 25. in favor of Malabon Longlife Trading Corporation in the amount of P12.386. Check No. Parogurga. 1981. 6 The respondent court found with the trial court that the private respondent was guilty of negligence but agreed that the petitioner was nevertheless not entitled to moral damages. 1981.000. This Court has carefully examined the facts of this case and finds that it cannot share some of the conclusions of the lower courts. the petitioner demanded reparation from the respondent bank for its "gross and wanton negligence. Inc. 1981. Check No. 2 As a consequence. We feel it is not enough to say that the private respondent rectified its records and credited the deposit in less than a . vs.000. observing that the plaintiff's right had been violated. there was the omission by the defendant-appellee bank to credit appellant's deposit of P100. Gonzalez.000.385. wanton and gross bad faith and negligence on the part of the defendant-appellant. 1981. thus increasing its balance as of that date to P190. The petitioner complained to the respondent bank on June 10. 1981. 5 This decision was affirmed in toto by the respondent court.00: 6. Greg Pedreño in the amount of P7. San Juan. 215477 dated June 9. 150 SCRA 280). Check No. the California Manufacturing Corporation sent on June 9. Canada and the Middle East. in favor of Baguio Country Club Corporation in the amount of P4.000. On May 25. The dishonored checks are the following: 1. Serquinia rendered judgment holding that moral and exemplary damages were not called for under the circumstances. 1981. in favor of the Bureau of Internal Revenue in the amount of P3.00 plus P5. 1981. a letter of demand to the petitioner.380. 1981. 215391 dated May 29. INCORPORATED. threatening prosecution if the dishonored check issued to it was not made good. Meantime.00: 2. The dishonored checks were eventually paid. The petitioner then filed a complaint in the then Court of First Instance of Rizal claiming from the private respondent moral damages in the sum of P1. 1981.953.275. 4.: We are concerned in this case with the question of damages.000. fraudulent. petitioner. CRUZ. It credited the said amount in favor of plaintiff-appellant in less than a month. Malabon also canceled the petitioner's credit line and demanded that future payments be made by it in cash or certified check.000. The petitioner is a private corporation engaged in the exportation of food products. J. the petitioner deposited to its account in the said bank the amount of P100. San Agustin & Sinense for private respondent. in favor of Mr. It is this ruling that is faulted in the petition now before us. action on the pending orders of the petitioner with the other suppliers whose checks were dishonored was also deferred. the petitioner issued several checks against its deposit but was suprised to learn later that they had been dishonored for insufficient funds. particularly in the United States. 1981. on June 10. This was simply glossed over if not. which we impose.000. even the humble wage-earner has not hesitated to entrust his life's savings to the bank of his choice. What is especially deplorable is that. The immediate consequence was that its prestige was impaired because of the bouncing checks and confidence in it as a reliable debtor was diminished. Its standing was reduced in the business community. the checks should have been paid immediately upon presentment. In every case. liquidated or compensatory damages. that the respondent court said had not been established by the petitioner. All this was due to the fault of the respondent bank which was undeniably remiss in its duty to the petitioner. In the case at bar. Moreover. The private respondent makes much of the one instance when the petitioner was sued in a collection case. we feel that the award of nominal damages in the sum of P20. justifies the grant of moral damages. this took almost a month when. The respondent court said that the claimed losses are purely speculative and are not supported by substantial evidence." As we have found that the petitioner has indeed incurred loss through the fault of the private respondent.month as if this were sufficient repentance. serious anxiety. banks have become an ubiquitous presence among the people. with equal faith. but if failed to consider that the amount of such losses need not be established with exactitude precisely because of their nature. the petitioner is seeking such damages for the prejudice sustained by it as a result of the private respondent's fault. by way of example or correction for the public good. In contracts and quasi-contracts. Its reputation was tarnished. the respondent bank did not immediately correct it but did so only one week later or twenty-three days after the deposit was made. oppressive. such as the dishonor of a check without good reason. the proper remedy is the award to it of moral damages. confident that the bank will deliver it as and to whomever he directs. resulting in its social humiliation. always having in mind the fiduciary nature of their relationship. or its name that prestigious. disbelieved. most of all. This has to be done if the account is to reflect at any given time the amount of money the depositor can dispose of as he sees fit. it is obvious that the respondent bank was remiss in that duty and violated that relationship. Moral damages are not susceptible of pecuniary estimation. its claim of moral damages in the amount of P1. if not wanton bad faith. Its business certainly is not that big. whether such account consists only of a few hundred pesos or of millions. the petitioner is an unsavory and disreputable entity that has no good name to protect. to sustain such an extravagant pretense." There is no question that the petitioner did sustain actual injury as a result of the dishonored checks and that the existence of the loss having been established "absolute certainty as to its amount is not required. in the same amount of P20. it cannot experience physical suffering or such sentiments as wounded feelings.000. nominal. temperate. fraudulent. Its business declined. usually maintains a modest checking account for security and convenience in the settling of his monthly bills and the payment of ordinary expenses.000. aggravated by the lack of promptitude in repairing its error. the depositor expects the bank to treat his account with the utmost fidelity." That is why the determination of the amount to be awarded (except liquidated damages) is left to the sound discretion of the court. not being a natural person. may be vindicated or recognized. having been informed of its error in not crediting the deposit in question to the petitioner.00. The fact is that the petitioner's credit line was canceled and its orders were not acted upon pending receipt of actual payment by the suppliers. according to "the circumstances of each case." From every viewpoint except that of the petitioner's. mental anguish and moral shock. as the private respondent would portray it. temperate. 9 We shall recognize that the petitioner did suffer injury because of the private respondent's negligence that caused the dishonor of the checks issued by it. a corporation is not as a rule entitled to moral damages because. reckless. 2229. 2232. not only in the form of loans when needed but more often in the conduct of their day-to-day transactions like the issuance or encashment of checks. as the Court of Appeals put it.000. Article 2216 of the Civil Code specifically provides that "no proof of pecuniary loss is necessary in order that moral. confidence." 7 Such injury should bolster all the more the demand of the petitioner for moral damages and justifies the examination by this Court of the validity and reasonableness of the said claim. 8 In the case at bar. However. Art. The respondent bank has not even explained why it was committed at all. or malevolent manner. the decision practically ignored the prejudice suffered by the petitioner. Exemplary or corrective damages are imposed. The only exception to this rule is where the corporation has a good reputation that is debased. liquidated or exemplary damages may be adjudicated. knowing that they will be safe in its custody and will even earn some interest for him. in our discretion. down to the last centavo. indeed. the bank is a trusted and active associate that can help in the running of their affairs. A blunder on the part of the bank.00 was not the proper relief to which the petitioner was entitled. who have come to regard them with respect and even gratitude and. but that did not prove that it did not have a good reputation that could not be marred. The error should not have been committed in the first place. and as promptly as possible. Under Article 2221 of the Civil Code. The ordinary person. more so since that case was ultimately settled. We also note that while stressing the rectification made by the respondent bank. properly. The bank must record every single transaction accurately. Now for the exemplary damages. As the Court sees it. in addition to the moral. "eventually" paid. As for business entities like the petitioner. Article 2205 of the Civil Code provides that actual or compensatory damages may be received "(2) for injury to the plaintiff s business standing or commercial credit. It bears repeating that the record does not contain any satisfactory . Whether as mere passive entities for the safekeeping and saving of money or as active instruments of business and commerce. the initial carelessness of the respondent bank. and not for the purpose of indemnifying the plaintiff for any loss suffered by him. The point is that as a business affected with public interest and because of the nature of its functions. This rather lackadaisical attitude toward the complaining depositor constituted the gross negligence. the bank is under obligation to treat the accounts of its depositors with meticulous care. 10 It does not appear that.00 is nothing short of preposterous. which has been violated or invaded by the defendant. the court may award exemplary damages if the defendant acted in a wanton. The banking system is an indispensable institution in the modern world and plays a vital role in the economic life of every civilized nation. can cause the depositor not a little embarrassment if not also financial loss and perhaps even civil and criminal litigation. Considering all this. "nominal damages are adjudicated in order that a right of the plaintiff. We agree that moral damages are not awarded to penalize the defendant but to compensate the plaintiff for the injuries he may have suffered. It is true that the dishonored checks were. Thus. The pertinent provisions of the Civil Code are the following: Art. hereby imposes upon the respondent bank exemplary damages in the amount of P50. It is expected that this ruling will serve as a warning and deterrent against the repetition of the ineptness and indefference that has been displayed here. vs. Republic of the Philippines THIRD DIVISION [G. LIM.000. JJ. moral damages in the amount of P20. . 1999] ROMEO P. BUSUEGO.explanation of why the error was made in the first place and why it was not corrected immediately after its discovery. No. Such ineptness comes under the concept of the wanton manner contemplated in the Civil Code that calls for the imposition of exemplary damages.00. in lieu of nominal damages.000. lest the confidence of the public in the banking system be further impaired. the appealed judgment is hereby MODIFIED and the private respondent is ordered to pay the petitioner. ACCORDINGLY. Narvasa.00. petitioners. 95326. After deliberating on this particular matter.R. and exemplary damages in the amount of P50. concur. "by way of example or correction for the public good.000. in the exercise of its discretion.000. respondents. March 11. SO ORDERED. CATALINO F. the Court. THE HONORABLE COURT OF APPEALS and THE MONETARY BOARD OF THE CENTRAL BANK OF THE PHILIPPINES.. Grino-Aquino and Medialdea. and costs.00. Gancayco. BANEZ and RENATO F." in the words of the law.00 plus the original award of attorney's fees in the amount of P5. xxx 5. J. but petitioners did not attend such conference.DECISION PURISIMA. Inc. Central Bank ("CB") Supervision and Examination Section ("SES") Department IV Director Ricardo."xviii[3] xxx xxx xxx On January 23. 1987. On September 11. Catalino Banez. Costs against respondent.xxiii[8] disposing thus: "WHEREFORE. the decretal portion of which is to the following effect: . Supervision and Examination Section (SES) Department IV. The writ of preliminary prohibitory injunctions issued on February 10. 805 the pertinent provisions of which are as follows: "1. 1988. as warranted by the evidence. 1989 is deemed permanent. On July 19. the Monetary Board of the Central Bank. petitioner Renato Lim wrote the PESALA's Board of Directors explaining his side on the said examination of PESALA's records and requesting that a copy of his letter be furnished the CB. Catalino Banez. PESALA's Board of Directors sent to Director Lirio a letter concerning the 16th regular examination of PESALA's records.xvii[2] On July 29. among which are: 1. 7. (PESALA) as of December 31. (now Banko Sentral ng Pilipinas) from including the names of petitioners in the watchlist. On January 26 1989. The Monetary Board presented a Motion for Reconsiderationxxii[7] of the said Order. Mr. 1988. F.: This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking a reversal of the Decisionxvi[1]. Inc. To note the report on the examination of the PAL Employees' Savings and Loan Association. Q-89-1617 before Branch 104 of the Regional Trial Court of Quezon City. 2. conditioned upon the filing by petitioners of a bond in the amount of Ten Thousand (P10.00) Pesos each. or to properly charge these against their respective accounts. judgment is hereby rendered declaring Monetary Board Resolution No. To require the board of directors of PESALA to immediately inform the members of PESALA of the results of the Central Bank examination and their effects on the financial condition of the Association. 4. To include the names of Mr. 6. which was fortwith made by the Board. CV No. On July 28. 805 as void and inexistent. Romeo Busuego and Renato Lim for all the misfeasance and malfeasance committed by them.. Renato Lim in the Sector's watchlist to prevent them from holding responsible positions in any institution under Central Bank supervision. To require the board of directors of PESALA to improve the operations of the Association.000. dated August 19. as submitted in a memorandum of the Director. the same trial court issued a writ of preliminary injunctionxxi[6]. 2. 1988 by a team of CB examiners headed by Belinda Rodriguez. the said court issued a temporary restraining orderxx[5] enjoining the defendant. 1989. 1990. 1988. Following the said examination. the Monetary Board adopted and issued MB Resolution No. of the Court of Appeals in CA-G. To require the board of directors of PESALA to file civil and criminal cases against Messrs. Romeo Busuego and Mr. To require PESALA to enforce collection of the overpayment to the Vista Grande Management and Development Corporation and to require the accounting of P12." The Monetary Board appealed the aforesaid Decision to the Court of Appeals which came out with a Decisionxxiv[9] of reversal on September 14. petitioners filed a Petition for Injunction with Prayer for the Immediate Issuance of a Temporary Restraining Orderxix[4] docketed as Civil Case No. dated September 14. correct all violations noted. several anomalies and irregularities committed by the herein petitioners. the trial court handed down its Decision. 3. As culled from the records. 1990.9 million other unsupported cash disbursements from the responsible directors and officers. On September 9. SES Department IV. but the same was denied. ("PESALA") was conducted from March 14 to April 16. On February 10. 1988 to discuss subject findings noted in the said 16th regular examination. Lirio sent a letter to the Board of Directors of PESALA inviting them to a conference on July 21. were uncovered. 8. the facts of the case are as follows: The 16th regular examination of the books and records of the PAL Employees Savings and Loan Association. 23656. 1988.28 million unaccounted and unremitted bank loan proceeds and P3. PESALA's directors and officers. 1989. 1989. if necessary.R. and adopt internal control measures to prevent the recurrence of similar incidents as shown in Annex E of the subject memorandum of the Director. Questionable investment In a multi-million peso real estate project (Pesalaville) Conflict of interest in the conduct of business Unwarranted declaration and payment of dividends Commission of unsound and unsafe business practices. 1988. " Dissatisfied with the said Decision of the Court of Appeals. 1988 to discuss the findings made in the 16th regular examination of PESALA's records. 2. the court denied the said motion. Petitioners did not attend. petitioners filed an "Urgent Motion for the Immediate Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction against the Secretary of Justice and the City Prosecutor of Pasay"xxv[10] stating that several complaints were lodged against the petitioners before the Office of the City Prosecutor of Pasay City pursuant to Monetary Board Resolution No. 2. Petitioners were duly afforded their right to due process by the Monetary Board. 90-1834. The decision must be rendered on the evidence presented at the hearing. I WHETHER OR NOT THE PETITIONERS WERE DEPRIVED OF THEIR RIGHT TO A NOTICE AND THE OPPORTUNITY TO BE HEARD BY THE MONETARY BOARD PRIOR TO ITS ISSUANCE OF MONETARY BOARD RESOLUTION NO. The tribunal must consider the evidence presented. that the said complaints were dismissed by the City Prosecutor and the dismissals were appealed to the Secretary of Justice for review. Petitioners were invited by Director Lirio to a conference scheduled for July 21. 805 IS NULL AND VOID FOR BEING VIOLATIVE OF PETITIONERS' RIGHTS TO DUE PROCESS. 805 of the Monetary Board. the trial court said: "The evidence submitted preponderates in favor of petitioners. explaining his side of the controversy. and 3. in the Resolutionxxvi[11] dated September 9. the decision appealed from is hereby reversed and another one entered dismissing the petition for injunction. petitioners have come to this Court via the present petition for review on certiorari."WHEREFORE. they were not informed of any charges against them and were not afforded the opportunity to adduce countervailing evidence so as to deserve the punitive measures promulgated in Resolution No. was forwarded to the Monetary Board which the latter considered in adopting Monetary Board Resolution No. On June 5.S. 1988. it appearing that: 1. 1992. 3. 1988 to PESALA's Board of Directors. explaining the Board's side of the controversy. 90-3032. 90-3031. The decision must have something to support itself. dated July 29. The essence of due process is to be afforded a reasonable opportunity to be heard and to submit any evidence one may have in support of his defense. 805. III WHETHER OR NOT MONETARY BOARD RESOLUTION NO. Petitioners cite Ang Tibay v. 1992. was properly considered in the adoption of Monetary Board Resolution No. 90-1249. 90-1835. much so. PESALA's Board of Director's letter. they were not denied due processxxx[15]. 6. The petition poses as issues for resolution. 805. Petitioner Renato Lim's letter of July 28. . 805.xxix[14] Petitioners having availed of their opportunity to present their position to the Monetary Board by their letters-explanation. to the Monetary Board. Petitioners prayed that a Temporary Restraining Order and/or Writ of Preliminary Injunction issue "restraining and enjoining the Secretary of Justice and the City Prosecutor of Pasay City from proceeding and taking further actions. The right to a hearing. The tribunal or body or any of its judges must act or its or his own independent consideration of the law and facts of the controversy and not simply accept the view of a subordinate in arriving at a decision. 90-1831. With respect to the first issue. CIRxxxi[16] and assert that the following requisites of procedural due process were not observed by the Monetary Board: 1. 90-1832. 5. 805." However. Petitioners therefore cannot complain of deprivation of their right to due process. and more specially from filing Informations in I. or at least contained in the record and disclosed to the parties affected. Petitioners were never notified that they were being investigated. some of which have been reversed already. pending the final resolution of the case at bar xxx. said conference. The deprivation of petitioners' rights in the Resolution undermines the constitutional guarantee of due process. Nos. II WHETHER OR NOT THE RESPONDENT BOARD IS LEGALLY BOUND TO OBSERVE THE ESSENTIAL REQUIREMENTS OF DUE PROCESS OF A VALID CHARGE. 4. as they were given ample opportunity by the Monetary Board to air their Submission and defenses as to the findings of irregularity during the said 16th regular examination. 90-1837.xxviii[13] What is offensive to due process is the denial of the opportunity to be heard. NOTICE AND OPPORTUNITY TO BE HEARD INSOFAR AS THE PETITIONERS' SUBJECT CASE IS CONCERNED.-90-1836. xxx”xxvii[12] The foregoing disquisition by the trial court is untenable under the facts and circumstances of the case. 90-1248. The evidence must be substantial. which includes the right to present one's case and submit evidence in support thereof. Inc. declared. there is tenability in petitioners' contention that the Monetary Board. as it is hereby. the standard of due process that must be met in administrative tribunals allows a certain latitude as long as the element of fairness is not ignored. the reason for the issuance of Monetary Board Resolution No. the Monetary Board considered the evidence presented.' Monetary Board Resolution No. the Monetary Board is not vested with "the authority to disqualify persons from occupying positions in institutions under the supervision of the Central Bank without proper notice and hearing" nor is it vested with authority "to file civil and criminal cases against its officers/directors for suspected fraudulent acts. by order. Amoresxxxiii[18]: "While administrative tribunals exercising quasi-judicial functions are free from the rigidity of certain procedural requirements they are bound by law and practice to observe the fundamental and essential requirements of due process in justiciable cases presented before them. Lastly. there is no denial of due process where records show that hearings were held with prior notice to adverse parties. 805 Violates basic and essential requirements. placing reliance on the said findings made during the 16th regular examination. to wit: "A reading of Monetary Board Resolution No. Section 28 of Rep." Petitioners opine that with the issuance of Monetary Board Resolution No. 3779. its directors. 805 is null and void for being violative of petitioners' right to due process. 805 discloses that it imposes administrative sanctions against petitioners. to decide any controversy over the obligations and duties of directors and officers. (The requirement of a hearing is complied with as long as there was an opportunity to be heard. "they are now barred from being elected or designated as officers again of PESALA. as warranted by the evidence. 152 SCRA 237) specifically its failure to afford petitioners the opportunity to be heard. banking and credit system of the countryxxxiv[19] and is granted the power of supervision and examination over banks and non-bank financial institutions performing quasi-banking functions. It must therefore be. officers. (c) and (d). is the government agency charged with the responsibility of administering the monetary. To support their stance. form part ofxxxv[20]. 805. Contrary to petitioners' allegation. of which savings and loan associations. 805 virtually deprives petitioners their respective gainful employment. fourthly and fifthly. any inspection." Petitioners' contentions are untenable. Act No. Sixthly.' Monetary Board Resolution No. and whenever necessary. after appropriate notice and hearings any controversy as to the rights or obligations of the savings and loan association. petitioners theorize that Monetary Board Resolution No. and financial condition of any savings and loan association with or without prior notice but always with fairness and reasonable opportunity for the association or any of its officials to give their side of the case. In short.7. and are likewise prevented from future engagements or employments in all institutions under the supervision of the Central Bank thereby virtually depriving them of the opportunity to seek employments in the field which they can excel and are best fitted. Hence. and at the same time marks them for judicial prosecution. require observance of due process in the exercise of its powers: “x x x (c) To conduct at least once every year. there is a clear showing of arbitrariness resulting in an irreparable injury against petitioners as the Resolution certainly affects their 'life. 805? x x x Although the Monetary Board is free from the rigidity of certain procedural requirements. a savings and loan association for violation of law. through the Monetary Board. The special law governing savings and loan association is Republic Act No. v. Thirdly. The crucial question here is that were petitioners afforded due process in the investigations conducted which prompted the issuance of Monetary Board Resolution No." According to them.' it mandates the PESALA Board of Directors as well to file Civil and Criminal charges against them 'for all the misfeasance and malfeasance committed by them." Said law authorizes the Monetary Board to conduct regular yearly examinations of the books and records of savings and loan associations. they cite the trial court's ruling. to suspend a savings and loan association for violation of law. 805 is readily apparent. process as long as the parties are given the opportunity to be heard. With respect to the second issue. In fact. 3779 ("RA 3779") delineating the powers of the Monetary Board over savings and loan associations. Amores. However. and. it openly derogates the fundamental rights of petitioners. there is no denial of procedural due. and records. The board or body should." Even Section 28. Inc. Monetary Board Resolution No. x x x" (italics supplied) Anent the third issue. (f) To decide. among others. it appears that the requisites of procedural due process were complied with by the Monetary Board before it issued the questioned Monetary Board Resolution No. as void and inexistent because among other things. for unsafe and unsound practices or for reason of insolvency. to suspend. Firstly. and to take remedial measures. as an administrative agency. the petitioners were invited to a conference to discuss the findings gathered during the 16th regular examination of PESALA's records. x x x (d) After proper notice and hearing. reads: . otherwise known as the "Savings and Loan Association Act. liberty and property. examination or investigation of the books. which is to prevent further irregularities from being committed and to prosecute the officials responsible therefor. administration. 805. But even in the absence of previous notice. is legally bound to observe due process. and the reason for the decision rendered. in all controversial questions. business affairs. it failed 'to observe the essential requirement of due process' (Adamson and Adamson.xxxii[17]) Secondly. the members of the Monetary Board acted independently on their own in issuing subject Resolution. 805 was adopted on the basis of said findings unearthed during the 16th regular examination of PESALA's records and derived from the letter-comments submitted by the parties. as amended. v. to enforce the same. stockholders and members under its charter. As held in Adamson and Adamson. render its decision in such a manner that the parties to the proceedings can know the various issues involved. Philippines (now Bangko Sentral ng Pilipinas). It must be remembered that the Central Bank of the. x x x x x x. it does not only penalize petitioners by including them in the watchlist to prevent them from holding responsible positions in any institution under Central Bank supervision. 3779. although they are free from the rigidity of certain procedural requirements. and not necessarily that an actual hearing was conducted. such as PESALA. of Republic Act No. All things studiedly considered. for as long as may be necessary in connection with the investigation or examination being conducted. by order."SEC. except such as is actually necessary for its operation. depositors or creditor.necessary. orders. The official of the Central Bank in charge of savings and loan associations and his deputies are hereby authorized to administer oaths to any director.R. the person authorized to do so may seize books and records and keep them under his custody after giving proper receipts therefor. as amended." As may be gathered from the records. officer or employee of any association under the supervision of the Monetary Board. the court upholds the validity of Monetary Board Resolution No. SO ORDERED. rules and regulations promulgated by the Monetary Board or in a manner substantially prejudicial to the interest of the government. and. Republic of the Philippines SUPREME COURT Manila EN BANC G. and financial condition of any savings and loan association with or without prior notice but always with fairness and reasonable opportunity for the association or any of its officials to give their side of the case. 805 and affirms the decision of the respondent court. take such remedial measures. vaults. Supervisory powers over savings and loan associations. whether stock or noti-stock their directors and/or officers administrative sanctions under Sections 34-A or 34-B of Republic Act Two Hundred sixty-five. depositors or creditors. and the assailed Decision dated September 14. the said requirement was properly complied with by the respondent Monetary Board. We sustain the ruling of the Court of Appeals that petitioners' suspension was only preventive in nature and therefore. the petition is DENIED. officers. the Monetary Board shall have the power to exercise the following: xxx (c) To conduct at least once every year. examination or investigation is conducted under this grant of power. exercise all powers which are now or may hereafter be conferred upon it by Republic Act Numbered Two Hundred sixty-five in the enforcement of this legislation. through the Monetary Board. to enforce the same. and whenever. WHEREFORE. may make any marking or notation on any paper. the Monetary Board may impose appropriate sanctions. Until such time that the petitioners have proved their innocence. no notice or. it is gleanable that the Central Bank. instructions. Neither were petitioners deprived of their lawful calling as they are free to look for another employment so long as the agency or company involved is not subject to Central Bank control and supervision. The management by the Monetary Board shall be without expense to the savings and loan association. until a new board of directors and officers are elected and qualified without prejudice to the prosecution of the persons responsible for such violations. is empowered to conduct investigations and examine the records of savings and loan associations. they may be preventively suspended from holding office so as not to influence the conduct of investigation. after appropriate notice and hearings any controversy as to the rights or obligations of the savings and loan association. stockholders and members under its charter.In addition to whatever powers have been conferred by the foregoing provisions. 1991 . Whenever an inspection. upon the proof that a savings and loan association or its board or directors or officers are conducting and managing its affairs in a manner contrary to laws. 28. xxx (l) To conduct such investigations. to suspend a savings and loan association for violation of law. No. safes. xxx (d) After proper notice and hearing. The requirement of prior notice is also relaxed under Section 28 (c) of RA 3779 as investigations or examinations may be conducted with or without prior notice "but always with fairness and reasonable opportunity for the association or any of its officials to give their side. . If any irregularity is discovered in the process. examination or investigation of the books and records. such as suspending the offender from holding office or from being employed with the Central Bank. receptacles or similar containers and prohibit the opening thereof without first securing authority therefor. 70054 December 11. document or book to show that it has been examined and verified and may padlock or seal shelves. The Monetary Board may likewise. any inspection. for unsafe and unsound practices or for reason of insolvency. 1990 of the Court of Appeals AFFIRMED. record. Petitioners can still practise their profession or engage in business as long as these are not within the ambit of Monetary Board Resolution No. and to prevent the commission of further irregularities. or placing the names of the offenders in a watchlist. 805. administration. take over the management of the savings and loan association after due hearing. xxx (f) To decide. business affairs." From the foregoing. No pronouncement as to costs. its directors. hearing was necessary. pending the election and qualification of a new board of directors and officers to take the place of those responsible for the violation or acts contrary to the interest of the government. and impose upon associations. namely. petitioner. THE MONETARY BOARD. COURT OF APPEALS. 68878. G. petitioner. HERNANDEZ AND GATMAITAN. petitioner. respondents. Florencio T. VALENZUELA. 78766. 1991 EL GRANDE CORPORATION. Nos. THE COURT OF APPEALS. G. JR. THE COURT OF APPEALS. Ex-Officio Sheriff REGALADO E.BANCO FILIPINO SAVINGS AND MORTGAGE BANK. HON. CENTRAL BANK OF THE PHILIPPINES AND CARLOTA P. 81303 December 11. No. 1991 BF HOMES DEVELOPMENT CORPORATION. petitioner. 1991 TOP MANAGEMENT PROGRAMS CORPORATION AND PILAR DEVELOPMENT CORPORATION.R. G. 1991 BANCO FILIPINO SAVINGS AND MORTGAGE BANK. 81304 December 11.R. J. INTERMEDIATE APPELLATE COURT and CELESTINA S.R.:p This refers to nine (9) consolidated cases concerning the legality of the closure and receivership of petitioner Banco Filipino Savings and Mortgage Bank (Banco Filipino for brevity) pursuant to the order of respondent Monetary Board. respondents. in his capacity as Presiding Judge of Branch 136 of the Regional Trial Court of Makati. FERNANDEZ.R. SALAZAR. CARLOTA P. respondents. No. vs. assisted by her husband. BANCO FILIPINO SAVINGS AND MORTGAGE BANK. No. VALENZUELA.R. VALENZUELA. Cornejo for intervenors. COSICO. MEDIALDEA. CENTRAL BANK OF THE PHILIPPINES. CARLOTA P. ARNULFO B. vs. G. G. 7004. 90473 December 11. BANCO FILIPINO SAVINGS AND MORTGAGE BANK. FERNANDEZ. Jr. SALAZAR. VALENZUELA AND SYCIP. EUSEBIO. Barinaga & Bautista Law Offices collaborating counsel for petitioner. CLERK OF COURT and Ex-Officio Sheriff ADORACION VICTA. 78766 December 11. ARNULFO AURELLANO AND RAMON TIAOQUI. respondents. 78894 December 11. AURELLANO AND RAMON TIAOQUI. VALENZUELA AND SYCIP. and Crisanto S. PAHIMUNTUNG. COURT OF APPEALS. 1991 BANCO FILIPINO SAVINGS AND MORTGAGE BANK. ARNULFO B. Domingo. 1991 EL GRANDE DEVELOPMENT CORPORATION. THE EXECUTIVE JUDGE of The Regional Trial Court and Ex-Officio Sheriff REGALADO E. vs. VALENZUELA. respondents. THE CENTRAL BANK OF THE PHILIPPINES. SALAZAR. Panganiban. Benitez. G.. VALENZUELA. petitioner vs. Corollary to this issue is whether the CB can be sued to fulfill financial commitments of a closed bank pursuant to Section 29 of the Central Bank Act. No. No. vs. On . petitioner.R. G. CARLOTA P. respondents. No. No. CARLOTA P. CENTRAL BANK OF THE PHILIPPINES. 1991 METROPOLIS DEVELOPMENT CORPORATION. AURELLANO and RAMON V. CARLOTA P. respondents. JOSE B. vs. THE EXECUTIVE JUDGE of the Regional Trial Court of Cavite. respondents. THE COURT OF APPEALS. G. FELICIANO AND HERNANDEZ. COURT OF APPEALS.R. respondents. petitioner vs. The Executive Judge of the Regional Trial Court of Cavite. MANUEL M. No. Six (6) of these cases. HERNANDEZ AND GATMAITAN. 68878 December 11.. vs. CENTRAL BANK AND CARLOTA P. HON. FERNANDEZ.R. petitioner. 81303. THE COURT OF APPEALS. 78767 December 11. BANCO FILIPINO SAVINGS AND MORTGAGE BANK. G. 77255-68. petitioners. EUSEBIO. CARLOTA P.R. 81304 and 90473 involve the common issue of whether or not the liquidator appointed by the respondent Central Bank (CB for brevity) has the authority to prosecute as well as to defend suits. and to foreclose mortgages for and in behalf of the bank while the issue on the validity of the receivership and liquidation of the latter is pending resolution in G. No. JR. JOSE B. TIAOQUI. VALENZUELA AND SYCIP.R. 1991 PILAR DEVELOPMENT CORPORATION. 77255-58 December 11. JOSE B. vs. 000 from Banco Filipino as evidenced by a promissory note dated January 7. Cavite. No. The antecedent facts of each of the nine (9) cases are as follows: G. to represent Banco Filipino in all litigations. 1985. Valenzuela appointed the law firm of Sycip. petitioner was granted a loan in the amount of P8.130. On March 22. 1984.R. January 5. The respondent-movant contends that the petitioner has no more personality to continue prosecuting the instant case considering that petitioner bank was placed under receivership since January 25.R. the law firm of Sycip. the Ex-Officio Sheriff of the Regional Trial Court of Cavite issued a notice of extra-judicial foreclosure sale of the properties on December 16. the ex-officio sheriff of said court and Sycip. Pilar Development obtained loans from Banco Filipino between 1982 and 1983 in the principal amounts of P6.R. et al. 1986. 1984. et al. Pilar Development defaulted in the payment of its loans.836. the Monetary Board issued another resolution placing the bank under liquidation and designating Valenzuela as liquidator.R SP Nos. 78766 Petitioner El Grande Development Corporation (El Grande for brevity) is engaged in the business of developing residential subdivisions. 1985. By virtue of her authority as liquidator. respectively. 1986. who was appointed by the Monetary Board as liquidator of Banco Filipino.000. from proceeding with foreclosure sale. Top Management filed a petition for injunction and prohibition with the respondent appellate court docketed as CAG. Banco Filipino filed the petition for certiorari in G. 07892 seeking to enjoin the Regional Trial Court of Cavite. Top Management failed to pay its loan on the due date. 08962-64 seeking to enjoin the same respondents from enforcing the foreclosure sale of its properties. acting as counsel for Banco Filipino under authority of Valenzuela as liquidator. Top Management obtained a loan of P4. namely. No. Similarly. In a resolution dated August 29. 1985. placed it under receivership and designated Deputy Governor Carlota Valenzuela as receiver. 1985.370. the Monetary Board issued a resolution finding Banco Filipino insolvent and unable to do business without loss to its creditors and depositors. Salazar.R. 1985.R. the Monetary Board forbade Banco Filipino to do business. granting the petition for review on certiorari and reversing the questioned decision of respondent appellate court.the other hand.R. 07892 and 08962-64 were consolidated and jointly decided. G.000. SP Nos. enjoining the respondents from executing further acts of liquidation of the bank. this Court in G. The Central Bank is ordered to designate a comptroller for Banco Filipino. CA-G. 1985.00 secured by real estate mortgages on its various estates located in Cavite. of the decision promulgated by thisCourt on April 8.000 with maturity dates on December 28.R No. Salazar. 1985 by the Central Bank pursuant to the resolution of the Monetary Board. Hence. applied for extra-judicial foreclosure of the mortgage over Top Management's properties. Likewise. On December 9. which is the main case. Thus. filed by respondent Celestina Pahimuntung. On October 30. G. On March 22. 70054 questioning the validity of the resolutions issued by the Monetary Board authorizing the receivership and liquidation of Banco Filipino. On January 15. the other three (3) cases. the Monetary Board confirmed Banco Filipino's insolvency and designated the receiver Carlota Valenzuela as liquidator. Hence. It was extended by respondent Banco Filipino a credit accommodation to finance its housing program. The law firm of Sycip. Nos. 70054 resolved to issue a temporary restraining order.300. Resolution No. No. filed separate applications with the ex-officio sheriff of the Regional Trial Court of Cavite for the extra-judicial foreclosure of mortgage over its properties. 78767 and 78894 all seek to annul and set aside M. 70054. To secure the loan. 70054. P7. 68878 This is a motion for reconsideration.034. On March 26.R. 1985. which annulled the writ of possession issued by the trial court in favor of petitioner. effective during the same period of 30 days. Salazar. Hence.R. has no authority to proceed with the foreclosure sale of petitioners' properties on the ground that the resolution of the issue on the validity of the closure and liquidation of Banco Filipino is still pending with this Court in G. 1985 and February 16. Pilar Development mortgaged to Banco Filipino various properties in Dasmariñas. 1985. Salazar. Nos. 77255-58 Petitioners Top Management Programs Corporation (Top Management for brevity) and Pilar Development Corporation (Pilar Development for brevity) are corporations engaged in the business of developing residential subdivisions. 1985. .000 and P5. G. the respondent appellate court rendered a decision dismissing the aforementioned petitions. Hence. SP No. Pilar Development filed with the respondent appellate court a petition for prohibition with prayer for the issuance of a writ of preliminary injunction docketed as CA-G. et al. Deputy Governor of the Central Bank. this petition was filed by the petitioners Top Management and Pilar Development alleging that Carlota Valenzuela. The loan was secured by real estate mortgage in its various properties in Cavite. Subsequently. On January 25.B. et al. 1982 payable in three years from date. 75 issued by respondents Monetary Board and Central Bank on January 25. It placed Banco Filipino under receivership of Carlota Valenzuela. that acts such as receiving collectibles and receivables or paying off creditors' claims and other transactions pertaining to normal operations of a bank are not enjoined. which restrained Carlota Valenzuela from acting as liquidator and allowed Banco Filipino to resume banking operations only under a Central Bank comptroller. 1986. et al. Hence this petition for review on certiorari was filed alleging that the respondent court erred when it held in its decision that although Carlota P. the Court of Appeals rendered a decision dismissing the petition. initiated the foreclosure with the Clerk of Court and Ex-officio sheriff of RTC Cavite. T-82187. this petition for review on certiorari was filed. the trial court granted the motion to expunge in an order dated March 17. 1985.R.R.R. Subsequently. 81304 On July 9. 04609 had stated that Banco Filipino has been ordered closed and placed under receivership pending liquidation. the trial court granted the motion to dismiss the supplemental complaint on the grounds (1) that plaintiff has no contractual relation with the defendants. the appointed liquidator of BF. petitioner filed the instant petition for review on certiorari. On June 17. No. the respondent appellate court dismissed the appeal and affirmed the order of the trial court. G. 1985. the continuation of the facility sued for by the plaintiff has become legally impossible and the suit has become moot. On March 24. T109027. 1986 the said law firm filed an answer for Banco Filipino which confessed judgment against Banco Filipino. When Banco Filipino was ordered closed and placed under receivership in 1985. The Central Bank filed a motion to dismiss the action. petitioner filed a second amended complaint. this instant motion for reconsideration. On April 8. Salazar. 1989. 70054 . 1987. thru the law firm Sycip. she was not legally precluded from foreclosing the mortgage over the properties of the petitioner through counsel retained by her for the purpose. petitioner Pilar Development Corporation (Pilar Development for brevity) filed an action against Banco Filipino. On June 16. Petitioner Pilar Development filed with the respondent appellate court a petition for certiorari and mandamus to annul the order of the trial court. docketed as Civil Case No.R. G. thru its counsel Sycip. and (2) that the Intermediate Appellate Court in a previous decision in AC-G. No.R. 1987. 1988. Petitioner BF Homes in a supplemental complaint impleaded as defendant Carlota Valenzuela as receiver of Banco Filipino Savings and Mortgage Bank.When petitioner El Grande failed to pay its indebtedness to Banco Filipino.00. petitioner filed a second supplemental complaint to which respondents filed a motion to dismiss. No. and thus. Hence. The order of dismissal was appealed by the petitioner to the Court of Appeals. et al. acting for all the defendants including Banco Filipino moved that the answer filed by Quisumbing & Associates for defendant Banco Filipino be expunged from the records. petitioner El Grande filed a petition for prohibition with the Court of Appeals alleging that respondent Carlota Valenzuela could not proceed with the foreclosure of its mortgaged properties on the ground that this Court in G. G. 12191. No. On June 23. 1986. the ex-officio sheriff issued the notice of extra-judicial sale of the mortgaged properties of El Grande scheduled on April 30. petitioner filed with the Court of Appeals a petition for prohibition with prayer for writ of preliminary injunction to enjoin the respondents from foreclosing the mortgage and to nullify the notice of foreclosure. 1985. Hence. T-132897. Despite opposition from Quisumbing & Associates. respondent Court of Appeals rendered a decision dismissing the petition.034. 81303 On November 8. SP. A petition was filed with this Court but was denied in a resolution dated March 22. secured by a mortgage over its five parcels of land located in Cavite which were covered by Transfer Certificate of Title Nos. 1986. It appears that the former management of Banco Filipino appointed Quisumbing & Associates as counsel for Banco Filipino. Thus. financing facility with Banco Filipino.R. on March 31. No. Petitioner Pilar Development moved to reconsider the order but the motion was denied. the latter thru its liquidator. The Central Bank and Carlota Valenzuela. petitioner BF Homes Incorporated (BF Homes for brevity) filed an action with the trial court to compel the Central Bank to restore petitioner's. T-148377. 1986. Carlota Valenzuela. The Court of Appeals rendered a decision dismissing the petition. Sycip. 70054 issued a resolution dated August 29. 1986. applied with the ex-officio sheriff of the Regional Trial Court of Cavite for the extrajudicial foreclosure of the mortgage constituted over petitioner's properties. G. On June 12. the ex-officio sheriff issued a notice of extrajudicial foreclosure sale of the properties of petitioner.130. On March 2. On November 4.. Hernandez and Gatmaitan filed an answer to the complaint. No. Valenzuela was restrained by this Honorable Court from exercising acts in liquidation of Banco Filipino Savings & Mortgage Bank. and T-79371 of the Registry of Deeds of Cavite. In order to stop the public auction sale. Salazar. the Central Bank and Carlota Valenzuela for specific performance. Not satisfied with the decision. On July 9. 90473 Petitioner El Grande Development Corporation (El Grande for brevity) obtained a loan from Banco Filipino in the amount of P8. 1985. 1987. 1985. alleging that the respondent court erred when it found that the private respondents should not be the ones to respond to the cause of action asserted by the petitioner and the petitioner did not have any cause of action against the respondents Central Bank and Carlota Valenzuela. and as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors. 1985. . Special Assistant to the Governor and Head. 29 of RA 265. and Anthony Aguirre. 3. 1984. with more than three (3) million depositors. In consequence of the foregoing. To forbid Banco Filipino Savings and Mortgage Bank and all its branches to do business in the Philippines. To direct and authorize Management to do all other things and carry out all other measures necessary or proper to implement this Resolution and to safeguard the interests of depositors. Aurellano. as listed in the attached Annex "A" be included in the watchlist of the Supervision and Examination Sector until such time that they shall have cleared themselves. regarding the major findings of examination on the financial condition of petitioner BF as of July 31. Carlota P. Petitioner Bank had an approved emergency advance of P119. Resolution No. creditors and the general public. 934 dated July 27. Valenzuela.Banco Filipino Savings and Mortgage Bank was authorized to operate as such under M. I) On February 2. 839 dated June 29. It commenced operations on July 9.B. 1985. On the same date. He was later replaced by Gilberto Teodoro as conservator on August 10. that the Banco Filipino Savings & Mortgage Bank is insolvent and that its continuance in business would involve probable loss to its depositors and creditors.A No. 955 placing petitioner bank under conservatorship of Basilio Estanislao. Tiu Family Group. 2. 1985 was submitted to the Monetary Board by Ramon Tiaoqui. 1984. 223 dated February 14. This was augmented with a P3 billion credit line under M. respondent Board issued M. as Deputy Receivers who are likewise hereby directly vested with jurisdiction and authority to do all things necessary or proper to carry out the functions entrusted to them by the Receiver and otherwise to assist the Receiver in carrying out the functions vested in the Receiver by law or Monetary Board Resolutions. All the foregoing provides sufficient justification for forbidding the bank from engaging in banking. officers. as shown earlier. and in pursuance of Sec. 1984.B. Supervision and Examination Sector (SES) Department II as recited in his memorandum dated January 23. Vol. 1985. (pp. 1985 of the Conservator for Banco Filipino Savings and Mortgage Bank that the continuance in business of the bank would involve probable loss to its depositors and creditors. the following are recommended: 1. to immediately take charge of the assets and liabilities. Subsequently. To designate Mrs. Rollo) On January 25. 10-11. the Board decided: 1. to terminate the conservatorship over Banco Filipino Savings and Mortgage Bank. Designate the Head of the Conservator Team at the bank. Tiaoqui. Apex Mortgage and Loans Corporation. 1963. which shall be referred to herein as the Tiaoqui Report contained the following conclusion and recommendation: The examination findings as of July 31. As of July 31. 4. 3. the Monetary Board issued the assailed MB Resolution No. The latter submitted a report dated January 8. 2. 4. forty-six (46) of which are in Manila. Rollo. 75 which ordered the closure of BF and which further provides: After considering the report dated January 8. The Board of Directors and the principal officers from Senior Vice Presidents.B. indicate one of insolvency and illiquidity and further confirms the above conclusion of the Conservator. and employees for activities which led to its insolvent position. Deputy Governor as Receiver who is hereby directly vested with jurisdiction and authority to immediately take charge of the bank's assets and liabilities. as Receiver of Banco Filipino Savings & Mortgage Bank. Refer to the Central Bank's Legal Department and Office of Special Investigation the report on the findings on Banco Filipino for investigation and possible prosecution of directors. 1984. Resolution No. Filipino Business Consultants. as amended. and Mr. Special Assistant to the Governor and Head. exercising all the powers necessary for these purposes including but not limited to. 1984. Resolution No. pursuant to Sec. Arnulfo B. 1984. It has eighty-nine (89) operating branches. 1985 to respondent Board on the conservatorship of petitioner bank. Supervision and Examination Sector Department II. and 5. Resolution No. bringing suits and foreclosing mortgages in the name of the bank. as amended.7 million under M. LBH Inc. 29 of R. as expeditiously as possible collect and gather all the assets and administer the same for the benefit of all the creditors. and after discussing and finding to be true the statements of the Special Assistant to the Governor and Head. another report dated January 23.61-62. (pp. 9675 with the Regional Trial Court of Makati to set aside the action of the Monetary Board placing BF under receivership. Ramon V. 1964. SES Department II of the Central Bank. 265. To designate Mr. and exercise all the powers necessary for these purposes including but not limited to bringing suits and foreclosing mortgages in the name of the bank. the list of stockholders showed the major stockholders to be: Metropolis Development Corporation. petitioner BF filed a complaint docketed as Civil Case No. Special Assistant to the Governor. The report. Foregoing considered. Forbid the Banco Filipino Savings & Mortgage Bank to do business in the Philippines effective the beginning of office January 1985.B. which report shall hereinafter be referred to as the Teodoro report. 167. and for both parties to conduct the required cross-examination of witnesses/deponents. On October 21.R. 1991. I) On July 23. The reception of evidence in the form of affidavits was followed throughout. On March 19. which is to ascertain whether substantial administrative due process had been observed by the respondent Monetary Board. 1987. to order respondents to furnish petitioner with the reports of examination which led to its closure and to afford petitioner BF a hearing prior to any resolution that may be issued under Section 29 of R. This Court. The Legal Department.R. 1985 in the most expeditious manner and to submit its resolution to this Court. stockholders of petitioner bank for and on behalf of other stockholders of petitioner. in G. petitioner BF filed an urgent motion to reopen hearing to which respondents filed their comment on December 16. counter-affidavits of its officers and also documents to prove its claims. 1985. 1988. 78894. Acts such as receiving collectibles and receivables or paying off creditors' claims and other transactions pertaining to normal operations of a bank were no enjoined. 1988. The report contained the following recommendation: In view of the foregoing and considering that the condition of the banking institution continues to be one of insolvency. Valenzuela. 29 of RA No. This Court also Resolved in its resolution to re-open the referral hearing that was terminated after Judge Cosico had submitted his report and recommendation with the end in view of allowing petitioner to complete its presentation of evidence and also for respondents to adduce additional evidence. Sec. denied the aforesaid motions for intervention. This Court noted that during the referral hearing however.R. there being no legal impediment or justifiable reason to bar the former from conducting such hearing. After having deliberated on the grounds raised in the pleadings. The aforementioned resolution had ordered a healing on the reports that led respondents to order petitioner's closure and its alleged pre-planned liquidation.e. Management be instructed to inform the stockholders of Banco Filipino Savings & Mortgage Bank of the Monetary Board's decision liquidate the Bank. 70054 by BF Depositors' Association and others similarly situated. Although the records disclose that both parties had not waived cross-examination of their deponents. "Santiago Report") on the following issues stated therein as follows: . 1985 had not been faithfully adhered to by the herein petitioner and respondents. 1985. the hearing commissioner. may be expedited by Judge Manuel Cosico who now presides the court vacated by Judge Ricardo Francisco. 1985. 9676 and 10183 in Branch 136 of the Regional Trial Court of Makati. 1989. Rollo. 265. Makati. it is recommended that: 1. in compliance with the mandate of Sec.. 1985. 1985. 1985 as made without or in excess of jurisdiction or with grave abuse of discretion. Branch 149 (now Associate Justice of the Court of Appeals). 1990. this Court directed Judge Manuel Cosico to expedite the hearing and submit his report to this Court. Tiaoqui Report. this Court Resolved direct the respondents Monetary Board and Central Bank hold hearings at which the petitioner should be heard. and terminate such hearings and submit its resolution within thirty (30) days. again in G. affidavits of the private respondents relative to the findings. this Court submitted a resolution order ing Branch 136 of the Regional Trial Court of Makati the presided over by Judge Ricardo Francisco to conduct the hear ing contemplated in the resolution of August 29. third. However. 1985 ordering the issuance of the aforesaid temporary restraining order. as amended. 1989 declared that its intention as expressed in its resolution of August 29. i. this Court in its resolution dated August 3. 29 of R. this Court designated a new hearing commissioner in the person of former Judge Consuelo Santiago of the Regional Trial Court. This Court also ordered th consolidation of Civil Cases Nos. petitioner filed a motion before this Court praying that a restraining order or a writ of preliminary injunction be issued to enjoin respondents from causing the dismantling of BF signs in its main office and 89 branches. also known as Central Bank Act. 1985. Dizon. Justice Consuelo Santiago of the Court of Appeals submitted her report and recommendation (to be hereinafter called. 2. this Court in the meantime suspended the hearing it ordered in its resolution of August 29. No. Carlota Valenzuela. a different scheme was followed. Judge Manuel Cosico submitted his report to this Court with the recommendation that the resolutions of respondents Monetary Board and Central Bank authorizing the closure and liquidation of petitioner BP be upheld. on September 12. The Central Bank was also ordered to designate comptroller for the petitioner BF. On January 28. other creditors and the general public. be authorized to file in the proper court a petition for assistance in th liquidation of the Bank. This Court also held that the documents pertinent to the resolution of the instant petition are the Teodoro Report. To obviate all doubts on Judge Cosico's impartiality. The Statutory Receiver be designated as the Liquidator of said bank. as Receiver and Arnulfo Aurellano and Ramon Tiaoqui as Deputy Receivers of Banco Filipino submitted their report on the receivership of BF to the Monetary Board. This Court issued a resolution on August 8. Respondents merely submitted to the commissioner their findings on the examinations conducted on petitioner. its realizable assets are insufficient to meet all its liabilities and that the bank cannot resume business with safety to its depositors. second. On October 8. their reports to the Monetary Board and several other documents in support of their position while petitioner had merely submitted objections to the findings of respondents. on March 1. No. Three motions for intervention were filed in this case as follows: First. Petitioner filed their reply to respondent's comment of January 11. 70054 filed by Eduardo Rodriguez and Fortunate M. the Court stated that the hearing contemplated in the resolution of August 29. On February 20. petitioner filed with this Court the instant petition for certiorari and mandamus under Rule 65 of the Rules of Court seeking to annul the resolution of January 25. and 4. through the Solicitor General.A. In a resolution dated August 29. no such cross-examination has been conducted. 265 which provides that the Monetary Board shall determine within sixty (60) days from date of receivership of a bank whether such bank may be reorganized/permitted to resume business or ordered to be liquidated. Vol. filed by the same stockholders. This Court further resolved to issue a temporary restraining order enjoining the respondents from executing further acts of liquidation of a bank. the case was submitted for resolution.On February 28. 265. and. 3. 8108. (p. if so minded. In the Court's resolution of February 19. in G. who was elevated to the Court of Appeals. No. until the commissioner submitted his report and recommendations to the Court. Banco Filipino Savings & Mortgage Bank be liquidated pursuant to paragraph 3.A. 1985. On August 20. 1985. to be done within a period of three months. 1988. Hence. 1985. Aurellano and Tiaoqui Report and the supporting documents which were made as the bases by the reporters of their conclusions contained in their respective reports. the day it was closed. On March 12. a complaint was filed with the trial court in the name of Banco Filipino to annul the resolution o the Monetary Board dated January 25. 1984 and that on January 25. 29 of RA 265. "Central Bank et al. On March 22. No. That consequently. 1991. G. On February 25. Banco Filipino filed a complaint with the trial court docketed as Civil Case No. Respondents thereafter filed a motion for leave to file objections to the Santiago Report. respondents requested that the report and recommendation be set for oral argument before the Court. respondents filed their objections to the Santiago Report. 265. the evidence indicates that BF was solvent on July 31. 1985. In the same motion. 1985. its insolvency was not clearly established. 1985 in G. 1991. 78767 On February 2. 1985) was its condition one of insolvency or would its continuance in business involve probable loss to its depositors or creditors? The commissioner after evaluation of the evidence presented found and recommended the following: 1. was null and void. 1985.A. 1985. 1985 which ordered the closure of Banco Filipino and placed it under receivership. 1991) holding that petitioner's closure was null and void because petitioner's insolvency was not clearly established before its closure. 1986. No. having submitted their respective memoranda. On March 20. The receivers appointed by the Monetary Board were Carlota Valenzuela. BF should be allowed to re-open subject to such laws. 9675 to annul the resolution of the Monetary Board dated January 25. as amended.l) Had the Monetary Board observed the procedural requirements laid down in Sec. While the motion to dismiss was pending resolution.R. (Cosico Report dated February 19. 1988) and the other (Santiago Report dated January 25. . On February 7. 65723 entitled. by way of correction. On February 14. Intermediate Appellate Court" whereby We held that a complaint questioning the validity of the receivership established by the Central Bank becomes moot and academic upon the initiation of liquidation proceedings. The parties. Arnulfo Aurellano and Ramon Tiaoqui. 1985. rules and regulations that apply to its situation. BF's closure on January 25. 2. The Central Bank filed a supplemental motion to dismiss which was denied. 1985. That accordingly. the respondent appellate court granted the petition and dismissed the complaint of Banco Filipino with the trial court. 1985. which ordered the closure of the bank and placed it under receivership. Hence this petition was filed by Metropolis Development Corporation questioning the decision of the respondent appellate court. 9675. G. On July 19. it filed its reply to respondents' objections to the Santiago Report. In a supplemental motion to dismiss. No. the Central Bank and the receivers filed a motion to dismiss the complaint on the ground that the receivers had not authorized anyone to file the action. Hence. On February 14. 1991. and ordering the dismissal of the complaint filed by Banco Filipino with the trial court as well as the complaint in intervention of petitioner Metropolis Development Corporation. as amended to justify th closure of the Banco Filipino Savings and Mortgage Bank? 2) On the date of BF's closure (January 25. petitioner herein Metropolis Development Corporation (Metropolis for brevity) filed a motion to intervene in the aforestated civil case on the ground that as a stockholder and creditor of Banco Filipino. 1985. a hearing was held where both parties were heard on oral argument before this Court. not having satisfied the requirements prescribed under Sec. the Central Bank and the receivers of Banco Filipino filed a petition for certiorari with the respondent appellate court alleging that the trial court committed grave abuse of discretion in not dismissing Civil Case No. On the contrary. the Central Bank and the receiver filed a motion to dismiss the complaint on the ground that the receiver had not authorized anyone to file the action. 1986. On March 5. 29 of the R. the Central Bank cited the resolution of this Court dated October 15. the respondent appellate court rendered a decision annulling and setting aside the questioned orders of the trial court. the Monetary Board placed the bank under liquidation and designated Valenzuela as liquidator and Aurellano and Tiaoqui as deputy liquidators. the case is now submitted for decision. and that such a hearing on oral argrument will therefore allow the parties to directly confront the issues before this Court. the latter filed a petition for certiorari with the respondent appellate court to set aside the order of the trial court denying the motion to dismiss. 1985. On June 5. as amended. 265. this Court denied the request for oral argument of the parties. 1991. the trial court denied the motion to dismiss and also denied the motion for reconsideration of the order later filed by Central Bank. it has an interest in the subject of the action.A. 1991. respondents submitted a motion for oral argument alleging that this Court is confronted with two conflicting reports on the same subject. 1985. That the TEODORO and TIAOQUI reports did not establish in accordance with See. 1984 or that its continuance in business thereafter would involve probable loss to its depositors or creditors. v. BF's insolvency as of July 31. 78894 On February 2. 29 of R.R. the trial court allowed the motion for intervention. On March 17. Hence. 3. 1991 petitioner filed its opposition to the motion for oral argument.R. On June 18. On March 17. one upholding on all points the Monetary Board's closure of petitioner. reply. We cannot uphold the legality of its closure and thus. 68878. the petition. The mere duty of the comptroller is to supervise counts and finances undertaken by the liquidator and to d mine the propriety of the latter's expenditures incurred behalf of the bank. If the Monetary Board shall later determine and confirm that banking institution is insolvent or cannot resume business safety to depositors. No. 68878 and 81303 and the petitions in G. 81304. as explained in Sec.R. this petition for certiorari was filed with the petitioner contending that a bank which has been closed and placed under receivership by the Central Bank under Section 29 of RA 265 could file suit in court in its name to contest such acts of the Central Bank. 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 . 2. L-26990.R. as well as to correct manifest abuses of discretion committed by the officer or tribunal involved. and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution. Nos. 81303. the liquidator is empowered under the law to continue the functions of receiver is preserving and keeping intact the assets of the bank in substitution of its former management. Such acts of liquidation. in G. This is generally true with respect to acts involving the exercise of judgment or discretion. 265. After deliberating on the pleadings in the following cases: 1.R. Similarly.R.R. which was ordered by respondent Monetary Board on January 25. When the issue on the validity of the closure and receivership of Banco Filipino bank was raised in G. the liquidator is likewise authorized to resist or defend suits instituted against the bank by debtors and creditors of the bank and by other private persons.R. We hold that the closure and receivership of petitioner bank. Secretary of Agriculture and Natural Resources. but not limited to. August 31. courts have no supervising power over the proceedings and actions of the administrative departments of the government. Nos. it shall.R. In G. of the liquid insofar as the management of the assets of the bank is concerned. 70054. 29 of the Central Bank Act are those which constitute the conversion of the assets of the banking institution to money or the sale. 78767 and 78894 impressed with merit. 1985 and issued a restraining order to respondents Monetary Board and Central Bank. and findings of fact. like the Central Bank of the Philippines and the Monetary Board. comment. provides that when a bank is forbidden to do business in the Philippines and placed under receivership.R. Section 29 of the Republic Act No. Sr. v. 78766. 29. creditors and the general public. The law applicable in the determination of these issues is Section 29 of Republic Act No. as amended. In general. the petitioner's motion for reconsideration. due to the aforestated reasons. public interest requires. 1985 for the designation by the Central Bank of a comptroller Banco Filipino alter the powers and functions. While We recognize the actual closure of Banco Filipino and the consequent legal effects thereof on its operations.No. as amended known as the Central Bank Act. find the petitions in G. through these petitions. No. Nos. 77255-58. and to prevent the dissipation of its assets to the detriment of the creditors of the bank. Nos. We did not prohibit however acts a as receiving collectibles and receivables or paying off credits claims and other transactions pertaining to normal operate of a bank. — Whenever. 90473. in G. has committed grave abuse of discretion or has acted without or in excess of jurisdiction in issuing the assailed order. The Central Bank possesses those powers and functions only as provided for in Sec.Thus. 265. the petition. the person designated as receiver shall immediately take charge of the bank's assets and liabilities. 4. to undertake the delicate task of ascertaining whether or not an administrative agency of the government. comment. collect and gather all the assets and administer the same for the benefit of its creditors. Clearly. institute such actions as may necessary in the appropriate court to collect and recover a counts and assets of such institution or defend any action ft against the institution. 78766 and 90473. is null and void. But when there is a grave abuse of discretion which is equivalent to a capricious and whimsical exercise of judgment or where the power is exercised in an arbitrary or despotic manner. also known as the Central Bank Act. the liquidator by himself or through counsel has the authority to bring actions for foreclosure of mortgages executed by debtors in favor of the bank. as expeditiously as possible. 2. 70054. In G. No. once again. In G. exercising all the powers necessary for these purposes including. the petition comment and reply.R. 3. in G. In G. the Central Bank cannot be compelled to fulfill financial transactions entered into by Banco Filipino when the operations of the latter were suspended by reason of its closure. Finally. order its liquidation and appoint a liquidator who shall take over and continue the functions of receiver previously appointed by Monetary Board. No. In G. 81303. in the name of the bank and with the assistance counsel as he may retain. No. These powers and functions of the liquidator in directing the operations of the bank in place of the former management or former officials of the bank include the retaining of counsel of his choice in actions and proceedings for purposes of administration. reply and rejoinder. Nos.R. 78766. then there is a justification for the courts to set aside the administrative determination reached (Lim. Notwithstanding this. Coupled with this task is the duty of this Court not only to strike down acts which violate constitutional protections or to nullify administrative decisions contrary to legal mandates but also to prevent acts in excess of authority or jurisdiction. The liquid for may.R. 34 SCRA 751) The jurisdiction of this Court is called upon. bringing and foreclosing mortgages in the name of the bank. which provides: SEC. No. pendency of the case did not diminish the powers and authority of the designated liquidator to effectuate and carry on the a ministration of the bank. the petition. 1985. 68878. 77255-58. assignment or disposition of the s to creditors and other parties for the purpose of paying debts of such institution. rejoinder and sur-rejoinder. We find the motions for reconsideration in G. In fact when We adopted a resolute on August 25. Proceedings upon insolvency.R. without the authorization of the CB-appointed receiver.R. the respondent's motion for reconsideration. 1970. There is no doubt that the prosecution of suits collection and the foreclosure of mortgages against debtors the bank by the liquidator are among the usual and ordinary transactions pertaining to the administration of a bank. 81304 and 90473 devoid of merit. No. 5. 81304. 29 of the Central Bank Act. comment and reply. We enjoined me further acts of liquidation. In G. 77255-58. It is a well-recognized principle that administrative and discretionary functions may not be interfered with by the courts. their did Our order in the same resolution dated August 25. Nos. the liquidator may. which shall be in the form of cash or Central Bank cashier's check. attachment. orexecution.R. 70054. namely the report by Judge Manuel Cosico submitted February 20. but not limited to. effect partial payments of such claims for assets of the institution in accordance with their legal priority. it shall. the Monetary Board may order the cessation of operations of a bank in the Philippine and place it under receivership upon a finding of insolvency or when its continuance in business would involve probable loss its depositors or creditors. be exempt from any order of garnishment. in an amount twice the amount of the bond of th petitioner or plaintiff conditioned that it will pay the damages which the petitioner or plaintiff may suffer by the refusal or the dissolution of the injunction.performing quasi-banking functions. That after having reasonably established all claims against the institution. the actions of the Monetary Board under this Section. in the name of the bank or non-bank financial intermediary performing quasi-banking functions and with the assistance of counsel as he may retain. 1988 and the report submitted by Justice Consuelo Santiago on January 28. 1985. an the second paragraph of Section 34 of this Act shall be final an executory. to inform the Monetary Board of the facts. order its liquidation. shall be dissolved upon filing by the Central Bank of a bond. The Monetary Board shall thereupon determine within sixty days whether the institution may be reorganized or otherwise placed in such a condition so that it may be permitted to resume business with safety to its depositors and creditors and the general public and shall prescribe the conditions under which such resumption of business shall take place as well as the time for fulfillment of such conditions. institute such actions as may be necessary in the appropriate court to collect and recover accounts and assets of such institution or defend any action filed against the institution: Provided. Tiaoqui Report. it shall be disclosed that the condition of the same is one of insolvency. The liquidator designated as hereunder provided shall. Specifically. assign or otherwise dispose of the same to creditors and other parties for the purpose of paying the debts of such institution and he may. The restraining order or injunction shall be refused or. This Court shall likewise take into consideration the findings contained in the reports of the two commissioners who were appointed by this Court to hold the referral hearings. if public interest will be served. it shall. and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution. bringing and foreclosing mortgages in the name of the bank or non-bank financial intermediary performing quasi-banking functions. the expenses and fees in the collection and administration of the assets of the institution shall be determined by the Board and shall be paid to the Central Bank out of the assets of such institution. in case of conservatorship or liquidation. The provisions of any law to the contrary notwithstanding. and the general public. it shall be the duty of the department head concerned forthwith. by the Solicitor General. As We have stated in Our resolution dated August 3. in writing. 1991. 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. The former recommended the closure and receivership of petitioner bank while the latter report made the recommendation to eventually place the petitioner bank under liquidation. as expeditiously as possible collect and gather all the assets and administer the same for the benefit's of its creditors. We will focus Our study and discussion however on the Tiaoqui Report and the Valenzuela. The court shall have jurisdiction in the same proceedings to assist in the adjudication of the disputed claims against the bank or non-bank financial intermediary performing quasi-banking functions and in the enforcement of individual liabilities of the stockholders and do all that is necessary to preserve the assets of such institutions and to implement the liquidation plan approved by the Monetary Board. within ten (10) days from receipt of notice by the said majority stockholders of said bank or non-bank financial intermediary of the order of its placement under conservatorship o liquidation. xxx xxx xxx Based on the aforequoted provision. The Board may. file a petition in the regional trial court reciting the proceedings which have been taken and praying the assistance of the court in the liquidation of such institutions. However. 1989. 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. when warranted. The Monetary Board shall designate an official of the Central bank or a person of recognized competence in banking or finance. upon finding the statements of the department head to be true. In such case. creditors. and can be set aside by a court only if there is convince proof. or that its continuance in business would involve probable loss to its depositors or creditors. levy. the basic question to be resolved in G. exercising all the powers necessary for these purposes including. the documents pertinent to the resolution of these petitions are the Teodoro Report. The liquidator shall. with all convenient speed. Aurellano and Tiaoqui Report and the supporting documents made as bases by the supporters of their conclusions contained in their respective reports. and the Valenzuela. after hearing. in an amount be fixed by the court. . involve disposition of any or all assets in consideration for the assumption of equivalent liabilities. If the Monetary Board shall determine and confirm within the said period that the bank or non-bank financial intermediary performing quasi-banking functions is insolvent or cannot resume business with safety to its depositors. if the public interest requires. as liquidator who shall take over and continue the functions of the receiver previously appointed by the Monetary Board under this Section. creditors and the general public. indicate the manner of its liquidation and approve a liquidation plan which may. Aurellano and Tiaoqui Report. That the same is raised in an appropriate pleading filed by the stockholders of record representing the majority of th capital stock within ten (10) days from the date the receiver take charge of the assets and liabilities of the bank or non-bank financial intermediary performing quasi-banking functions or. as receiver to immediately take charge of its assets and liabilities. 78767 and 78894 is whether or not the Central Bank and the Monetary Board acted arbitrarily and in bad faith in finding and thereafter concluding that petitioner bank is insolvent. and in ordering its closure on January 25. The provisions of Rule 58 of the New Rules of Court insofar as they are applicable and not inconsistent with the provision of this Section shall govern the issuance and dissolution of the re straining order or injunction contemplated in this Section. Section 28-A. order its liquidation. convert the assets of the banking institutions or non-bank financial intermediary performing quasi-banking function to money or sell. No restraining order or injunction shall be issued by an court enjoining the Central Bank from implementing its actions under this Section and the second paragraph of Section 34 of this Act in th absence of any convincing proof that the action of the Monetary Board is plainly arbitrary and made in bad faith and the petitioner or plaintiff files a bond. if granted. that the action is plainly arbitrary and made in bad faith: Provided. executed in favor of the Central Bank. If the Monetary Board shall determine and confirm within sixty (60) days that the bank is insolvent or can no longer resume business with safety to its depositors. with the approval of the court. The actuation of the Monetary Board in closing petitioner bank on January 25. the department head concerned shall inform the Monetary Board in writing. revealed that the finding of insolvency of petitioner was based on the partial list of exceptions and findings on the regular examination of the bank as of July 31. 1984. submitted on January 23. 3313-3314. especially if doubt exists as to whether such bases or findings faithfully represent the real financial status of the bank. A formal reply of the bank would still be forthcoming. Vol. This provision is also known as valuation reserves which was set up or deducted against the capital accounts of the bank in arriving at the latter's financial condition. 1985. the Tiaoqui report. Rollo. What transpired and what was agreed upon during the conference was explained in the Tiaoqui report. It is worthy to note that a conference was held on January 21. (pp. Tiaoqui however admits the insufficiency and unreliability of the findings of the examiner as to the setting up of recommended valuation reserves from the assets of petitioner bank. we are submitting herewith a partial list of our exceptions/findings for your comments.4 million pursuant to the examination. It is hard to understand how a period of four days after the conference could be a reasonable opportunity for a bank to undertake a responsive and corrective action on the partial list of findings of the examiner-in-charge. should a pre-closing conference led by the examiner-in-charge be held with the officers/representatives of the institution on the findings/exception. 1984) and that we are still awaiting for the unsubmitted replies to our previous letters requests.. . that capital adjustments. Tiaoqui Report) This was attached to the letter dated December 17. It would be a drastic move to conclude prematurely that a bank is insolvent if the basis for such conclusion is lacking and insufficient. 59. emphasis ours) Clearly. an examination shall be conducted by the head of the appropriate supervising or examining department or his examiners or agents into the condition of the bank. that he believed. that he (Tiaoqui) however prepared his report despite the absence of such reply. . he met with officers of petitioner bank to discuss the advanced findings and exceptions made by Mr. 810. Fortunato Dizon (BF's Executive Vice President) said that as regards the unsecured loans granted to various corporations. It is evident from the foregoing circumstances that the examination contemplated in Sec.8 million. and lastly. The letter reads: In connection with the regular examination of your institution a of July 31. 1984. General Instruction. 1985 at the Central Bank between the officials of the latter an of petitioner bank. which disclosed that the examination of the petitioner bank as to its financial condition as of July 31. total capital accounts consisting of paid-in capital and other capital accounts such as surplus. secondly. The discussion centered on the substantial exposure of the bank to the various entities which would have a relationship with the bank. Vol. 7. 1985 barely four days after a conference with the latter on the examiners' partial findings on its financial position is also violative of what was provided in the CB Manual of Examination Procedures. thirdly. and a copy of the summary of the findings/violations should be furnished the institution examined so that corrective action may be taken by them as soon as possible (Manual of Examination Procedures. Rollo. collectively these corporations have large undeveloped real estate properties in the suburbs which can be made answerable for the unsecured loans a well as the Central Bank's credit accommodations. Said manual provides that only after the examination is concluded. 6. the following are the mandatory requirements to be complied with before a bank found to be insolvent is ordered closed and forbidden to do business in the Philippines: Firstly. for which the bank would in turn reply. surplus reserves and undivided profits aggregated P351. Tiaoqui report.There is no question that under Section 29 of the Central Bank Act. Also. Moreover. other findings/ observations are still being summarized including the classification of loans and other risk assets. 1984. as in fact it is stated in his report. p. 1985. 14). Tiaoqui testified that on January 21. 1985.. the manner by which some bank funds were made indirectly available to several entities within the group. or that its continuance in business would involve probable loss to its depositors or creditors.956 million. p. (p. the examination has not been officially terminated. the Monetary Board shall find the statements of the department head to be true. Rollo. Rollo). did not wait anymore for a discussion of the recommended valuation reserves and instead prepared his report two days after January 21. this list of exceptions and finding was submitted to the petitioner bank (p. on the bank solvency Mr. emphasis ours). that despite the meeting on January 21. before these can be considered in the financial condition of the bank. 58-59. and the unhealth financial status of these firms in which the bank was additionally exposed through new funds or refinancing accommodation including accrued interest. Tiaoqui Report). 1984 conducted by the Supervision and Examination Sector II of the Central Bank of the PhilippinesCentral Bank (p. 1984. 1984 was not yet completed or finished on December 17. 29 of the CB Act as a mandatory requirement was not completely and fully complied with. Queried in the impact of these clean loans. 1. Despite the existence of the partial list of findings in the examination of the bank. it shall be disclosed in the examination that the condition of the bank is one of insolvency. of the facts. Anent the first requirement. Please be informed that we have not yet officially terminated our examination (tentatively scheduled last December 7. On December 17. consistent with standard examination procedure. wiped out the capital accounts and placed the bank with a capital deficiency amounting to P334. He stated: The recommended valuation reserves as bases for determining the financial status of the bank would need to be discussed with the bank. These shall be submitted to you in due time (p. Tiaoqui based his report on an incomplete examination of petitioner bank and outrightly concluded therein that the latter's financial status was one of insolvency or illiquidity. that the biggest adjustment which contributed to the deficit is the provision for estimated losses on accounts classified as doubtful and loss which was computed at P600.1985. 1984 when the Central Bank submitted the partial list of findings of examination to th petitioner bank. president of petitione bank. of examiner-in-charge Dionisio Domingo of SES Department II of the Central Bank to Teodoro Arcenas. 1985 (pp. III. Records further show that the examination of petitioner bank was officially terminated only when Central Bank Examination-charge Dionisio Domingo submitted his final report of examination on March 4. however. that he however. said corporations had large undeveloped real estate properties which could be answerable for the said unsecured loans and that a reply from BF was forthcoming. Vol. I. Dizon (BF Executive Vice President) intimated that. that at that meeting. there were still highly significant items to be weighed and determined such as the matter of valuation reserves. He arrived at the said conclusion from the following facts: that as of July 31. I) In his testimony in the second referral hearing before Justice Santiago. there was still a need to discuss the recommended valuation reserves of petitioner bank and. Dionisio Domingo which covered 70%-80% of the bank's loan portfolio. 335). It is a basic accounting principle that assets are composed of liabilities and capital.162 SCRA 288). However. Time and again. 69 Phil. L-50031-32. 106 SCRA 143). Assets include cash and those due from banks. Consequently. Court of Appeals. But express grants of power to public officers should be subjected to a strict interpretation. and undivided profits net of such valuation reserves as may be required by the Central Bank. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion (Ang Tibay vs. the contention of the Central Bank that a bank's true financial condition is synonymous with the terms "unimpaired capital and surplus. the term "capital" includes common and preferred stock.. IAC. discounts and advances. Act No. We have held in several cases. G.R. No. discriminatory. Court of Industrial Relations. as to the requirement of notice and hearing. 302). and will be construed as conferring those powers which are expressly imposed or necessarily implied (Floyd Mechem. In this case." "combined capital accounts" and net worth after deducting valuation reserves from the capital. banking and credit system of the country and that its powers and functions shall be exercised by the Monetary Board pursuant to Rep.. June 20. to which practically all the questioned valuation reserves refer. that the procedure of administrative tribunals must satisfy the fundamentals of fair play and that their judgment should express a well-supported conclusion. since its action is subject to judicial scrutiny as provided for under the same law (Rural Bank of Bato v. 1985 cannot be given weight and finality as the report itself admits the inadequacy of its basis to support its conclusion. If valuation reserves would be deducted from these items. when warranted. the standard of fairness mandated in the due process clause is not met. it is clear from the law that a solvent bank is one in which its assets exceed its liabilities. or loans the ultimate collection of which is doubtful and in which a substantial loss is probable but not yet definitely ascertainable as to extent. Central Bank examiners must recommend valuation reserves. the total of the "unimpaired paid-in capital. or loans regarded by the examiner as absolutely uncollectible or worthless. 267 p. 8. 635.We recognize the fact that it is the responsibility of the Central Bank of the Philippines to administer the monetary. nature and changes in the assets and liabilities. valuation reserves of one hundred percent (100%) of the accounts should be recommended to be set up (p. shall be understood to mean that "the realizable assets of a bank or a non-bank financial intermediary performing quasi-banking functions as determined by the Central Bank are insufficient to meet its liabilities. 973. administrative due process does not mean that the other important principles may be dispensed with. known as the Central Bank Act. For doubtful loans. The format enumerates the items which will compose the assets and liabilities of a bank.A. Notwithstanding the foregoing. 5 of RA 337 is misplaced. 3-C). . f. surplus and unretained earnings. citing Sec. namely: the decision of the administrative body must have something to support itself and the evidence must be substantial. Unimpaired Capital and Surplus. 1981. this Court laid down several cardinal primary rights which must be respected in a proceeding before an administrative body. supra). as to justify its closure on January 25. surplus reserves. CIR. The following terms shall be held to be synonymous and interchangeable: ." and "Net worth. "Combined capital accounts. the power and authority of the Monetary Board to close banks and liquidate them thereafter when public interest so requires is an exercise of the police power of the state. October 15. 1988. the result would merely be the networth or the unimpaired capital and surplus of the bank applying Sec. Report of Examination on Department of Commercial and Savings Banks. In the case at bar. the manual provides that: 1. The term "assets" includes capital and surplus" (Exley v. In the celebrated case of Ang Tibay v. p. surplus and undivided profits. Firstly. surplus. arbitrary." which terms shall mean for the purposes of this Act. fixed assets and other property owned or acquired and other miscellaneous assets. such as for the purpose of closure on the ground of insolvency stated in Section 29 of the Central Bank Act. 29 of RA 265 does not require a previous hearing before the Monetary Board implements the closure of a bank.R. For loans classified as loss. unjust or is tantamount to a denial of due process and equal protection clauses of the Constitution (Central Bank v. may not be done arbitratrily or unreasonably and could be set aside if it is either capricious. July 27. discounts and advances to be stated in the statement of condition as provided for in the manual is computed after deducting valuation reserves when deemed necessary. the respondents contend that under the Central Bank Manual of Examination Procedures. the statement of assets and liabilities is used in balance sheets. 1984. Court of Appeals. whimsical. In the instant case. 265. 61689. where the decision is merely based upon pieces of documentary evidence that are not sufficiently substantial and probative for the purpose and conclusion they are presented. Sec. p. known as the General Banking Act which states: Sec. R. 5 of RA 337 but not the total financial condition of the bank. Sec. Secondly. The amount of loans. 126 Kan. to be set up or deducted against the corresponding asset account to determine the bank's true condition or net worth. Objections to Santiago report)." Hence. Hence. 970. On the other hand. there can be no clearer explanation of the concept of insolvency than what the law itself states. The foregoing criteria used by respondents in determining the financial condition of the bank is based on Section 5 of RA 337. the basic standards of substantial due process were not observed. 29 of the Central Bank Act provides that insolvency under the Act. Banks use statements of condition to reflect the amounts." There is no doubt that the Central Bank Act vests authority upon the Central Bank and Monetary Board to take charge and administer the monetary and banking system of the country and this authority includes the power to examine and determine the financial condition of banks for purposes provided for by law. Substantial evidence is more than a mere scintilla. 2. the conclusion arrived at by the respondent Board that the petitioner bank is in an illiquid financial position on January 23. Nos. (Manual of Examination Procedures. The second requirement provided in Section 29. however. loans. 5. Police power. Rural Bank v. valuation reserves of fifty per cent (50%) of the accounts should be recommended to be set up. 1985. On the other hand. 65642. 265 before a bank may be closed is that the examination should disclose that the condition of the bank is one of insolvency.. In the case of loan accounts. As to the concept of whether the bank is solvent or not. The Central Bank Manual of Examination Procedures provides a format or checklist of a statement of condition to be used by examiners as guide in the examination of banks. G. Harris. Treatise on the Law of Public Offices and Officers. Rollo. There can be no basis therefore for both the conclusion of insolvency and for the decision of the respondent Board to close petitioner bank and place it under receivership.2 million. Resolution No. The Tiaoqui report dated January 23. on the assumption that the bank or company will continue in business indefinitely. would equal or exceed its total liabilities exclusive of stock liability. the consolidated statement of condition of petitioner bank as of January 25. Clearly.1 million exceeds total assets of P4. Hence. Further. 1985.540. 360.. 970. 8. Likewise. This paved the way for the reopening of the bank on August 1. branches. 1984.981. Respondents acknowledge that under the said CB manual. 302. We will however.22 even exceeds total liabilities amounting to P4. 1984 and at the figures presented by the CB authorized deputy receiver and by the Valenzuela. Even the CB Manual of Examination Procedures does not confine examination of a bank solely with the determination of the books of the bank. 955 dated July 27. 1985. Llewellyn. .. Hence. 2n 115. borrowings. (Gillian v. 1985. 194 N. rules and regulations. there was no valid reason for the Valenzuela. 1985 prepared by the Central Bank Authorized Deputy Receiver Artemio Cruz shows that total assets amounting to P4. testified that the reason for petitioner bank's closure was not unsound. which was based on partial examination findings on the bank's condition as of July 31.834. This Court however. 90. the statement of condition which contains a provision for recommended valuation reserves should not be used as the ultimate basis to determine the solvency of an institution for the purpose of termination of its operations.559. that this has any material bearing on the validity of the closure. State. 267 p. 661). Tiaoqui himself. when petitioner bank was under conservatorship no official of the bank was ever prosecuted. Concerning the financial position of the bank as of January 25. p. App.E. 1984.126 Kan. Central Bank Act empowers the Monetary Board to take action under Section 29 of the Central Bank Act when a bank "persists in carrying on its business in an unlawful or unsafe manner. is not in the position to determine how much cash or market value shall be assigned to each of the assets and liabilities of the bank to determine their total realizable value. In periods of emergency or of imminent financial panic which directly threaten monetary and banking stability. Alexander v. accounts.836. cashier's. suspended or removed for any participation in unsafe and unsound banking practices. 5). This is not the proper procedure contemplated in Sec.117). Section 34 of the RA 265. while audit concerns itself with verification (CB Manual of Examination Procedures.4 if the 612. the consolidated statement of condition thereof as of the aforesaid date shown in the Valenzuela. We do not see. 3316.2 million after deducting from the assets valuation reserves of P612. take a look at the figures presented by the Tiaoqui Report in concluding insolvency as of July 31. the allowance for probable losses on loans and discounts represents the amount set up against current operations to provide for possible losses arising from non-collection of loans and advances. etc. 70 S. 1984 after a self-imposed bank holiday on July 23. .947. The proper determination of these matters by using the actual cash value criteria belongs to the field of fact-finding expertise of the Central Bank and the Monetary Board. August 3. 1985. VIII). 973. the insolvency of a bank occurs when the actual cash market value of its assets is insufficient to pay its liabilities. respondents used its books which undoubtedly are not reflective of the actual cash or fair market value of its assets. We take note of the exhaustive study and findings of the Cosico report on the petitioner bank's having engaged in unsafe. the quality and character of management and determines the institution's compliance with laws.540.84 million does not exceed the total assets of 4. 1990. as We have explained in our previous discussion that valuation reserves can not be legally deducted as there was no truthful and complete evaluation thereof as admitted by the Tiaoqui report itself. a bank is solvent if the fair cash value of all its assets. Aurellano and Tiaoqui report to finally recommend the liquidation of petitioner bank instead of its rehabilitation. indicates that total liabilities of 4. General Instructions. unsafe and fraudulent banking practices but the alleged insolvency position of the bank (TSN. vouchers. as author of the report recommending the closure of petitioner bank admits that the valuation reserves should still be discussed with the petitioner bank in compliance with standard examination procedure. CB Deputy Governor. Aurellano and Tiaoqui Report which recommended the liquidation of the bank by reason of insolvency as o January 25. dated March 19.53 million. Section 90 of RA 265 provides two types of emergency loans that can be granted by the Central Bank to a financially distressed bank: Sec. the debtor institution may not expand the total volume of its loans or investments without the prior authorization of the Monetary Board. to be set up against the corresponding asset account (p.B. Carlota Valenzuela. Harris.W. p. The amounts stated in the balance sheets or statements of condition including the computation of valuation reserves when justified. due to head office. in her testimony during the second referral hearing. based on respondents' submissions. the bank is insolvent. 1984.liabilities are composed of demand deposits. Notwithstanding the fact that the figures arrived at by the respondent Board as to assets and liabilities do not truly indicate their realizable value as they were merely based on book value.996. when warranted. Objections to Santiago report). Stated in other words. the Central Bank may grant banking institutions extraordinary advances secured by any assets which are defined as acceptable by by a concurrent vote of at least five members of the Monetary Board. 207 Ind. In fact. In arriving at the computation of realizable assets of petitioner bank. would be totally unjust and unfair. The test of insolvency laid down in Section 29 of the Central Bank Act is measured by determining whether the realizable assets of a bank are leas than its liabilities. however. Mo. realizable within a reasonable time by a reasonable prudent person. Since. for the Monetary Board to unilaterally deduct an uncertain amount as valuation reserves from the assets of a bank and to conclude therefrom without sufficient basis that the bank is insolvent.1985. Objections to Santiago report). Examination appraises the soundness of the institution's assets. ledgers. the date of the closure of the bank. Vol. During the period from July 27. time and savings deposits. unsound and fraudulent banking practices by the granting of huge unsecured loans to several subsidiaries and related companies. p. manager's and certified checks. 363. examination concerns itself with review and appraisal.. but if such fair cash value so realizable is not sufficient to pay such liabilities within a reasonable time. 29 of the Central Bank Act.1 million will not exceed the total assets which will amount to P5. and neither was the entire management of the bank replaced or substituted. not considering capital stock and surplus which are not liabilities for such purpose (Exley v.981. other liabilities and deferred credits (Manual of Examination Procedure. Audit is a detailed inspection of the institution's books. the networth shown in the statement is in no sense an indication of the amount that might be realized if the bank or company were to be liquidated immediately (Prentice Hall Encyclopedic Dictionary of Business Finance. and agencies. then an adjustment of the figures win show that the liabilities of P5. and this account is also referred to as valuation reserve (p. to determine the recording of all assets and liabilities. Hence.2 million allotted to valuation reserves will not be deducted from the assets. p. are based however. 9. On emergency loans and advances.15.282. CB examiners must recommend valuation reserves. states that total liabilities of P5. 9). 1984 up to January 25. 48). another circumstance which point to the solvency of petitioner bank is the granting by the Monetary Board in favor of the former a credit line in the amount of P3 billion along with the placing of petitioner bank under conservatorship by virtue of M." There was no showing whatsoever that the bank had persisted in committing unlawful banking practices and that the respondent Board had attempted to take effective action on the bank's alleged activities. Based on the foregoing. The latter is part of auditing which should not be confused with examination.282. While such advances are outstanding.522. Finally. Aurellano and Tiaoqui report on the receivership of petitioner bank. and therefore. took no part. L-29352. the reopening of Banco Filipino would require additional credit resources from the Central Bank as well as an independent management acceptable to the Central Bank. concur. The Central Bank and the Monetary Board are ordered to reorganize petitioner Banco Filipino Savings and Mortgage Bank and allow the latter to resume business in the Philippines under the comptrollership of both the Central Bank and the Monetary Board and under such conditions as may be prescribed by the latter in connection with its reorganization until such time that petitioner bank can continue in business with safety to its creditors. 78767 and 78894 are GRANTED and the assailed order of the Central Bank and the Monetary Board dated January 25. C. Section 29 of the Central Bank provides that a closed bank may be reorganized or otherwise placed in such a condition that it may be permitted to resume business with safety to its depositors.J. In view of the foregoing premises. further. Provided. Central Bank. Paras. even during normal periods. No. at its discretion. The motion for reconsideration in G. Separate Opinions . No. the fact that petitioner bank was suffering from serious financial problems should not automatically lead to its liquidation. 68878 and 81303. The petitions in G. A perusal of the foregoing "Whereas" clauses unmistakably show that the clear reason for the decision to grant the emergency loan to petitioner bank was that the latter was suffering from financial distress and severe bank "run" as a result of which it closed on July 23. This Court thereby finds that the grant of the said emergency loan was intended from the beginning to fall under the second paragraph of Section 90 of the Central Bank Act. the Central Bank even granted financial support to the latter and placed it under conservatorship. or events which. not only as regards petitioner bank. Davide. They should take all the necessary steps not violative of the laws that will fully secure the repayment of the total financial assistance that the Central Bank had already granted or would grant in the future. Narvasa. Granting in gratia argumenti that the closure was based on justified grounds to protect the public. JJ. 41 SCRA 565). 25. October 4. Nos. p. Jr. 1985 is hereby ANNULLED AND SET ASIDE. p. provides for a situation where the Central Bank grants a loan to a bank with uncertain financial condition but not insolvent. p. the closure by Banco Filipino Savings and Mortgage Bank of its Banking offices on its own initiative has worked serious hardships on its depositors and has affected confidence levels in the banking system resulting in a feeling of apprehension among depositors and unnecessary deposit withdrawals. Emphasis ours). 70054. and the petitions in G. 26. likewise grant advances to banking institutions. But there are alternatives to permanent closure and liquidation to safeguard those interests as well as those of the general public for the failure of Banco Filipino or any bank for that matter may be viewed as an irreversible decline of the country's entire banking system and ultimately. however. Gutierrez. WHEREAS. could not be prevented by the bank concerned. SO ORDERED. IX). That the Monetary Board has ascertained that the bank is not insolvent and has clearly realizable assets to secure the advances. Vol. it is the desire of the Central Bank to rapidly diffuse the uncertainty that presently exists. Rollo. the following are the reasons of the Central Bank in approving the resolution granting the P3 billion loan to petitioner bank and the latter's reopening after a brief self-imposed banking holiday: WHEREAS. We are aware of the Central Bank's concern for the safety of Banco Filipino's depositors as well as its creditors including itself which had granted substantial financial assistance up to the time of the latter's closure. IX. 1984 and that the release of the said amount is in accordance with the Central Bank's full support to meet Banco Filipino's depositors' withdrawal requirements (Excerpts of minutes of meeting on MB Min. Bidin and Regalado. though foreseeable. the emergency or financial confusion involves the whole banking community and not one bank or institution only. For one thing.. the Central Bank is charged with the function of administering the banking system. it may reflect on the Central Bank's own viability. As alleged by the respondents.B. . WHEREAS. Min. such actuation means that petitioner bank could still be saved from its financial distress by adequate aid and management reform. Nothing therein shows that an extraordinary emergency situation exists affecting most banks. Jr. We believe that the closure of the petitioner bank was arbitrary and committed with grave abuse of discretion.R. 78766.. Padilla.R. 35 dated July 27. Rollo. 35. which could not have occurred if the petitioner bank was not solvent. WHEREAS. Here. That a concurrent vote of at least five members of the Monetary Board is obtained.The Central Bank may. 77255-58. the Central Bank and the Monetary Board should exercise strict supervision over Banco Filipino. Cruz. Provided. 1984 cited in Respondents' Objections to Santiago Report. No. 2. No. Vol.. The second situation on the other hand. Feliciano. decision is hereby rendered as follows: 1. creditors and the general public. 1971.. JJ. (Emphasis ours) The first paragraph of the aforequoted provision contemplates a situation where the whole banking community is confronted with financial and economic crisis giving rise to serious and widespread confusion among the public... and Nocon. depositors and the general public. ACCORDINGLY.R. Nos. Where notwithstanding knowledge of the irregularities and unsafe banking practices allegedly committed by the petitioner bank. for the purpose of assisting a bank in a precarious financial condition or under serious financial pressures brought about by unforeseen events. which was required by Central Bank's duty to maintain the stability of the banking system and the preservation of public confidence in it (Ramos v. 3387. 81304 and 90473 are DENIED. which may eventually threaten and gravely prejudice the stability of the banking system. (M. R. These eight (8) cases are: 1. "Metropolis Development Corporation vs. The buyer's motion for reconsideration is awaiting resolution by this Court. Court of appeals. 5.R.R. (p. Judge Zoilo Aguinaldo. without "administrative due process. dissenting: I join Mme." 3..5 Billion in total accommodations. 08809 dismissing El Grande's petition for prohibition to prevent the foreclosure of BF's P8 million mortgage on El Grande's properties. 07503 entitled. considering its inability to meet the heavy withdrawals by its depositors and to pay its liabilities as they fell due. No. G. 77255-58.R. meanwhile annulling said Resolution of January 25. 78894. J. 07503. Rollo I. et al. Central Bank of the Philippines (CB). include taking charge of the insolvent's assets and administering the same for the benefit of its creditors and of bringing suits and foreclosing mortgages in the name of the bank. . That is also a ground for placing the bank under receivership. 70054 "Banco Filipino Savings and Mortgage Bank (BF) vs.R. "Central Bank.. 265). and can operate without loss to its many depositors and creditors. hence. Only G. Petitioner prays for such other remedy as the Court may deem just and equitable in the premises." is an original action for mandamus and certiorari filed in this Court by former officials of BF to annul the Monetary Board Resolution No. after a thorough assessment of whether or not BF is.R.MELENCIO-HERRERA. all of them except one.A. as receiver under Section 29 (R. petitioner prays that the assessment of the damages respondents should pay it be deferred and referred to commissioners. raise issues unrelated to the receivership and liquidation of said bank. in a literal state of insolvency at the time of the passage of said Resolution. Court of Appeals. possessed. SP Nos. March 4. Even assuming that the BF was not. reorganization or rehabilitation of BF is not within the competence of this Court to ordain but is better addressed to the Monetary Board and the Central Bank considering the latter's enormous infusion of capital into BF to the tune of approximately P3. of sufficient assets and capabilities with which to repay such huge indebtedness.R. "Banco Filipino Savings and Mortgage Bank vs. No. Court of Appeals" (formerly AC-G. "El Grande Corporation vs. pursuant to Section 29 of the Central Bank Act (Rep. The Court of Appeals dismissed the petitions on October 30. In fact. indeed. 75 placing Banco Filipino (BF) under receivership. No. GRIÑO-AQUINO. The closure of BF. 72. Aquino in her dissent and vote to deny the prayer. 265) including its amendatory Presidential Decrees Nos. to forbid the bank from further engaging in banking. to annul Monetary Board Resolution No. in G. 1986 on the ground that "the functions of the liquidator. No.) The other eight (8) cases merely involve transactions of BF with third persons and certain "related" corporations which had defaulted on their loans and sought to prohibit the extrajudicial foreclosure of the mortgages on their properties by the receiver of BF. 1985 (ordering the closure of Banco Filipino [BF] and appointing Carlota Valenzuela as receiver of the bank) on the ground that the resolution was issued "without affording BF a hearing on the reports" on which the Monetary Board based its decision to close the bank. 68878 and 81303) have already been decided by this Court and are only awaiting the resolution of the motions for reconsideration filed therein. SP No. Justice Carolina G. et al. 1771. 68878 "BF vs..R. et al. dissenting: Although these nine (9) Banco Filipino (BF) cases have been consolidated under one ponencia. G. 1985 and thereafter to afford it a hearing prior to any resolution that may be issued under Section 29 of R. the Monetary Board (MB). as it stoutly contends. 1827 and 1937 be annulled as unconstitutional." is an appeal of BFs old management (using the name of BF) from the decision of the Court of Appeals in CA-G." is an appeal from the Court of Appeals' decision in CA-G. et al. SP No. The appellate court's judgment for the buyer was reversed by this Court. The matter of reopening. Quezon City for Manila. based on that Bank's illiquidity. as a first step.R. Nos. No. 75 dated January 25. Honorable Zoilo Aguinaldo. there was a finding in the Teodoro report that. (p.') is an appeal of the intervenor (Metropolis) from the same Court of Appeals' decision subject of G. Act No. 1985 by writ of certiorari as made without or in excess ofjurisdiction or with grave abuse of discretion. vs. 87867. 0896264) is a consolidated petition for review of the Court of Appeals' joint decision dismissing the petitions for prohibition in which the petitioners seek to prevent the receiver/liquidator of BF from extrajudicially foreclosing the P4. No. G. RTC.8 million mortgage on Top Management's properties and the P18-67 million mortgage on Pilar Development properties. Cavite" (CA-G. 1985. "Top Management Programs Corporation and Pilar Development Corporation vs. G. therefore. Intermediate Appellate Court and Celestina Pahimutang" involves the repossession by BF of a house and lot which the buyer (Pahimutang) claimed to have completely paid for on the installment plan. petitioner respectfully prays that a writ of mandamus be issued commanding respondents immediately to furnish it copies of the reports of examination of BF employed by respondent Monetary Board to support its Resolution of January 25. 78766. 07892) and "Pilar Development Corporation vs." (CA-G.R. in addition to its prayer for mandamus and certiorari contained in its original petition. 265.R. et al. G. petitioner respectfully prays that Sections 28-A and 29 of the Central Bank charter (R.". Rollo I-) and the prayer of the Supplement to Petition reads: WHEREFORE.R. So as to expedite proceedings. No. et al. for no suit may be brought or defended in the name of the bank except by its receiver. 70054. 2. Executive Judge. to have allowed it to continue in operation would have meant probable loss to depositors and creditors. 265. 11-G. as alleged. "Central Bank. 1985. et al" dismissing the complaint of "BF" to annul the receivership.A. vs. two of these cases (G.A. The prayer of the petition reads: WHEREFORE. et al. 8.R.R. as amended). Court of Appeals. can not be said to have been arbitrary or made in bad faith. There was sufficient justification. Quezon City for Manila. 4. J.. No. February 28. SP No. No. the answer was expunged and the complaint was dismissed. 1988 by Judge Cosico pending the resolution of G. upon examination by the head of the appropriate supervising and examining department or his examiners or agents into the condition of any banking institution. 81304.R.R. we held that: "As liquidator of BF by virtue of a valid appointment from the Central Bank. the expenses and fees in the collection and administration of the assets of the institution shall be determined by the Board and shall be paid to the Central Bank out of the assets of such banking institution." is an appeal from the decision dated October 22. Br.R. 75 and ordering the respondents. G. 7. in the case at bar." is a petition to review the decision dated June 6.R.78894. et al.R. I concur with the ponencia insofar as it denies the motion for reconsideration in G. I am taking no part in G. On a petition for certiorari in this Court. who dismissed the complaint filed by Pilar Development Corporation against BF.R. RTC. N. exercising all the powers necessary for these purposes including. No.R. 81303. 143 to Br. forbid the institution to do business in the Philippines and shall designate an official of the Central Bank as receiver to immediately take charge of its assets and liabilities. 70054 annulling and setting aside MB Resolution No. BF should be reorganized and reopened. Court of Appeals. in writing. which authority includes the retainer of counsel to represent it in bringing or resisting suits in connection with such liquidation and. 10183 (to annul the liquidation) of BF were and are still pending. or that its continuance in business would involve probable loss to its depositors or creditors. In such case. G. upon finding the statements of the department head to be true. The petitioners' motion for reconsideration of that decision is pending resolution. Br. using the name of the bank and praying for the annulment of MB Resolution No. 1985 three weeks after they had filed on February 2. Court of Appeals. No. without the authority of the receiver. The Monetary Board shall thereupon determine within sixty days whether the institution may be reorganized or otherwise placed in such a condition so that it may be permitted to resume business with safety to its depositors and creditors and the general public and shall prescribe the conditions under which such resumption of business shall take place as well as the time for fulfillment of such conditions. Court of Appeals. It may be mentioned in this connection that neither in AC-G. CV No.R. All these three (3) cases were archived on June 30. 1985. as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors. No. 70054 "BF vs. vs. Nos. 08676 dismissing El Grande's petition for prohibition to stop foreclosure proceedings against it by the receiver of BF. On motion of the receiver. it shall be the duty of the department head concerned forthwith. Central Bank of the Philippines and the Monetary Board — to reorganize petitioner Banco Filipino Savings and Mortgage Bank. for I believe that this Court has neither the authority nor the competence to determine whether or not. Proceedings upon insolvency. G. for those issues were not raised in the Court of Appeals. No. 68878) and AC-G. 78766. SP No.R. and dismisses the petitions for review in G. to take the proper steps to prevent collusion. G. creditors and the general public. 02617 (now G. SP No." dismissing the petition for certiorari against Judge Manuel Cosico. and 90473. 08565 affirming the trial court's order dismissing BF Homes' action to compel the Central Bank to restore the financing facilities of BF. 78767 and 78894. No.R. "Pilar Development Corporation vs. Nos. 70054 by this Court. nor in AC-G. 8. 81303. SP No.. Nos. Makati. No.R. Honorable Manuel Cosico. to inform the Monetary Board of the facts.R. 75 dated January 25. — Whenever. et al. Monetary Board.R. 90473. If the Monetary Board shall determine and confirm within the said period that the banking institution is insolvent or cannot resume business with safety to its depositors..R. bringing suits and foreclosing mortgages in the name of the banking institution. As previously stated. and the validity of MB Resolution No. 02617. 265 provides: Section 29. 07503 (now G. if the public interest requires. Because of my previous participation. 49. depositors and the general public. 07503. 143 (presided over by Judge Zoilo Aguinaldo) for the same purpose of securing a declaration of the nullity of MB Resolution No. this Court ordered the transfer and consolidation of Civil Case No. but not limited to. All that we may determine in this case is whether the actions of the Central Bank and the Monetary Board in closing BF and placing it under receivership were "plainly arbitrary and made in bad faith. and under what conditions. 68878. On August 25. I respectfully dissent from the majority opinion in G." in the Regional Trial Court of Makati. private respondent Carlota Valenzuela has the authority to direct the operation of the bank in substitution of the former management. et al. virtually confessed judgment in favor of Pilar Development. did the Court of Appeals rule on the constitutionality of Sections 28-A and 29 of Republic Act 265 (Central Bank Act). 136. 1987 of the Court of Appeals in CA-G. and the Board may.. 77255-58. et al. It is a "forum-shopping" case because it was filed here on February 28. 6. et al. as BF's supposed counsel. 12368. 8108 (to annul the conservatorship) and Civil Case No. et al. 81304. it shall. "El Grande Development Corporation vs. Quisumbing & Associates. That decision should be made by the Central Bank and the Monetary Board. 1985. et al. and allow the latter to resume business in the Philippines under the comptrollership of both the Central Bank and the Monetary Board and under such conditions as may be prescribed by the latter until such time that petitioner bank can continue in business with safety to its creditors. Section 29 of Republic Act No. which also dismissed Metropolis' complaint in intervention on the ground that a stockholder (Metropolis) may not bring suit in the name of BF while the latter is under receivership.R. "Pilar Development Corporation." is an appeal from the decision dated November 4. 136 (Judge Manuel Cosico) of the Makati Regional Trial Court where Civil Case No. "BF Homes Development Corporation vs.R. it shall be disclosed that the condition of the same is one of insolvency. Rollo). in the disposition of AC-G. 1987 of the Court of Appeals in CA-G. . 9676 (to annul the receivership) from Br. No. to the prejudice of the legitimate creditors." is an original special civil action for certiorari and mandamus filed in this Court by the old management of BF. No. 1989 in CA-G. Monetary Board. 75 which ordered the closure of BF and placed it under receivership. An answer filed by Norberto Quisumbing and Associates. as a former member of the Court of Appeals.J. for specific performance of certain developer contracts. through their counsel.R. not by this Court. 9675 "Banco Filipino vs. 1985 Civil Case No. SP No. 75. 78767 and 78894). because the plaintiff (BF Homes) has no cause of action against the CB. No. between BF and the petitioners herein which appear to be owned and controlled by the same interest controlling BF" (p. as amended.R. SP No. 1984. in an amount to be fixed by the court. file a petition in the Court of First Instance. Tiaoqui Report). 1984 (pp. 2. receivership. Tiaoqui opined that BF's continuance in business would cause probable loss to depositors and creditors. The restraining order or injunction shall be refused or. convert the assets of the banking institution to money or sell. on January 23. Tiaoqui further categorically found that BF was insolvent. 1985 when the Monetary Board issued Resolution No. Three weeks later. responding to BFs pleas for additional financial assistance.3601 billions of the credit line were availed of by the end of 1984 exclusive of an overdraft of P932. granted BF a P3 billion credit line (MB Res. (p. shall be understood to mean the inability of a banking institution to pay its liabilities as they fall due in the usual and ordinary course of business. Teodoro hired financial consultants Messrs. to about 8. that this shall not include the inability to pay of an otherwise non-insolvent bank caused by extra-ordinary demands induced by financial panic commonly evidenced by a run on the banks in the banking community. No restraining order or injunction shall be issued by the court enjoining the Central Bank from implementing its actions under this section and the second paragraph of Section 34 of this Act. or that its continuance in business would involve probable loss to its depositors and creditors.) Additional emergencyt loans (a total of P119. and collaterals held.1984. however. if granted. unless there is convincing proof that the action of the Monetary Board is plainly arbitrary and made in bad faith and the petitioner or plaintiff files with the clerk or judge of the court in which the action is pending a bond executed in favor of the Central Bank.4 million by July 31. Both reports showedthat. 1984) to enable it to reopen and resume business on August 1. The ratio of liquid assets to deposits and borrowings plunged from about 20% at end-1983. 2. on and for some time before January 25. indicate the manner of its liquidation and approve a liquidation plan. in the name of the banking institution. assign or otherwise dispose of the same to creditors and other parties for the purpose of paying the debts of such bank and he may.order its liquidation.337): 2 1. Arnulfo B. On January 9. 1984. 265. Presumably to assure that the financial assistance would be properly used. Estanislao resigned after two weeks for health reasons. the CB. the actions of the Monetary Board under this section and the second paragraph of Section 34 of this Act shall be final and executory. upon examination by the SES of the Central Bank. 19.A.9 million during the week of June 11-15. and can be set aside by the court only if there is convincing proof that theaction is plainly arbitrary and made in bad faith. (p.) . the MB appointed Basilio Estanislao as conservator of the bank. that it had become "a substantial borrower in the call loans market" and in June 1984 it obtained a P30 million emergency loan from the Central Bank. 1984. (Tiaoqui Report. The provisions of Rule 58 of the new Rules of Court insofar as they are applicable and not inconsistent with the provisions of this section shall govern the issuance and dissolution of the restraining order or injunction contemplated in this section.1991). conditioned that it will paythe which the petitioner or plaintiff may suffer by the refusalor the dissolution of the injunction.0 million during the week of November 21-25. BF's management motu proprio. 1985. 8. Why was this so? The Teodoro and Tiaoqui reports as well as the report of the receivers. without obtaining the conformity of the Central Bank. The Philippine Appraisal Company (PAC) appraised BFs real estate properties. Anthony Aguirre. 1984 up to January 8.4 millions (p. Tiaoqui Report). Tiaoqui Report. Total accommodations granted to BF amounted to P3. that its condition "is one of insolvency. Teodoro submitted his Report.A. The Central Bank shall. unable to meet heavy deposit withdrawals. institute such actions as may be necessary in the appropriate court to collect and recover accounts and assets of the banking institution. Casuela to make an analysis of BF's financial condition. P2.) 2. The liquidator shall. 75 closing the bank and placing it under receivership? Would its continued operation involve probable loss to its depositors and creditors? The answer to both questions is yes. BFs chairman. The Monetary Board shall designate an official of the Central Bank as liquidator who shall take over the functions of the receiver previously appointed by the Monetary Board under this section. The other ground is when "its continuance in business would involve probable loss to its depositors and creditors. On July 27. provided. and liquidation of a bank is the finding. 1983 to a high of P435. in violation of Section 37 of the General Banking Act (R.6% by end-May 1984. much below the statutory requirements of 24% for demand deposits/deposit substitutes and 14% for savings and time deposits.) It should be pointed out that insolvency is not the only statutory ground for the closure of a bank. in an amount twice the amount of the bond of the petitioner or plaintiff. Cosico Report). A conservatorship team of 78 examiners and accountants was assigned at the bank to keep track of its activities and ascertain its financial condition (p. Receiver's Report. Tiaoqui. Both the conservator Gilberts Teodoro and the head of the SES (Supervision and Examination Sector) Ramon V. Tiaoqui also submitted his Report. under this Act. which shall be in the form of cash or Central Bank cashier's check.e. closed the bank and declared a bank holiday. BF had been continually deficient in liquidity reserves (Teodoro Report). Jr. 934 of July 27. 2." (Sec.4122 billions (p. The determinative factor in the closure. reciting the proceedings which have been taken and praying the assistance of the court in the liquidation of the banking institutions.. acquired assets.7 millions) were extended by the Central Bank to BF that month (MB Res. Deficiencies in average daily legal reserves rose from P63. 1985. offered to "turn over the administration of the affairs of the bank" to the Central Bank (Aguirre's letter to Governor Jose Fernandez. Santillan. Aurellano and Ramon V. The provisions of any law to the contrary notwithstanding. Velayo and Company to make an asset evaluation. Tirso G. 1985. Besides the conservatorship team. No. and rose to P48 million by the end of 1984. Carlota Valenzuela. and Plorido P. Annex 7 of Manifestation dated May 3. Insolvency. He was succeeded by Gilberto Teodoro as conservator in August. The bank had been experiencing a severe drop in liquidity levels. 2-3. 29. with all convenient speed. by the Solicitor General. No. showed that since the end of November 1983 BF had already been incurring "chronic reserve deficiencies' and experiencing severe liquidity problems. On July 23. unable to pay its liabilities as they fell due in the usual and ordinary course of business. On July 12. Gorres.1984). shall be dissolved upon filing by the Central Bank of a bond. The court shall have jurisdiction in the same proceedings to adjudicate disputed claims against the bank and enforce individual liabilities of the stockholders and do all that is necessary to preserve the assets of the banking institution and to implement the liquidation plan approved by the Monetary Board. Tiaoqui Report). So much so. Teodoro also engaged the accounting firm of Sycip. R. Accumulated penalties on reserve deficiencies amounted to P37. Was BF insolvent i. 839 dated June 29. Based on the projected outlook.4 million was paid out of the proceeds of loans to stockholders/ borrowers with relationship to the bank (Annex D). 13. (Teodoro Report. — a) For the eleven (11) months ended November 30. Some of the loans were used to acquire preferred stocks of BF. which were at P3.) 12. (Teodoro Report. 3 8.3 million were granted simply to pay-off old loans including accrued interest. About 85% or P42. hence. This represented an average monthly loss of P485 million vs.a. Tiaoqui Report. 6. Teodoro Report) c) Around 71.. P247 million in loans were not guaranteed by HFC. Total liabilities of P5. 4 10.1 millions were clean loans or against PNs (promissory notes) of these entities. During the period of marked decline in liquidity levels the loan portfolio grew by P417. deficient by P291 million.882 million including accrued interest. (b) Other properties (collaterals) supposedly worth P711 million could not be evaluated by PAC because the details submitted by the bank were insufficient. and operating expenses of 4.6 Million. Hence. .) d) The bank's financial condition as of date of examination. BF Homes.a. b) For the twelve (12) months from November 1984.. 52. Deposits had declined at the rate of P20 million during the month of December 1984. 1983 and February 10. Between September 17. Around P18. an average monthly gain of P26 million during the first 5 months of 1984.8 million were issued in the name of an entity other than the purchaser of the stocks.2% of it channeled to companies whose stockholders. Total capital account of P334. were secured by collateral worth only Pl.487 million were appraised by PAC to be worth only P1.947.54 billion.) 7. BFs unsecured exposure amounted to P586. showed that: (a) 2.38%. committing as much as 52% of its peso deposits to its affiliates or "related accounts" to which it continued lending even when it was already suffering from liquidity stresses. Tiaoqui Report. (p.3% p. 2-3. a related company which has filed with the SEC a petition for suspension of payments. 56. (c) While P674 million in loans were supposedly guaranteed by the Home Financing Corporation (HFIC). 1984. Teodoro Report. 2. (Tiaoqui Report.9 million of preferred non-convertible stocks were issued.) (d) Per SGV's report.658 TCT's which BF evaluated to be worth P1.9 million) is deficient by P322.8% p. indicates one of insolvency. (p.2 millions. (p. and some stockholders of BF.l million in the next two months.2 million.7% or P697. (Teodoro Report.7 million against the minimum capital required of P657. loans totalling P1.) This was done in violation of Section 38 of the General Banking Act (R. as an accommodation for the direct maturing loans of some firms and as a way of paying-off loans of other borrower firms which have their own credit lines with the bank.2 millions and accumulated net loss of P48. the latter confirmed only P427 million. the projected net loss would be P390.A.) 11. 1984. the estimated net loss was P372. (p. BF had been suffering heavy losses. Loans amounting to some P69. (pp.910 million.A.2 million by 6.282. Capital to risk assets ratio is negative 10. 5.5% p. dropped to P935 million at the end of November 1984 or a loss of P2. 1984.3 million in the first five months of 1984 — and by another P105.7 Million and would continue unabated.1 million exceeds total assets of P4.3. Examination of the collaterals for the loan accounts of 63 major borrowers and 32 other selected borrowers as of July 31. An imprudently large proportion of assets were locked into long-term applications. was insufficient to meet the average cost of funds of 19.) Here again BF violated the General Banking Act (R. 8. 2-3.679 billion at the end of July 1984. These helped to make otherwise delinquent loans appear "current" and deceptively "improved" the quality of the loan portfolio.845 million at end-May l984 (its last "normal" month).0677 billions to the related/linked entities were adversely classified. Inc.) 6. (pp. Tiaoqui Report. directors and officers were related to the officers. 5 Teodoro Report. Of the latter. Close to 33. 337)." (P.6 million (Annex F).8%.a. The loan portfolio stood at P3.) 4.) 5. (Tiaoqui Report.196 million.7% of the total accommodations of P2. Tiaoqui Report. P49. BF overextended itself in lending to the real estate industry. Deposit levels. directors. owes P502 million to BF.) 9. but expenses of about P17 million per month were required to maintain the bank's operation. after setting up the additional valuation reserves of P612. 337).6% were classified as loss. the Bank's average yield on assets of 16. The MB Resolution reads as follows: After considering the report dated January 8. Forbid the Banco Filipino Savings & Mortgage Bank to do business in the Philippines effective the beginning of office on January. then composed of: Chairman: Jose B. BF's major stockholders.0 millions or 5. 1984 as shown earlier.0 million to entities related with each other and to the bank. Tiaoqui submitted his report to the Monetary Board. in his report to the Monetary Board dated January 8. directors and officers. Supervision and Examination Sector (SES) Department II. Minister of Economic Planning & Director General of NEDA 4. Annual Report 1985) issued Resolution No. companies owned or controlled by them of their relatives) had been "borrowing" huge chunks of the money of the depositors.914.011. Designate the Head of the Conservator Team at the bank. pursuant to Sec. Minister of Trade & Industry & Chairman of Board of Investment 3. the Monetary Board.1 millions or 42. of which P194. (p. and exercise all the powers necessary for these purposes including but not limited to bringing suits and foreclosing mortgages in the name of the bank. Teodoro Report. 1985 of the Conservator for Banco Filipino Savings and Mortgage Bank that the continuance in business of the bank would involve probable loss to its depositors and creditors. indicate one of insolvency and illiquidity and further confirms the above conclusion of the Conservator. No. To forbid Banco Filipino Savings and Mortgage Bank and all its branches to do business in the Philippines." (pp.. Deputy Governor." He recommended "that the Monetary Board take a more effective and responsible action to protect the depositors and creditors . Valenzuela. 1985.3% were adversely classified (Substandard — P1. Roberto V.) Teodoro's conclusion was that "the continuance of the bank in business would involve probable loss to its depositors and creditors. that the Banco Filipino Savings and Mortgage Bank is insolvent and that its continuance in business would involve probable loss to its depositors and creditors. Refer to the Central Banles Legal Department and Office of Special Investigation the report on the findings on Banco Filipino for investigation and possible prosecution of directors. Valdepeñas. as Receiver of Banco Filipino Savings & Mortgage Bank. Ongpin. (p. Carlota P. 5. to immediately take charge of the assets and liabilities. 1985. as amended.. as recited in his memorandum dated January 23. 37. 75 closing BF and placing it under receivership. has stated that the continuance of the bank in business would involve probable loss to its depositors and creditors.657. as amended. 1985 or two days after the submission of Tiaoqui's Report. 3. as listed in the attached Annex "A" be included in the watchlist of the Supervision and Examination Sector until such time that they shall have cleared themselves.A. the following are recommended: 1.4 millions. President of Filipinas Shell Petroleum Corp. 265.0% were past due and P1. His Conclusion and Recommendations were: The Conservator." (p. and three weeks after it received Teodoro's Report. Foregoing considered. officers and employees for activities which led to its insolvent position.6 millions and Loss — P371.3 millions (gross). Accounts adversely classified included unmatured loan of Pl. All the foregoing provides sufficient justification for forbidding the bank from further engaging in banking. several of which showed distressed conditions. The Board of directors and the principal officers from Senior Vice President. Jr. Tiaoqui Report.) On January 23. Tiaoqui believed that the principal cause of the bank's failure was that in violation of the General Banking Law and CB rules and regulations.e) Total loans and investment portfolio amounted to P3.1 millions). CB Governor Members: 1. Cesar A. Fernandez. 29 of R. 2. Buenaventura. To designate Mrs.e. in the light of the bank's worsening condition. 2. the Board decided: 1. Jr. 4. and in pursuance of Section 29 of R. and after discussing and finding to be true the statements of the Special Assistant to the Governor and Head. Virata. Doubtful — P274. as expeditiously as possible collect and gather all the assets and administer the same for the benefit of all the creditors. It has recommended that a more effective action be taken to protect depositors and creditors. 9-10. 1985.. through their "related" companies: (i. 1985. as Receiver who is hereby directly vested with jurisdiction and authority to immediately take charge of . Cesar E. 265.A. Prime Minister & Concurrently Minister of Finance 2. Tiaoqui Report.) On January 25. No.482. Vicente B.A. Like Teodoro. The examination findings as of July 31. 7. 1984 up to December 7.538 millions.09 million until July 27. (pp. Estimated losses or "unhooked valuation reserves" for loans to entities with relationships to certain stockholder/directors and officers of the bank amounted to P600. hence. (2) The "adversely classified" loans were in fact included in the List of Exceptions and Findings (of irregularities and violations of laws and CB rules and regulations) prepared by the SES. Aurellano. (50% of face value of doubtful loans and 100% of face value of loss accounts) which BF had granted to its related/linked companies. BF remains insolvent with estimated deficiency to creditors of Pl. 75 ordering BF to cease banking operations and placing it under receivership was "plainly arbitrary and made in bad faith.5 million as of July 31. The receivers recommended that BF be placed under litigation. While Aguirre's Report showed BF ahead with a net worth of P412. Special Assistant to the Governor and Head.21 (millions). Insolvency." there were no substantial improvements on other loans classified "doubtful"or "loss. put together. 126-127. and the deputy receivers. Santiago's argument that valuation reserves should not be considered because the matter was not discussed by Tiaoqui with BF officials is not well taken for: (1) The records of the defaulting debtors were in the possession of BF.159. and its total liabilities were P4.23. and 5.) In the light of the results of the examination of BF by the Teodoro and Tiaoqui teams. bringing suits and foreclosing mortgages in the name of the bank.909. Arnulfo B. but not limited to. I do not find that the CB's Resolution No.5 millions plus BF's admitted liabilities of P4." there was no further increase in the value of assets owned/acquired supported by new appraisals and there was no infusion of additional capital such that the estimated realizable assets of BF remained at P3.the bank's assets and liabilities.5 million. emergency advance of P569. 3. BF had been suffering a capital deficiency of P336. (pp.2 million. or be liquidated. Ramon V.powers necessary for these purposes including. Carlota Valenzuela. Act 265.67 million from November 25. 1984. To designate Mr. and as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors. Receivers' Report). Combined with other adjustments in the amount of P73." The receivership was justified because BF was insolvent and its continuance in business would cause loss to its depositors and creditors. 1983 up to March 16. as Deputy Receivers who are likewise hereby directly vested with jurisdiction and authority to do all things necessary or proper to carry out the functions entrusted to them by the Receiver and otherwise to assist the Receiver in carrying out the functions vested in the Receiver by law or Monetary Board resolutions. 1984. 1985 on account of unhooked penalties for deficiencies in legal reserves (P49. a copy of which was furnished BF on December 1 7. Since June 1984. there were no efforts on the part of the stockholders of the bank to improve its financial condition and the possibility of rehabilitation has become more remote. Its reserve deficiencies against deposits and deposit substitutes began on the week ending June 15.478 billions (p. Act. would wipe out BFs realizable assets of P4. (millions) while the total liabilities amounted to P5. To direct and authorize Management to do all other things and carry out all other measures necessary or proper to implement this Resolution and to safeguard the interests of depositors/credition and the general public. The bank's assets as of the end of 1984 amounted to P4.49 million from Central Bank. Receivers' Report. 1985. The estimated valuation reserves of P600. a bank's insolvency is not determined by its excess of liabilities over assets. but by its "inability to pay its liabilities as they fall due in the ordinary course of business" and it was abundantly shown that BF was unable to pay its liabilities to depositors for over a six-month-period before it was placed under receivership. the result would be no different. All the discussion in the Santiago Report concerning the bank's assets and liabilities as determinants of BF's solvency or insolvency is irrelevant and inconsequential. the Monetary Board shall determine whether the bank may be reorganized and permitted to resume business.5 millions. the Monetary Board correctly found its condition to be one of insolvency. 58.891 billions and confirm its insolvent condition to the tune of P187. The bank's weekly reserve deficiencies averaged P146. said report did not make any provision for estimated valuation reserves amounting to P600. The bank was already insolvent on July 31. submitted a report to the Monetary Board as required in Section 29. 1984. . they will entirely wipe out the bank's entire capital account and leave a capital deficiency of P336. they found that: 1.98 million.1985. 1985. 4. the biggest of them being the Central Bank. For. Arnulfo B.A.07 million). Tiaoqui. the receiver. 265. Rollo I. with average daily reserve deficiencies of P2. Tiaoqui. there were no collections from loans granted to firms related to each other and to BF classified as "doubtful" or "loss. Aurellano and Ramon V. and Mr.44 (millions). to terminate the conservatorship over Banco Filipino Savings and Mortgage Bank.) The Receivers further noted that — After BF was closed as of January 25. 2 and 4. 265 which provides that within sixty (60) days from date of the receivership. 3-4.891 billions (not P6 billions) according to the Report signed and submitted to the CB by BF's own president. 3. Cosico Report).) On March 19.961 millions. 1984 (pp.4 million as of January 26. among other things. (P. The capital deficiency increased to P908. 2. 8. In consequence of the foregoing. 1984.478 billions. Moreover. rising to a peak of P338. Special Assistant to the Governor. unhooked interest on overdrawings. 2nd paragraph of R. BF had been unable to meet the heavy cash withdrawals of its depositors and pay its liabilities to its creditors. Even if assets and liabilities were to be factored into a formula for determining whether or not BF was already insolvent on or before January 25. exercising all the. means 'the inability of a banking institution to pay its liabilities as they fall due in the usual and ordinary course of business. Receivers' Report.5 million.250.5 million. Supervision and Examination Sector Department II. as defined in Rep. for under Section 29 of Rep. and additional valuation reserves of P124. Thus. BF's and Judge (now CA Justice) Consuelo Y. 1984. can not be said to have been arbitrary or made in bad faith. Central Bank of the Philippines (CB). BF's strange argument that it was not insolvent for otherwise the CB would not have given it financial assistance does not merit serious consideration for precisely BF needed financial assistance because it was insolvent. 46 of them in Metro Manila alone. Dizon. of sufficient assets and capabilities with which to repay such huge indebtedness. the result would be a gravely distorted picture of the financial condition of BF. Only G. based on that Bank's illiquidity. Up to this time. BF had no reason to go bankrupt if it were properly managed. 1985 did not make the action of the Monetary Board of closing the bank and appointing receivers for it. BF channeled and diverted a substantial portion of the finds into the coffers of its related/linked companies. pumping the hard-earned savings of 3 million depositors into the bank. 1985 none of the loans. therefore. raise issues unrelated to the receivership and liquidation of said bank. among others. considering its inability to meet the heavy withdrawals by its depositors and to pay its liabilities as they fell due. dissenting: Although these nine (9) Banco Filipino (BF) cases have been consolidated under one ponencia. The closure of BF. as it stoutly contends. The Central Bank had to infuse almost P3. The prayer of the petition reads: WHEREFORE. # Separate Opinions MELENCIO-HERRERA.R. to annul Monetary Board Resolution No. 2. to have allowed it to continue in operation would have meant probable loss to depositors and creditors. reorganization or rehabilitation of BF is not within the competence of this Court to ordain but is better addressed to the Monetary Board and the Central Bank considering the latter's enormous infusion of capital into BF to the tune of approximately P3. WHEREFORE. But even this financial assistance was misused. as alleged. 70054 for lack of merit.". 75 dated January 25. 70054 "Banco Filipino Savings and Mortgage Bank (BF) vs. petitioner respectfully prays that a writ of mandamus be issued commanding respondents immediately to furnish it copies of the reports of examination of BF employed by respondent Monetary Board to support its Resolution of . No. indeed." without a corresponding entry in the liabilities column for estimated losses or valuation reserves arising from their uncollectability. had been paid either partially or in full.. 70054. pursuant to Section 29 of the Central Bank Act (Rep. Act 265). 75 placing Banco Filipino (BF) under receivership. I vote to dismiss the petition for certiorari and mandamus in G.R. hence. The damage to the banking system and to the depositing public is bigger when the bank. No. as a first step. without "administrative due process. J.. (4) Subsequent events proved correct the SES classification of the loan accounts as "doubtful" or "loss' because as of January 25." and what had not been examined was negligible and would not have materially altered the result. In fact. The CB could not wait forever for BF to respond for the CB had to act with reasonable promptness to protect the depositors and creditors of BF because the bank continued to operate. What authority has this Court to require the Central Bank to reopen and rehabilitate the bank. its officers. et al. not for this Court.. Justice Carolina G. the official termination of the examination with the submission by the Chief Examiner of his report to the Monetary Board in March 1985. possessed.5 Billion in total accommodations. unsafe. Even assuming that the BF was not. like Banco Filipino. Tiaoqui's admission that the examination of BF had "not yet been officially terminated" when he submitted his report on January 23. concurs. after a thorough assessment of whether or not BF is. Cosico Report. if the uncollectible loan accounts would be entered in the assets column as "receivables. No.. the Monetary Board (MB). GRIÑO-AQUINO. in G. even if they had already matured (p. With 89 branches nationwide. Romero. I do not think it would be proper and advisable for this Court to interfere with the CB's exercise of its prerogative and duty to discipline banks which have persistently engaged in illegal. J. to forbid the bank from further engaging in banking. There was sufficient justification. for instead of satisfying the depositors' demands for the withdrawal of their money. all of them except one. Cosico Report). nor submitted a credible plan for the rehabilitation of the bank. 265.6 billion financial assistance. there was a finding in the Teodoro report that.5 millions for "doubtful" and "loss" accounts was a proper factor to consider in the capital adjustments of BF and was in accordance with accounting rules. For. The matter of reopening. 'plainly arbitrary and in bad faith. except three. Act No. dissenting: I join Mme. is big. nor put up adequate collaterals therefor. That is also a ground for placing the bank under receivership.(3) A conference on the matter washeld on January 2l. two of these cases (G. but in fact confirmed. as amended). 53. and in effect risk more of the Government's money in the moribund bank? I respectfully submit that decision is for the Central Bank. of maintaining monetary stability in the country (Sec. 68878 and 81303) have already been decided by this Court and are only awaiting the resolution of the motions for reconsideration filed therein. (pp. the findings in the Tiaoqui Report. unsound and fraudulent banking practices causing tremendous losses and unimaginable anxiety and prejudice to depositors and creditors and generating widespread distrust and loss of confidence in the banking system. and can operate without loss to its many depositors and creditors. did not contradict." is an original action for mandamus and certiorari filed in this Court by former officials of BF to annul the Monetary Board Resolution No. J. No. in a literal state of insolvency at the time of the passage of said Resolution.R. Aquino in her dissent and vote to deny the prayer. directors and major stockholders have neither repaid the Central Bank's P3. 1985 (ordering the closure of Banco Filipino [BF] and appointing Carlota Valenzuela as receiver of the bank) on the ground that the resolution was issued "without affording BF a hearing on the reports" on which the Monetary Board based its decision to close the bank. Rep. The responsibility of administering the Philippine monetary and banking systems is vested by law in the Central Bank whose duty it is to use the powers granted to it under the law to achieve the objective. 14-15. 1985 with senior officials of BF headed by EVP F.5 billions into the bank in its endeavor to save it. to make.R." For what had been examined by the SES was more than enough to warrant a finding that the bank was "insolvent and could not continue in business without probable loss to its depositors or creditors. In any event.. The recommended provision for valuation reserves of P600.) BF did not formally protest against the CBs estimate of valuation reserves. R. 1985. et al. this Court ordered the transfer and consolidation of Civil Case No. et al." (CA-G. "El Grande Corporation vs. petitioner respectfully prays that Sections 28-A and 29 of the Central Bank charter (R. as BF's supposed counsel. 07503 entitled. "Pilar Development Corporation vs. 49. Nos. 87867. 265. "Central Bank. using the name of the bank and praying for the annulment of MB Resolution No. private respondent Carlota Valenzuela has the authority to direct the operation of the bank in substitution of the former management. As previously stated." is an original special civil action for certiorari and mandamus filed in this Court by the old management of BF.R.8 million mortgage on Top Management's properties and the P18-67 million mortgage on Pilar Development properties. . 77255-58. "Banco Filipino Savings and Mortgage Bank vs. G. et al" dismissing the complaint of "BF" to annul the receivership. 1985 by writ of certiorari as made without or in excess ofjurisdiction or with grave abuse of discretion. 11-G. SP No. Monetary Board. Quisumbing & Associates. 136 (Judge Manuel Cosico) of the Makati Regional Trial Court where Civil Case No. 1985.R. Court of Appeals. 1989 in CA-G." is an appeal from the decision dated October 22. SP Nos. et al." is an appeal of BFs old management (using the name of BF) from the decision of the Court of Appeals in CA-G. 90473. which authority includes the retainer of counsel to represent it in bringing or resisting suits in connection with such liquidation and. 12368. et al. for specific performance of certain developer contracts. 1985 Civil Case No. 07892) and "Pilar Development Corporation vs. include taking charge of the insolvent's assets and administering the same for the benefit of its creditors and of bringing suits and foreclosing mortgages in the name of the bank. G.A. Makati. Rollo I.R. et al. who dismissed the complaint filed by Pilar Development Corporation against BF. On August 25.January 25. G. et al.R.R. So as to expedite proceedings.') is an appeal of the intervenor (Metropolis) from the same Court of Appeals' decision subject of G." in the Regional Trial Court of Makati. It is a "forum-shopping" case because it was filed here on February 28.R.R.R. Monetary Board. No. 81304. No. 72. Court of Appeals. 1771. 143 (presided over by Judge Zoilo Aguinaldo) for the same purpose of securing a declaration of the nullity of MB Resolution No. RTC. 07503. Honorable Zoilo Aguinaldo. in the case at bar.J. Honorable Manuel Cosico. Court of Appeals. the answer was expunged and the complaint was dismissed. SP No. No. Br.. On motion of the receiver. in addition to its prayer for mandamus and certiorari contained in its original petition. to take the proper steps to prevent collusion." is an appeal from the Court of Appeals' decision in CA-G.R. 78766. On a petition for certiorari in this Court.R. No. between BF and the petitioners herein which appear to be owned and controlled by the same interest controlling BF" (p." is an appeal from the decision dated November 4. G.R. Petitioner prays for such other remedy as the Court may deem just and equitable in the premises. 9675 "Banco Filipino vs. "El Grande Development Corporation vs. (p. 08565 affirming the trial court's order dismissing BF Homes' action to compel the Central Bank to restore the financing facilities of BF. Court of Appeals" (formerly AC-G. G. Quezon City for Manila. Intermediate Appellate Court and Celestina Pahimutang" involves the repossession by BF of a house and lot which the buyer (Pahimutang) claimed to have completely paid for on the installment plan. petitioner prays that the assessment of the damages respondents should pay it be deferred and referred to commissioners. 1985. 8. to the prejudice of the legitimate creditors. 81303. Judge Zoilo Aguinaldo. 0896264) is a consolidated petition for review of the Court of Appeals' joint decision dismissing the petitions for prohibition in which the petitioners seek to prevent the receiver/liquidator of BF from extrajudicially foreclosing the P4. No. 78894. 1986 on the ground that "the functions of the liquidator.) The other eight (8) cases merely involve transactions of BF with third persons and certain "related" corporations which had defaulted on their loans and sought to prohibit the extrajudicial foreclosure of the mortgages on their properties by the receiver of BF. Rollo). 9676 (to annul the receivership) from Br.A." is a petition to review the decision dated June 6. vs. 265).. "Top Management Programs Corporation and Pilar Development Corporation vs.R. No. 70054 "BF vs. RTC. 1987 of the Court of Appeals in CA-G. meanwhile annulling said Resolution of January 25. "Pilar Development Corporation. we held that: "As liquidator of BF by virtue of a valid appointment from the Central Bank. 1985 and thereafter to afford it a hearing prior to any resolution that may be issued under Section 29 of R. The buyer's motion for reconsideration is awaiting resolution by this Court. No. "Central Bank. because the plaintiff (BF Homes) has no cause of action against the CB. 78894.R. CV No. "BF Homes Development Corporation vs. which also dismissed Metropolis' complaint in intervention on the ground that a stockholder (Metropolis) may not bring suit in the name of BF while the latter is under receivership. et al. February 28. March 4. Court of appeals. The appellate court's judgment for the buyer was reversed by this Court. et al." dismissing the petition for certiorari against Judge Manuel Cosico. et al. as receiver under Section 29 (R. SP No. N. Executive Judge.A. G. 8108 (to annul the conservatorship) and Civil Case No. SP No. vs. 2. 68878 "BF vs.R. 8. "Metropolis Development Corporation vs. 6. et al. (p. Court of Appeals. 08676 dismissing El Grande's petition for prohibition to stop foreclosure proceedings against it by the receiver of BF. 4. 143 to Br. vs. Rollo I-) and the prayer of the Supplement to Petition reads: WHEREFORE. G. through their counsel. 1987 of the Court of Appeals in CA-G. 1985 three weeks after they had filed on February 2. 5. 7.R. et al." 3. The Court of Appeals dismissed the petitions on October 30. et al. No. without the authority of the receiver. virtually confessed judgment in favor of Pilar Development. G. The petitioners' motion for reconsideration of that decision is pending resolution. 75 dated January 25. 265) including its amendatory Presidential Decrees Nos. 08809 dismissing El Grande's petition for prohibition to prevent the foreclosure of BF's P8 million mortgage on El Grande's properties. et al. SP No. Cavite" (CA-G. Court of Appeals.R. 1985. 75 which ordered the closure of BF and placed it under receivership. These eight (8) cases are: 1.. G.. An answer filed by Norberto Quisumbing and Associates. No. Br. No. 136. 1827 and 1937 be annulled as unconstitutional.R. Quezon City for Manila. for no suit may be brought or defended in the name of the bank except by its receiver. That decision should be made by the Central Bank and the Monetary Board. SP No. that its condition "is one of insolvency.R. conditioned that it will paythe which the petitioner or plaintiff may suffer by the refusalor the dissolution of the injunction. 77255-58. If the Monetary Board shall determine and confirm within the said period that the banking institution is insolvent or cannot resume business with safety to its depositors. upon examination by the SES of the Central Bank. for those issues were not raised in the Court of Appeals. upon finding the statements of the department head to be true. in the disposition of AC-G. not by this Court. it shall. No. under this Act. receivership. unless there is convincing proof that the action of the Monetary Board is plainly arbitrary and made in bad faith and the petitioner or plaintiff files with the clerk or judge of the court in which the action is pending a bond executed in favor of the Central Bank.R. in an amount to be fixed by the court. assign or otherwise dispose of the same to creditors and other parties for the purpose of paying the debts of such bank and he may. I respectfully dissent from the majority opinion in G. 265 provides: Section 29. creditors and the general public. 70054 by this Court. 75.R. and under what conditions.R. The restraining order or injunction shall be refused or. The Monetary Board shall thereupon determine within sixty days whether the institution may be reorganized or otherwise placed in such a condition so that it may be permitted to resume business with safety to its depositors and creditors and the general public and shall prescribe the conditions under which such resumption of business shall take place as well as the time for fulfillment of such conditions. It may be mentioned in this connection that neither in AC-G. The Monetary Board shall designate an official of the Central Bank as liquidator who shall take over the functions of the receiver previously appointed by the Monetary Board under this section. 02617.R. The court shall have jurisdiction in the same proceedings to adjudicate disputed claims against the bank and enforce individual liabilities of the stockholders and do all that is necessary to preserve the assets of the banking institution and to implement the liquidation plan approved by the Monetary Board.R. Because of my previous participation. BF should be reorganized and reopened. No restraining order or injunction shall be issued by the court enjoining the Central Bank from implementing its actions under this section and the second paragraph of Section 34 of this Act. and the validity of MB Resolution No. All that we may determine in this case is whether the actions of the Central Bank and the Monetary Board in closing BF and placing it under receivership were "plainly arbitrary and made in bad faith. shall be dissolved upon filing by the Central Bank of a bond. I am taking no part in G. in writing. as amended. 78766. SP No. Central Bank of the Philippines and the Monetary Board — to reorganize petitioner Banco Filipino Savings and Mortgage Bank. 1988 by Judge Cosico pending the resolution of G.10183 (to annul the liquidation) of BF were and are still pending.R. No. to inform the Monetary Board of the facts. exercising all the powers necessary for these purposes including. file a petition in the Court of First Instance. did the Court of Appeals rule on the constitutionality of Sections 28-A and 29 of Republic Act 265 (Central Bank Act). in the name of the banking institution. 02617 (now G. shall be understood to mean the inability of a banking institution to pay its liabilities as they fall due in the usual and ordinary course of business. Insolvency. 68878. The provisions of any law to the contrary notwithstanding. reciting the proceedings which have been taken and praying the assistance of the court in the liquidation of the banking institutions. I concur with the ponencia insofar as it denies the motion for reconsideration in G. 68878) and AC-G.R. 75 and ordering the respondents. 78767 and 78894. Nos. 70054 annulling and setting aside MB Resolution No. and allow the latter to resume business in the Philippines under the comptrollership of both the Central Bank and the Monetary Board and under such conditions as may be prescribed by the latter until such time that petitioner bank can continue in business with safety to its creditors. and the Board may. for I believe that this Court has neither the authority nor the competence to determine whether or not. the actions of the Monetary Board under this section and the second paragraph of Section 34 of this Act shall be final and executory. SP No. provided. as a former member of the Court of Appeals. however. or that its continuance in business would involve probable loss to its depositors and creditors. and dismisses the petitions for review in G. forbid the institution to do business in the Philippines and shall designate an official of the Central Bank as receiver to immediately take charge of its assets and liabilities. 78767 and 78894). depositors and the general public. but not limited to. No. that this shall not include the inability to pay of an otherwise non-insolvent bank caused by extra-ordinary demands induced by financial panic commonly evidenced by a run on the banks in the banking community. The provisions of Rule 58 of the new Rules of Court insofar as they are applicable and not inconsistent with the provisions of this section shall govern the issuance and dissolution of the restraining order or injunction contemplated in this section. All these three (3) cases were archived on June 30. as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors. which shall be in the form of cash or Central Bank cashier's check. if granted. Nos. In such case. it shall be the duty of the department head concerned forthwith. No.R. 81303. institute such actions as may be necessary in the appropriate court to collect and recover accounts and assets of the banking institution. Proceedings upon insolvency. The Central Bank shall. indicate the manner of its liquidation and approve a liquidation plan. 81304. 07503. in an amount twice the amount of the bond of the petitioner or plaintiff. The determinative factor in the closure. order its liquidation. by the Solicitor General. 07503 (now G. The liquidator shall. 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. and 90473. Nos. No. and liquidation of a bank is the finding. convert the assets of the banking institution to money or sell. with all convenient speed. upon examination by the head of the appropriate supervising and examining department or his examiners or agents into the condition of any banking institution. nor in AC-G. bringing suits and foreclosing mortgages in the name of the banking institution.R. Section 29 of Republic Act No." . if the public interest requires.R. — Whenever. the expenses and fees in the collection and administration of the assets of the institution shall be determined by the Board and shall be paid to the Central Bank out of the assets of such banking institution. and can be set aside by the court only if there is convincing proof that theaction is plainly arbitrary and made in bad faith. ) Additional emergencyt loans (a total of P119.) 6.(Sec. and Plorido P. 1985. Tiaoqui Report). (Teodoro Report. 1984 (pp. 2-3. acquired assets. Tiaoqui also submitted his Report.) 2. 839 dated June 29.8% p. (p. (p. Was BF insolvent i. 1983 to a high of P435.9 million during the week of June 11-15.a. 1984.a. 1984.337): 2 1. Tiaoqui Report).0 million during the week of November 21-25. This represented an average monthly loss of P485 million vs. P2.) 9. 1985. Teodoro submitted his Report. On January 9. 5 Teodoro Report. 1984. committing as much as 52% of its peso deposits to its affiliates or "related accounts" to which it continued lending even when it was already suffering from liquidity stresses. and some stockholders of BF. 1984 up to January 8. (pp.A. Both the conservator Gilberts Teodoro and the head of the SES (Supervision and Examination Sector) Ramon V. Total accommodations granted to BF amounted to P3.l million in the next two months.) 3. Accumulated penalties on reserve deficiencies amounted to P37. P49. Teodoro Report.A. The ratio of liquid assets to deposits and borrowings plunged from about 20% at end-1983.e. Cosico Report). Tiaoqui Report. offered to "turn over the administration of the affairs of the bank" to the Central Bank (Aguirre's letter to Governor Jose Fernandez.) This was done in violation of Section 38 of the General Banking Act (R. On July 23. Teodoro hired financial consultants Messrs. The Philippine Appraisal Company (PAC) appraised BFs real estate properties.) 4. 2. Deposits had declined at the rate of P20 million during the month of December 1984..3% p. 56.910 million. The other ground is when "its continuance in business would involve probable loss to its depositors and creditors. BFs chairman. Tiaoqui Report). Presumably to assure that the financial assistance would be properly used.2% of it channeled to companies whose stockholders.1991).845 million at end-May l984 (its last "normal" month). without obtaining the conformity of the Central Bank. 337). 6. Based on the projected outlook. 1985. Three weeks later.) 7. responding to BFs pleas for additional financial assistance. (p. 8. but expenses of about P17 million per month were required to maintain the bank's operation. Tiaoqui.7 millions) were extended by the Central Bank to BF that month (MB Res.4 million was paid out of the proceeds of loans to stockholders/ borrowers with relationship to the bank . BF had been continually deficient in liquidity reserves (Teodoro Report).3 million in the first five months of 1984 — and by another P105.4 million by July 31. Why was this so? The Teodoro and Tiaoqui reports as well as the report of the receivers. in violation of Section 37 of the General Banking Act (R. an average monthly gain of P26 million during the first 5 months of 1984. the MB appointed Basilio Estanislao as conservator of the bank. 2-3. During the period of marked decline in liquidity levels the loan portfolio grew by P417. 4 10. and operating expenses of 4. Velayo and Company to make an asset evaluation. Deficiencies in average daily legal reserves rose from P63. About 85% or P42.4122 billions (p.A.6% by end-May 1984. Aurellano and Ramon V. which were at P3. Jr. 19.. directors. 1984) to enable it to reopen and resume business on August 1. Tiaoqui opined that BF's continuance in business would cause probable loss to depositors and creditors. 934 of July 27. the Bank's average yield on assets of 16. 1984. much below the statutory requirements of 24% for demand deposits/deposit substitutes and 14% for savings and time deposits. Some of the loans were used to acquire preferred stocks of BF. Arnulfo B. Tiaoqui Report. 1985 when the Monetary Board issued Resolution No. and rose to P48 million by the end of 1984.A. Gorres.3601 billions of the credit line were availed of by the end of 1984 exclusive of an overdraft of P932. 3 8. Estanislao resigned after two weeks for health reasons. (Teodoro Report. granted BF a P3 billion credit line (MB Res. (pp. No. BF's management motu proprio. An imprudently large proportion of assets were locked into long-term applications. Casuela to make an analysis of BF's financial condition. Both reports showedthat. 29. on January 23. Between September 17. Tirso G. On July 27. The bank had been experiencing a severe drop in liquidity levels. unable to pay its liabilities as they fell due in the usual and ordinary course of business. A conservatorship team of 78 examiners and accountants was assigned at the bank to keep track of its activities and ascertain its financial condition (p. No. Tiaoqui further categorically found that BF was insolvent. The loan portfolio stood at P3. Carlota Valenzuela. 337). directors and officers were related to the officers. that it had become "a substantial borrower in the call loans market" and in June 1984 it obtained a P30 million emergency loan from the Central Bank. 8.5% p. 2-3.) Here again BF violated the General Banking Act (R.) It should be pointed out that insolvency is not the only statutory ground for the closure of a bank. Santillan. He was succeeded by Gilberto Teodoro as conservator in August.) 5. Teodoro also engaged the accounting firm of Sycip. Annex 7 of Manifestation dated May 3. and collaterals held. on and for some time before January 25.4 millions (p. was insufficient to meet the average cost of funds of 19. BF overextended itself in lending to the real estate industry. R. Anthony Aguirre. Tiaoqui Report. 265. (p.679 billion at the end of July 1984. So much so. (Tiaoqui Report. showed that since the end of November 1983 BF had already been incurring "chronic reserve deficiencies' and experiencing severe liquidity problems. Besides the conservatorship team.1984). Deposit levels. the CB. 1983 and February 10. (p. On July 12. 2. dropped to P935 million at the end of November 1984 or a loss of P2. 75 closing the bank and placing it under receivership? Would its continued operation involve probable loss to its depositors and creditors? The answer to both questions is yes.9 million of preferred non-convertible stocks were issued. unable to meet heavy deposit withdrawals. 2. closed the bank and declared a bank holiday. to about 8. Tiaoqui Report.1984. Receiver's Report.a. 6% were classified as loss. Examination of the collaterals for the loan accounts of 63 major borrowers and 32 other selected borrowers as of July 31.6 Million.914. as an accommodation for the direct maturing loans of some firms and as a way of paying-off loans of other borrower firms which have their own credit lines with the bank. (p.2 millions. 52...7 Million and would continue unabated. of which P194.2 million by 6. BFs unsecured exposure amounted to P586. the following are recommended: 1. Teodoro Report) c) Around 71. No. Total capital account of P334. The examination findings as of July 31.e. in the light of the bank's worsening condition.54 billion.882 million including accrued interest. Accounts adversely classified included unmatured loan of Pl. Forbid the Banco Filipino Savings & Mortgage Bank to do business in the Philippines effective the beginning of office on January.. were secured by collateral worth only Pl.2 million. in his report to the Monetary Board dated January 8. hence.) 12.0 million to entities related with each other and to the bank. directors and officers. loans totalling P1.) d) The bank's financial condition as of date of examination. 2. Tiaoqui believed that the principal cause of the bank's failure was that in violation of the General Banking Law and CB rules and regulations. Around P18.7 million against the minimum capital required of P657.196 million. 1984.1 millions). It has recommended that a more effective action be taken to protect depositors and creditors. (Teodoro Report.1 million exceeds total assets of P4. Hence.4 millions. BF's major stockholders.3% were adversely classified (Substandard — P1.A. Doubtful — P274. after setting up the additional valuation reserves of P612. Tiaoqui submitted his report to the Monetary Board. 7. pursuant to Sec.2 millions and accumulated net loss of P48. (Tiaoqui Report. indicate one of insolvency and illiquidity and further confirms the above conclusion of the Conservator. the projected net loss would be P390.8 million were issued in the name of an entity other than the purchaser of the stocks.1 millions were clean loans or against PNs (promissory notes) of these entities. owes P502 million to BF. 5. All the foregoing provides sufficient justification for forbidding the bank from further engaging in banking. the estimated net loss was P372." (p.) (d) Per SGV's report. e) Total loans and investment portfolio amounted to P3. a related company which has filed with the SEC a petition for suspension of payments. deficient by P291 million.) 11. through their "related" companies: (i. 1985.8%. showed that: (a) 2.6 millions and Loss — P371. Teodoro Report.482. (Tiaoqui Report." He recommended "that the Monetary Board take a more effective and responsible action to protect the depositors and creditors .3 million were granted simply to pay-off old loans including accrued interest.0% were past due and P1. — a) For the eleven (11) months ended November 30.1 millions or 42. Tiaoqui Report. Inc. (b) Other properties (collaterals) supposedly worth P711 million could not be evaluated by PAC because the details submitted by the bank were insufficient. 5. P247 million in loans were not guaranteed by HFC. Tiaoqui Report.38%.3 millions (gross). 1985. (c) While P674 million in loans were supposedly guaranteed by the Home Financing Corporation (HFIC). Close to 33.7% of the total accommodations of P2. 29 of R.0677 billions to the related/linked entities were adversely classified.9 million) is deficient by P322.) Teodoro's conclusion was that "the continuance of the bank in business would involve probable loss to its depositors and creditors.0 millions or 5. Total liabilities of P5. the latter confirmed only P427 million. as amended.658 TCT's which BF evaluated to be worth P1. .6 million (Annex F). several of which showed distressed conditions. Like Teodoro. Capital to risk assets ratio is negative 10.7% or P697. indicates one of insolvency. 13. 1984. has stated that the continuance of the bank in business would involve probable loss to its depositors and creditors. His Conclusion and Recommendations were: The Conservator. 265." (P.) On January 23. b) For the twelve (12) months from November 1984. BF Homes.487 million were appraised by PAC to be worth only P1. These helped to make otherwise delinquent loans appear "current" and deceptively "improved" the quality of the loan portfolio. 1984 as shown earlier. companies owned or controlled by them of their relatives) had been "borrowing" huge chunks of the money of the depositors.657. Of the latter.282.011.(Annex D). (p. BF had been suffering heavy losses.947. Foregoing considered. 1985. Loans amounting to some P69. Arnulfo B. as Receiver of Banco Filipino Savings & Mortgage Bank. Carlota Valenzuela. 1984. Designate the Head of the Conservator Team at the bank. In consequence of the foregoing. as Deputy Receivers who are likewise hereby directly vested with jurisdiction and authority to do all things necessary or proper to carry out the functions entrusted to them by the Receiver and otherwise to assist the Receiver in carrying out the functions vested in the Receiver by law or Monetary Board resolutions. exercising all the. CB Governor Members: 1. among other things. The MB Resolution reads as follows: After considering the report dated January 8. Prime Minister & Concurrently Minister of Finance 2. and Mr. The Board of directors and the principal officers from Senior Vice President. they found that: 1. 265. 2 and 4. For. 3. Tiaoqui. as recited in his memorandum dated January 23. To direct and authorize Management to do all other things and carry out all other measures necessary or proper to implement this Resolution and to safeguard the interests of depositors/credition and the general public. and in pursuance of Section 29 of R. Buenaventura. Its reserve deficiencies against deposits and deposit substitutes began on the week ending June 15. Minister of Trade & Industry & Chairman of Board of Investment 3. and as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors. Special Assistant to the Governor. but not limited to. 1984. Jr. . Carlota P. as Receiver who is hereby directly vested with jurisdiction and authority to immediately take charge of the bank's assets and liabilities. Arnulfo B. Receivers' Report). 1984. as expeditiously as possible collect and gather all the assets and administer the same for the benefit of all the creditors. (pp. Jr. Aurellano and Ramon V. Special Assistant to the Governor and Head. (p. Virata. 126-127. 2nd paragraph of R. the Monetary Board. 2. that the Banco Filipino Savings and Mortgage Bank is insolvent and that its continuance in business would involve probable loss to its depositors and creditors.A. Valenzuela. Fernandez. Vicente B. or be liquidated. Cesar E. The bank's weekly reserve deficiencies averaged P146. 2. Aurellano. 1985.. as listed in the attached Annex "A" be included in the watchlist of the Supervision and Examination Sector until such time that they shall have cleared themselves. Tiaoqui Report. Tiaoqui. and exercise all the powers necessary for these purposes including but not limited to bringing suits and foreclosing mortgages in the name of the bank. To forbid Banco Filipino Savings and Mortgage Bank and all its branches to do business in the Philippines. The receivers recommended that BF be placed under litigation. Supervision and Examination Sector (SES) Department II. submitted a report to the Monetary Board as required in Section 29. and three weeks after it received Teodoro's Report. 1984 up to December 7. 37.A. Cesar A. the receiver. 4. rising to a peak of P338.67 million from November 25. and after discussing and finding to be true the statements of the Special Assistant to the Governor and Head. the Monetary Board shall determine whether the bank may be reorganized and permitted to resume business. 1985 of the Conservator for Banco Filipino Savings and Mortgage Bank that the continuance in business of the bank would involve probable loss to its depositors and creditors. To designate Mr. Minister of Economic Planning & Director General of NEDA 4. 9-10. officers and employees for activities which led to its insolvent position." (pp. 1985 or two days after the submission of Tiaoqui's Report. with average daily reserve deficiencies of P2.09 million until July 27. and the deputy receivers. Annual Report 1985) issued Resolution No. Rollo I.A. to immediately take charge of the assets and liabilities.powers necessary for these purposes including. 3.) On March 19.5 million as of July 31. 4. Ongpin. BF had been suffering a capital deficiency of P336. bringing suits and foreclosing mortgages in the name of the bank. as amended. 75 closing BF and placing it under receivership. President of Filipinas Shell Petroleum Corp.98 million. Refer to the Central Banles Legal Department and Office of Special Investigation the report on the findings on Banco Filipino for investigation and possible prosecution of directors. To designate Mrs. Supervision and Examination Sector Department II.1985. then composed of: Chairman: Jose B. Ramon V. to terminate the conservatorship over Banco Filipino Savings and Mortgage Bank. Deputy Governor. the Board decided: 1. 1983 up to March 16. 265 which provides that within sixty (60) days from date of the receivership.) On January 25. 1984 (pp. No. Roberto V.2. and 5. Valdepeñas. 5 million. Insolvency. (50% of face value of doubtful loans and 100% of face value of loss accounts) which BF had granted to its related/linked companies. 14-15. (3) A conference on the matter washeld on January 2l. they will entirely wipe out the bank's entire capital account and leave a capital deficiency of P336. 1985 on account of unhooked penalties for deficiencies in legal reserves (P49.5 billions into the bank in its endeavor to save it.478 billions (p. But even this financial assistance was misused. BF had been unable to meet the heavy cash withdrawals of its depositors and pay its liabilities to its creditors.) In the light of the results of the examination of BF by the Teodoro and Tiaoqui teams. The responsibility of administering the Philippine monetary and banking systems is vested by law in the Central Bank whose duty it is to use the powers granted to it under the law to achieve the objective. emergency advance of P569. said report did not make any provision for estimated valuation reserves amounting to P600. had been paid either partially or in full. 3-4. Act 265).3. the result would be a gravely distorted picture of the financial condition of BF. unsafe. With 89 branches nationwide. the findings in the Tiaoqui Report. Act 265. there were no collections from loans granted to firms related to each other and to BF classified as "doubtful" or "loss.961 millions. Dizon.49 million from Central Bank. All the discussion in the Santiago Report concerning the bank's assets and liabilities as determinants of BF's solvency or insolvency is irrelevant and inconsequential. . a copy of which was furnished BF on December 1 7. 1985 with senior officials of BF headed by EVP F. 8." there were no substantial improvements on other loans classified "doubtful"or "loss. The recommended provision for valuation reserves of P600. 2. a bank's insolvency is not determined by its excess of liabilities over assets. I do not find that the CB's Resolution No. Cosico Report). (pp. 1985. except three. 53.5 millions. like Banco Filipino. The damage to the banking system and to the depositing public is bigger when the bank. BF remains insolvent with estimated deficiency to creditors of Pl. 1985 none of the loans. but by its "inability to pay its liabilities as they fall due in the ordinary course of business" and it was abundantly shown that BF was unable to pay its liabilities to depositors for over a six-month-period before it was placed under receivership.538 millions. the official termination of the examination with the submission by the Chief Examiner of his report to the Monetary Board in March 1985. did not contradict. The bank was already insolvent on July 31. Even if assets and liabilities were to be factored into a formula for determining whether or not BF was already insolvent on or before January 25. Santiago's argument that valuation reserves should not be considered because the matter was not discussed by Tiaoqui with BF officials is not well taken for: (1) The records of the defaulting debtors were in the possession of BF. The bank's assets as of the end of 1984 amounted to P4. (P. I do not think it would be proper and advisable for this Court to interfere with the CB's exercise of its prerogative and duty to discipline banks which have persistently engaged in illegal. Receivers' Report. pumping the hard-earned savings of 3 million depositors into the bank. and additional valuation reserves of P124.5 millions plus BF's admitted liabilities of P4. 'plainly arbitrary and in bad faith.5 millions for "doubtful" and "loss" accounts was a proper factor to consider in the capital adjustments of BF and was in accordance with accounting rules.. (2) The "adversely classified" loans were in fact included in the List of Exceptions and Findings (of irregularities and violations of laws and CB rules and regulations) prepared by the SES. hence. for instead of satisfying the depositors' demands for the withdrawal of their money.5 million.891 billions (not P6 billions) according to the Report signed and submitted to the CB by BF's own president. but in fact confirmed.44 (millions). 1985 did not make the action of the Monetary Board of closing the bank and appointing receivers for it.5 million. of maintaining monetary stability in the country (Sec. the Monetary Board correctly found its condition to be one of insolvency. Tiaoqui's admission that the examination of BF had "not yet been officially terminated" when he submitted his report on January 23.478 billions. Combined with other adjustments in the amount of P73. BF had no reason to go bankrupt if it were properly managed." and what had not been examined was negligible and would not have materially altered the result. In any event. Receivers' Report. Cosico Report). there were no efforts on the part of the stockholders of the bank to improve its financial condition and the possibility of rehabilitation has become more remote.) The Receivers further noted that — After BF was closed as of January 25.4 million as of January 26. is big. While Aguirre's Report showed BF ahead with a net worth of P412. The Central Bank had to infuse almost P3. The capital deficiency increased to P908. for under Section 29 of Rep.23. if the uncollectible loan accounts would be entered in the assets column as "receivables. BF's strange argument that it was not insolvent for otherwise the CB would not have given it financial assistance does not merit serious consideration for precisely BF needed financial assistance because it was insolvent. The estimated valuation reserves of P600. (4) Subsequent events proved correct the SES classification of the loan accounts as "doubtful" or "loss' because as of January 25. Rep. Thus. 265. would wipe out BFs realizable assets of P4. among others. the biggest of them being the Central Bank. 1985.2 million. The CB could not wait forever for BF to respond for the CB had to act with reasonable promptness to protect the depositors and creditors of BF because the bank continued to operate. 46 of them in Metro Manila alone. unsound and fraudulent banking practices causing tremendous losses and unimaginable anxiety and prejudice to depositors and creditors and generating widespread distrust and loss of confidence in the banking system. as defined in Rep.159.250. Since June 1984. put together." For what had been examined by the SES was more than enough to warrant a finding that the bank was "insolvent and could not continue in business without probable loss to its depositors or creditors. and its total liabilities were P4. For. 58." without a corresponding entry in the liabilities column for estimated losses or valuation reserves arising from their uncollectability." The receivership was justified because BF was insolvent and its continuance in business would cause loss to its depositors and creditors. 1984." there was no further increase in the value of assets owned/acquired supported by new appraisals and there was no infusion of additional capital such that the estimated realizable assets of BF remained at P3. the result would be no different. Moreover. (millions) while the total liabilities amounted to P5.21 (millions). (pp. unhooked interest on overdrawings. Act. means 'the inability of a banking institution to pay its liabilities as they fall due in the usual and ordinary course of business. Estimated losses or "unhooked valuation reserves" for loans to entities with relationships to certain stockholder/directors and officers of the bank amounted to P600.07 million). 75 ordering BF to cease banking operations and placing it under receivership was "plainly arbitrary and made in bad faith. 1984. BF's and Judge (now CA Justice) Consuelo Y. Cosico Report.909.) BF did not formally protest against the CBs estimate of valuation reserves. even if they had already matured (p.891 billions and confirm its insolvent condition to the tune of P187. directors and major stockholders have neither repaid the Central Bank's P3. either directly or indirectly. No director or officer of any banking institution shall. .6 billion financial assistance. nor submitted a credible plan for the rehabilitation of the bank. borrow any of the deposits of funds of such bank . Up to this time. 2 Sec. J. Whenever there is a call by depositors of a saving bank for repayment of their deposits and the call so made shall result in reducing its legal reserves below the amount required by the Monetary Board. All savings and mortgage banks shall maintain on deposit with the Central Bank of the Philippines such reserves against their deposit liabilities as the Monetary Board shall determine in accordance with the pertinent provisions of the Central Bank Act. 38.BF channeled and diverted a substantial portion of the finds into the coffers of its related/linked companies. concurs.83. dissenting : 1 P. not for this Court. I vote to dismiss the petition for certiorari and mandamus in G. What authority has this Court to require the Central Bank to reopen and rehabilitate the bank. # Footnotes Griño-Aquino. 37... No. 3. 4 Sec.R. for himself or as the representative or agent of others. to make. and in effect risk more of the Government's money in the moribund bank? I respectfully submit that decision is for the Central Bank. . such bank shall not make any new loans or investment 0 the funds of depositors or earnings of such funds until the call of the depositors has been satisfied and its legal reserves have been restored to the required minimum. Romero. WHEREFORE. nor put up adequate collaterals therefor. 70054 for lack of merit. 3 Sec. its officers.. Petition. Annex “L”. 157. pp. pp. 33-38. Petition for Review. Rollo. Rollo. xiv[14] Exh. 4. Annex “B”. Blg. Rollo. concurred in by Justices Jainal D. xvi[1] Penned by Associate Justice Jose A. pp. 244 SCRA 744. Lapena. Petition for Review. 15 November 1988. Inc. Petition for Review. 248. Annex “A”. Petition for Review. pp. Pasig City. 158 SCRA 138. G. p. Annex “C”." The Court of Appeals. 59514. Melo and concurred by Associate Justices Antonio M. xvii[2] xviii[3] xix[4] xx[5] xxi[6] xxii[7] xxiii[8] xxiv[9] xxv[10] See Rollo. v. 178. xi[11] Salame v. Court of Appeals. Martinez and Nicolas P. 7-8. p. Court of Appeals. Aquino. "C.R. 2 June 1995. pp. 239 SCRA 356. No. No. 39-40. xiii[13] TSN. Court of Appeals. p. both issued by the trial court. Rollo. pp. G." iv[4] Exh. 63-72. RA 2629. 124. 41.iAppeals and Asia Pacific Finance Corporation." xv[15] See South Surety and Insurance Co. Petition for Review. vii[7] Decision penned by Judge Domingo R. G. Petition for Review. iii[3] Exh.R. was excluded on motion of petitioners since the court which rendered the decision appealed from is not required to be joined as party-respondent (Rule 45. RTC-Br. which was inadvertently made party-respondent. 22 December 1994. ix[9] B.R. Garcia. x[10] RA 337. 25 February 1988. respectively.R. Rollo. viii[8] See Sec." v[5] Exh. Rollo. 334-360 Rollo. xii[12] Remalante v. pp. pp. ii[2] Penned by Justice Hilarion L. 405-406.P. Rollo.. p." vi[6] This case however continued to be prosecuted and defended in the names of ASIA PACIFIC and Teodoro Bañas. Rollo. Rollo. 102253. Annex “G”. "A. 122-124. xxvi[11] xxvii[12] xxviii[13] Salonga v. Rasul and Hector L. among other defendants. . "D. Jr. Tibe. Annex “H”. 104373. 1997 Rules of Civil Procedure). 65. notwithstanding the Orders of 22 August 1985 on substitution of party-plaintiff and of 23 October 1987 re dismissal of the case against deceased defendant Teodoro Bañas. "F. Hofileña. 28-32. No. 269 SCRA 534. 00 authorized by Roman and the other bank officials. MONETARY BOARD. Respondents assailed.: Petitioner-appellant Damaso P. instituted mandamus proceedings in the Court of First Instance of Manila on June 23. – It shall be the responsibility of the Central Bank of the Philippines to adminster the monetary and banking system of the Republic. ET AL. S. LEON ANCHETA. National Labor Relations Commission. Republic of the Philippines SUPREME COURT Manila EN BANC G. or employee of any institution under the supervision of the department and to compel the presentation of all books. Balboa. xxx[15] See Naguiat v. His object was to compel these respondents to prosecute. Office of the Solicitor General Arturo A. 76-78 and 83 thereof) and the Central Bank Act.R. BENGZON.268 SCRA 258. et al. xxxi[16] 69 Phil. The Central Bank and its respondent officials. It shall be the duty of the Central bank to use the powers granted to it under this Act to achieve the following objectives: (a) To maintain monetary stability in the Philippines. on the . employment and real income in the Philippines. QUISUMBING.. vs. which shall be composed of seven members as follows: xxx. intervenors-appellees. Perez. N. J. Pablo Roman and several other Republic Bank officials for violations of the General Banking Act (specifically secs. ETC. 275 SCRA 611. Natalio M. xxxiii[18] xxxiv[19] 152 SCRA 237.303. Quisumbing-Fernando for intervenors-appellees. Republic Act 265: “Creation of the Department – In order to assure the observance of this Act and of other pertinent laws. The Superintendent of Banks and the examiners f the Department of Supervision and Examination are hereby authorized to administer oaths to any director. J. and of the rules and regulations of the Monetary Board. Court of Appeals. F. ROMAN and NORBERTO J. E. documents. Republic Act 265: “Responsibilities and objectives. Gaddi for respondent-appellee Secretary of Justice. Evangelista and Severo Malvar for respondent-appellee Central Bank. Section 2. MIGUEL CANIZARES. officer. (b) To preserve the international value of the peso and the convertibility of the peso into other freely convertible currencies. No. Baizas and Associates and Halili. the Central Bank and the Secretary of Justice. 269 SCRA 564.P.. RECTO.” Section 5. including all government credit institutions.” xxxv[20] Section 25. 1962. THE SUPERINTENDENT OF BANKS. National Labor Relations Commission. the propriety of mandamus. the Superintendent of Banks. D. J.. Quisumbing and E. PABLO ROMAN. C.. The Chief of the department shall be known as the Superintendent of Banks. The Secretary of Justice claimed that it was not their specific duty to prosecute the persons denounced by Perez. xxxii[17] Pono v. in their respective answers.xxix[14] Garments and Textile Export Board v. CENTRAL BANK OF THE PHILIPPINES and SECRETARY OF JUSTICE. AURORA R. respondents-appellees. The Department of Supervision and Examination shall discharge its responsibilities in accordance with the instructions of the Monetary Board. 635. among others. Alafriz and Solicitor C. against the Monetary Board. the Central Bank shall have a Department of Supervision and Examination which shall be charged with the supervision and periodic examination of all banking institutions operating in the Philippines. petitioners-appellants. VICTORIA B. 250. Bolinao and Associates for petitioners-appellants. 1967 DAMASO P. L-23307 June 30. and for falsification of public or commercial documents in connection with certain alleged anomalous loans amounting to P1. PEREZ and REPUBLIC BANK. and (c) To promote a rising level of production. Republic Act 265: “Composition of the Moentary Board – The powers and functions of the Central Bank shall be exercised by a Monerary Board. papers or records necessary in his or their judgment to ascertain the facts relative to the true condition of any institution.400. for himself and in a derivative capacity on behalf of the Republic Bank. Subsequently. So ordered. to cause the prosecution of those persons denounced by Perez. 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. yet it is settled rule that mandamus will not lie to compel a prosecuting officer to prosecute a criminal case in court.8 Moreover. herein intervenors-appellees. This is untenable. 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. 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. 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. Pablo Roman and his family. 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. within the confines of their powers. the lower court granted the motions and dismissed the case. Appellants. argue that the remedy of mandamus lies3 to compel respondents to prosecute the aforementioned Pablo Roman and company. this appeal. would be tantamount to an ultra vires act already. Addressing Ourselves directly to this issue raised on the propriety of the petition for mandamus. Petitioners opposed. 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. 1964. then he has a plain. 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. Felix de la Costa. as petitioners would have it. is the controlling stockholders of Republic Bank. 1962. We rule that petitioners cannot seek by mandamus to compel respondents to prosecute criminally those alleged violators of the banking laws. The grant. Being an artificial person.1 On July 10. filed motion to intervene in the proceedings. adequate and speedy remedy in the ordinary course of law.6 But this corporate power of litigation evidently refers to civil cases only.1äwphï1. affirmed. Hence. The lower court denied the motion. the order of dismissal appealed from is.1äwphï1.other hand. 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. Miguel Cuaderno and Mr. as it is hereby.2 In view of these developments. Hon.9 Wherefore. On January 20. modification or reversal by it before the rendition of final judgment on its merits. or on March 13. For respondents to do the actual prosecuting themselves. Respondents-appellees also filed motion to dismiss in which they again raised the impropriety of mandamus. Subsequently. which makes mandamus against respondents improper. if any. As for the Secretary of Justice. Petitioners opposed the motion but the lower court approved the same. Pursuant to this resolution. 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. as the incumbent directors of the Board of the Republic Bank. the Monetary Board of the Central Bank passed Resolution No. 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. because the former order was purely interlocutory and thus remained constantly subject to alteration. however.ñët . 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. executed a voting trust agreement in favor of a board of trustees composed of former Chief Justice Ricardo Paras. Acting upon the two motions and the oppositions thereto filed by petitioners. while he may have the power to prosecute — through the office of the Solicitor General — criminal cases. the prosecution of which is a matter of public interest and hence. respondents moved for the dismissal of the petition for lack of cause of action. Said violations constitute a public offense. Costs against petitioner-appellant Perez.4 not a prosecution agency5 like the fiscal's office. Since Perez himself could cause the filing of criminal complaints against those allegedly involved in the anomalous loans. yet We find nothing in said laws that imposes a clear. 1964. this agreement was superseded by another one with the Philippine National Bank as the trustee.ñët The Central Bank and its respondent officials have already done all they could. 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. anyone — even private individuals — can denounce such violations before the prosecuting authorities. F. L-20119 June 30.R. against an order of the Court of First Instance of Manila. Bolinao.: This is an original action for certiorari. Halili. Balboa. petitioner.SUPREME COURT Manila EN BANC G. the dispositive part of which reads: . C. vs. E. No. respondents. CONCEPCION. Evangelista and Mariano Abaya for petitioner. Natalio M. Bolinao and Associates for respondents.. THE HONORABLE JUDGE JESUS P. MORFE and FIRST MUTUAL SAVING AND LOAN ORGANIZATION.J. prohibition and injunction. 1967 CENTRAL BANK OF THE PHILIPPINES. INC. with preliminary injunction. should they engage in the "lending of funds obtained from the public through the receipts of deposits or the sale of bonds. the Central Bank of the Philippines wishes to announce that all "savings and loan associations" now in operation and other organizations using different corporate names. except (c) honorary members. . the legal department of the Central Bank of the Philippines — hereinafter referred to as the Bank — rendered an opinion to the effect that the Organization and others of similar nature are banking institutions. according to its Articles of Incorporation. dated February 14. 337" and that the articles. 2745 Rizal Avenue. . Their activities and operations are not supervised by the Superintendent of Banks and persons dealing with such institutions do so at their risk. as Annex A thereof. a member of the intelligence division of the Bank filed with the Municipal Court of Manila a verified application for a search warrant against the Organization. and "being used or intended to be used in the commission of a felony. the Bank caused to be published in the newspapers the following: ANNOUNCEMENT To correct any wrong impression which recent newspaper reports on "savings and loan associations" may have created in the minds of the public and other interested parties. all the books. safekeeping or otherwise or transacts the business of a savings and mortgage bank and/or building and loan association . 1963. the premises at No. securities or obligations of any kind" without authority from the Monetary Board. BOOKS OF ORIGINAL ENTRY (1) General Journal (2) Columnar Journal or Cash Book (a) Cash Receipts Journal or Cash Receipt Book (b) Cash Disbursements Journal or Cash Disbursement Book II. — "at the exclusive discretion" thereof — due to "assistance. as well as to answer numerous inquiries from the public.WHEREFORE. alleging that "after close observation and personal investigation.2 Hence. on August 14. 1962. Republic Act No. . 1961. on April 1 and 3. their agents or representatives. let a writ of preliminary preventive and/or mandatory injunction issue.1äwphï1. or on May 18. or effects enumerated in a list attached to said application. without having first complied with the provisions of Republic Act No.00. honor. and papers so far seized from the petitioner pursuant to the aforesaid search warrant. — hereinafter referred to as the Organization — is a registered non-stock corporation. papers or effects are described in the aforementioned Annex A. the Governor of the Bank directed the coordination of "the investigation and gathering of evidence on the activities of the savings and loan associations which are operating contrary to law.3 are kept in said premises. whether in its main office or in any of its branches. upon the petitioner filing an injunction bond in the amount of P3. and implement savings and thrift among its members. is "to encourage . from further searching the premises and properties and from taking custody of the various documents and papers of the petitioner corporation. (b) participating members — with "no right to vote or be voted for" — to which category all other members belong. to wit: violation of Sections 2 and 6 of Republic Act No. and to extend financial assistance in the form of loans. so made by the board of trustees. on April 23."4 Said articles. Manila" — in which the offices of the Organization were housed — "are being used unlawfully. CENTRAL BANK OF THE PHILIPPINES Moreover. a writ of preliminary injunction restraining and prohibiting respondents herein from enforcing the order above quoted.ñët Upon the filing of the petition herein and of the requisite bond. the main purpose of which. the First Mutual Savings and Loan Organization." because said Organization is illegally engaged in banking activities. but engaged in operations similar in nature to said "associations" HAVE NEVER BEEN AUTHORIZED BY THE MONETARY BOARD OF THE CENTRAL BANK OF THE PHILIPPINES TO ACCEPT DEPOSIT OF FUNDS FROM THE PUBLIC NOR TO ENGAGE IN THE BANKING BUSINESS NOR TO PERFORM ANY BANKING ACTIVITY OR FUNCTION IN THE PHILIPPINES. 1962. 1962. papers. "by receiving deposits of money for deposit. we issued. prestige or help extended in the propagation" of the objectives of the Organization — without any pecuniary expenses on the part of said honorary members."1 namely: (a) founder members — who originally joined the organization and have signed the pre-incorporation papers — with the exclusive right to vote and be voted for . as follows: I. Inc. 1962. 337. The main respondent in this case. documents. 2 of the General Banking Act. and ordering the respondent Central Bank and/or its co-respondents to return to the petitioner within five (5) days from service on respondents of the writ of preventive and/or mandatory injunction. The Organization has three (3) classes of "members. falling within the purview of the Central Bank Act. On February 14." Soon thereafter. BOOKS OF FINAL ENTRY (1) General Ledger (2) Individual Deposits and Loans Ledgers (3) Other Subsidiary Ledgers . restraining the respondents." to them. disbursement. 337.000. Such institutions violate Section. . the Sheriff of Manila. OTHER ACCOUNTING RECORDS (1) Application for Membership (2) Signature Card (3) Deposit Slip (4) Passbook Slip (5) Withdrawal Slip (6) Tellers Daily Deposit Report (7) Application for Loan Credit Statement (8) Credit Report (9) Solicitor's Report (10) Promissory Note (11) I n d o r s e m e n t (12) Co-makers' Statements (13) Chattel Mortgage Contracts (14) Real Estate Mortgage Contracts (15) Trial Balance (16) Minutes Book — Board of Directors IV. (4) And other documents and articles which are being used or intended to be used in unauthorized banking activities and operations contrary to law. the Manila Police Department.. to annul the aforementioned search warrant. . with writ of preliminary injunction and/or writ of preliminary mandatory injunction. an original action for "certiorari. of a detective of the Manila Police Department and said intelligence officer of the Bank — that the Organization has under its control. the aforementioned articles. upon the ground that. . 1962. OTHERS (1) Articles of Incorporation (2) By-Laws (3) Prospectus. ." against said municipal court. without jurisdiction and/or in excess of jurisdiction" because: (a) "said search warrant is a roving commission general in its terms . and the seizure of the foregoing articles. Brochures Etc. in the address given. . FINANCIAL STATEMENTS (1) Income and Expenses Statements (2) Balance Sheet or Statement of Assets and Liabilities V.5 commanding the search of the aforesaid premises at No. . . as Judge of the said municipal court. Manila. permits the unreasonable search and seizure of documents which have no relation whatsoever to any specific criminal act .III. and the Bank. under oath." . there being "good and sufficient reasons to believe" upon examination. Roman Cancino.. 2745 Rizal Avenue. 50409 of the Court of First Instance of Manila. Forthwith. or on the same date. . issued the warrant above referred to. Hon. which are the subject of the offense adverted to above or intended to be used as means for the commission of said off offense. . on May 18. in issuing the same. Upon the filing of said application. the municipal court had acted "with grave abuse of discretion." (b) "the use of the word 'and others' in the search warrant . the Organization commenced Civil Case No. prohibition." and (c) "no court in the Philippines has any jurisdiction to try a criminal case against a corporation . then concluded that said deponent ". that a writ of preliminary mandatory injunction be forthwith issued ex parte. in line with the function of courts. . then the assumption is not necessarily justified. the failure of the witness to mention particular individuals does not necessarily prove that he had no personal knowledge of specific illegal transactions of the Organization. a condition dependent upon the circumstances surrounding each case. being limited to those which the board of trustees may. a writ of preliminary injunction be issued ex parte restraining the aforementioned search and seizure. and the funds so raised may be lent by the Organization. To authorize and seize all the records listed in Annex A to said application for search warrant. the Bank moved for a reconsideration thereof." with funds deposited by them. would be to harass the petitioner. at No. the order complained of. the present action. The law requiring compliance with certain requirements before anybody can engage in banking obviously seeks to protect the public against actual. distinct and different from the type of business in which it is generally engaged. likewise. Similarly. . open to the "public" for deposit accounts. not purely abstract or imaginary evils. In such case. be justified if the acts imputed to the Organization consisted of isolated transactions. The records suggest clearly that the transactions objected to by the Bank constitute the general pattern of the business of the Organization. Morfe." In other words." if any. if he really knew of actual violation of the law. in much the same way as the question whether or not "probable cause" exists is one which must be decided in the light of the conditions obtaining in given situations. the aforementioned order would seem to assume that an illegal banking transaction. amounting to lack of jurisdiction or excess of jurisdiction. was predicated upon the theory that the Organization was illegally engaged in banking — by receiving money for deposit. even if the names of the individuals concerned were unknown to him. Moreover. 2745 Rizal Avenue. that such funds are referred to — in the Articles of Incorporation and the By-laws — as their "savings. certainly. it is not clear from the order complained of whether respondent Judge opined that the above mentioned statement of the deponent — to the effect that the Organization was engaged in the transactions mentioned in his deposition — deserved of credence or not. must always connote the existence of a "victim. or. the Bank commenced. in the form of loans. pending hearing of the case on the merits. applied for a warrant to search and seize only books" or records: covering the specific purportedly illegal banking transactions of the petitioner with specific persons who are the supposed victims of said illegal banking transactions according to his knowledge. It lives up to the highest traditions of the Philippine Bench. could have. the Organization is. disbursement. determine from time to time. ." and "participating members" are expressly denied the right to vote or be voted for. ordering the preservation of the status quo of the parties. At the same time. Judge. is not the situation confronting us. seizures in question to be unreasonable. At the outset. As a consequence. Indeed. Such. 50409 had been assigned. No. Again. 337. their "privileges and benefits. it may be necessary to specify or identify the parties involved in said isolated transactions. but specific and concrete ones. respondent. Respondent judge deduce. in the very nature of things. prayed that. injury. that the deponent " knows specific banking transactions of the petitioner with specific persons. — without first complying with the provisions of R. issued. as well as the immediate return to the Organization of the documents and papers so far seized under." The concern thus shown by respondent judge for the civil liberty involved is. without reference to specific alleged victims of the purported illegal banking transactions. the "membership" of the "participating . against Judge Morfe and the Organization. the power to so dispose of said funds is placed under the exclusive authority of the "founder members. if the acts complained of have been partially performed. Hon.A.6 Yet respondent Judge found the searches and. through the following process of reasoning: the deposition given in support of the application for a search warrant states that the deponent personally knows that the premises of the Organization. from this premise. it should be noted that the action taken by the Bank. Accordingly. which underlies the people's faith in and adherence to the Rule of Law and the democratic principle in this part of the World. it cannot be gainsaid the Constitutional injunction against unreasonable searches and seizures seeks to forestall." If this term is used to denote a party whose interests have been actually injured. 1962. Upon the other hand. to its members." and. The line of reasoning of respondent Judge might. according to its By-laws. Jesus P. and that the order complained of assumes that the Organization had violated sections 2 and 6 of said Act. which was denied on August 7. the main purpose thereof. unreasonableness is. perhaps. a mere disagreement with Judge Cancino. in the Supreme Court. on the petition for said injunction. in causing the aforementioned search to be made and the articles above listed to be seized. who presided over the branch of the Court of First Instance of Manila to which said Case No. Indeed. After due hearing. would not justify the conclusion that said municipal Judge had committed a grave abuse of discretion. Referring particularly to the one at bar." but. in effect. alleging that respondent Judge had acted with grave abuse of discretion and in excess of his jurisdiction in issuing the order in question. as ramparts of justice and liberty and deserves the greatest encouragement and warmest commendation. for the witness might be acquainted with specific transactions. in the alternative. Within the period stated in said order. however. is "to extend financial assistance. safekeeping or otherwise. or transacting the business of a savings and mortgage bank and/or building and loan association. who issued the warrant. the search warrant in question. and its officers with a roving commission or fishing expedition for evidence which could be discovered by normal intelligence operations or inspections (not seizure) of books and records pursuant to Section 4 of Republic Act No 337 . even a cursory examination of said documents will readily show that anybody can be a depositor and thus be a "participating member. we are not aware of any rule limiting the use of warrants to papers or effects which cannot be secured otherwise. .The Organization. in its discretion. 1962. Manila. however. Obviously." and that the depositors thereof are designated as "members. on the credibility of said statement. It is true. on July 2. so that the search and seizure be limited to the records pertinent thereto.7 were being used unlawfully for banking and purposes. of the kind contemplated in the contested action of the officers of the Bank. as well as potential. P. Annex 6 to Annex E. building and loan associations. and that.. 1962." or other words of similar import. as amended on March 29.L. 106.. that the Municipal Judge did not commit a grave abuse of discretion in finding that there was probable cause that the Organization had violated Sections 2 and 6 of the aforesaid law and in issuing the warrant in question. and the writ of preliminary injunction issued by this Court on August 14. 33). 2 3 4 5 6 "Section 2. Only duly authorized persons and entities may engage in the lending of funds obtained from the public through the receipt of deposits or the sale of bonds securities or obligations of any kind. or building and loan association. branches and agencies in the Philippines of foreign banks. shall advertise or hold itself out as being engaged in the business of such bank. or use in connection with its business title the word or words "bank. Bengzon. as the case may be." "trust company. JJ. Footnotes 1 Pursuant to the by-laws of the Organization. and in line with Alverez vs. "Persons and entities which receive deposits only occasionally shall not be considered as banks. with the very dangers or evils which Republic Act No. or building and loan associations. This situation is fraught. disbursement. as defined in this Act.members" is purely nominal in nature. Rollo. by exacting compliance with the requirements of said Act. Rollo. P. corporation or association. No person. J. or solicit or receive deposits of money for deposit. p. corporation or association. trust corporation. and of other pertinent laws. concur. and in default of the payment thereof. but such persons and entities shall be subject to regulations by the Monetary Board of the Central Bank. precisely. savings and mortgage bank.. the officers and directors thereof shall be jointly and severally liable. or transact in any manner the business of any such bank. Wherefore. nevertheless. J. The terms "banking institution" and "bank. Zaldivar. in the light of the circumstance obtaining in this case.. without having first complied with the provisions of this Act in so far as it relates to commercial banking corporations. took no part. For any violation of the provisions of this section by a corporation. mortgage banks. safekeeping. and associations performing banking functions in the Philippines.B. also." "banking. P. or otherwise. accordingly." "building and loan association. Dizon. Makalintal. companies." "banker." 7 "Section 6." as the term is used in Republic Act No. and the writ of preliminary mandatory injunction issued in compliance therewith are hereby annulled. subsidiary imprisonment as prescribed by law. 105 of the Rollo. made permanent. or branches or agencies thereof." . Republic Act No. 107. "The Monetary Board may similarly regulate the activities of persons and entities which act as agents of banks. upon which the action of the Bank is based. and all entities regularly conducting such operations shall be considered as banking institutions and shall be subject to the provisions of this Act. are synonymous and interchangeable and specifically include banks. that the Organization does not seriously contest the main facts. J. 337. Inc. before the transactions in question could be undertaken. commercial banks. 1962. Reyes." as used in this Act. The principal issue raised by the Organization is predicated upon the theory that the aforementioned transactions of the Organization do not amount to " banking. 337 seeks to forestall. We are satisfied. hereinafter called Philippine branches. in no case may the Central Bank authorize the drawing of checks against deposits not maintained in banks. It is so ordered. Any violation of the provisions of the section shall be punished by a fine of five hundred pesos for each day during which such violation is continued or repeated. and all other corporations. the search and seizure complained of have not been proven to be unreasonable. banking institutions. It is interesting to note. trust corporations. savings banks. trust companies. with costs against respondent First Mutual Savings and Loan Organization. savings and mortgage banks. 1967. the order of respondent Judge dated July 2. Sanchez and Castro. however. Court of First Instance (64 Phil. 338. accordingly. association or corporation not conducting the business of a commercial banking corporation. of the Central Bank Act. partnerships. S. de Guzman and Triumph Savings Bank. TIAOQUI. Sycip. 29. petitioners.A. BELLOSILLO. Quisumbing. Q-45139. Hernandez & Gatmaitan for petitioners.Republic of the Philippines SUPREME COURT Manila EN BANC G. 5 On 1 July 1985. Department II. forbidding it from doing business in the Philippines. Tiaoqui as receiver. No. Tiaoqui assumed office on 3 June 1985. subject to Central Bank comptrollership. and appointing Ramon V. Q-45139. Tiaoqui to annul MB Resolution No. 07867 entitled "The Central Bank of the Philippines and Ramon V.." 3 the Monetary Board (MB) issued on 31 May 1985 Resolution No. against Central Bank and Ramon V. 1993 THE CENTRAL BANK OF THE PHILIPPINES and RAMON V." promulgated 26 September 1986. which affirmed the twin orders of the Regional Trial Court of Quezon City issued 11 November 1985 1 denying herein petitioners' motion to dismiss Civil Case No.' and. 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. otherwise known as "The Central Bank Act. placing it under receivership. i. Torres & Evangelista for Triumph Savings Bank. .R. challenging in the process the constitutionality of Sec. Jose C. and directing petitioner Ramon V.: 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. Hon." as amended. 269. 596. with prayer for injunction. COURT OF APPEALS and TRIUMPH SAVINGS BANK. 29 of R. No.P. that TSB failed to post the requisite bond in favor of Central Bank. 4 On 11 June 1985. vs. 2 The antecedent facts: Based on examination reports submitted by the Supervision and Examination Sector (SES). 596 ordering the closure of TSB.e. much less found guilty thereof. Tiaoqui vs. 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. TSB filed a complaint with the Regional Trial Court of Quezon City. Salazar. 596 "until further orders". docketed as Civil Case No. respondents. J. Tiaoqui to restore the private management of Triumph Savings Bank (TSB) to its elected board of directors and officers. that TSB failed to show convincing proof of arbitrariness and bad faith on the part of petitioners. thus prompting them to move for the quashal of the restraining order (TRO) on the ground that it did not comply with said Sec. the trial court temporarily restrained petitioners from implementing MB Resolution No.R. 76118 March 30. e. Meanwhile. 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. . Central Bank and Ramon Tiaoqui filed a motion to dismiss the complaint before the RTC for failure to state a cause of action. on 9 August 1985. 635) and Eastern Telecom Corp. will allow the receiver it has appointed to question that very appointment. subject to CB comptrollership. 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. 265 "may be taken as . even after it had been ordered closed and placed under receivership. 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". 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. 11 The respondents. 29 of R. vs. filed this petition under Rule 45 of the Rules of Court praying that the decision of the Court of Appeals in CA-G. 12 We held that CB violated the rule on administrative due process laid down in Ang Tibay vs. The charge of lack of due process in the complaint may be taken as constitutive of allegations of arbitrariness and bad faith.R. SP No. Tiaoqui to restore TSB to its private management. Since the orders of the trial court rendered moot the petition for certiorari then pending before this Court. 10 On 15 October 1986. and that TSB was without legal capacity to sue except through its receiver. (137 . 71465 which We granted on 18 December 1985. allege inter alia that in the Banco Filipino case. xxx xxx xxx On the questioned restoration order. on the other hand. as in the case at bar. Thereafter. Concerning the first ground. said action only being in line and congruent to the action of the Supreme Court in the Banco Filipino Case (G. which are the only grounds for the annulment of Monetary Board resolutions placing a bank under conservatorship. CIR (69 Phil. Q-45139. the trial court granted the relief sought and denied the application of TSB for injunction. TSB filed an urgent motion in the RTC to direct receiver Ramon V.A. that is. the appellate court.On 19 July 1985. 70054) where management of the bank was restored to its duly elected directors and officers. Central Bank and its appointed receiver. Tiaoqui. acting on the motion to quash the restraining order. or arbitrary in its issuance. and that the civil case pending before the RTC of Quezon City. On 11 November 1985. they mean to convey the impression that only the CB appointed receiver himself may question the CB resolution appointing him as such. Jr. No. This may be asking for the impossible. for it cannot be expected that the master. 9 On 26 September 1986. i. No. Rather. 8 Instead of proceeding to trial. this Court must say that it finds nothing whimsical. (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. Dans. capricious. despotic. Ramon V. 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. the CB.. we view such argument as being specious. 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. 07867 be set aside. judicial review of such action not being foreclosed. Should the argument of petitioners be given circulation. 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.R. 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. upheld the orders of the trial court thus — Petitioners' motion to dismiss was premised on two grounds. without first hearing the side of the bank. In regard to lack of capacity to sue on the part of Triumph Savings Bank. namely. but subject to the Central Bank comptrollership. allegations of arbitrariness and bad faith". that the CB action ousting them from the bank deserves to be set aside. Civil Case No. Central Bank and Tiaoqui moved on 2 December 1985 for the dismissal of G. then judicial review of actions of the CB would be effectively checked and foreclosed to the very bank officials who may feel. 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.R. 7 On 9 September 1985. for if we get the drift of petitioners' argument. it did not allege ultimate facts showing that the action was plainly arbitrary and made in bad faith. Triumph Savings Bank filed with Us a petition for certiorari under Rule 65 of the Rules of Court 6 dated 25 July 1985 seeking to enjoin the continued implementation of the questioned MB resolution. be dismissed. petitioners elevated the twin orders of the RTC to the Court of Appeals on a petition for certiorari and prohibition under Rule 65. In Rural Bank of Buhi. 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. 265 does not require a previous hearing before the Monetary Board can implement its resolution closing a bank. corollarily. 14 Petitioners further argue that the legislative intent of Sec. 29 of R. 29 of R. creditors. Arca [1965]. Banks are affected with public interest because they receive funds from the general public in the form of deposits. XII. is absence of prior notice and hearing constitutive of acts of arbitrariness and bad faith? Under Sec. evaluate and determine the condition of any bank. according to respondents.A. the Central Bank is tasked with providing policy direction in the areas of money. Under its charter.000. pursuant to its Charter (R. When par. Art. In the early case of Rural Bank of Lucena.00. 265. through the Monetary Board. banking and credit. 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. One can just imagine the dire consequences of a prior hearing: bank runs would be the order of the day. . 19 We stated that — . 29 does not contemplate prior notice and hearing before a bank may be directed to stop operations and placed under receivership.SCRA 628) which requires that prior notice and hearing be afforded to all parties in administrative proceedings. 1987 Constitution). consequently.A. forbid the bank or non-bank financial institution to do business in the Philippines. In this country. Since MB Resolution No. 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. 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 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]. resulting in panic and hysteria. Art. that task is delegated to the Central Bank which. Due to the nature of their transactions and functions. and finding such condition to be one of insolvency. 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. the bank's management should be restored to its board of directors and officers. In the process. 13 Petitioners claim that it is the essence of Sec. 29 of R. . allows the filing of a case to set aside the actions of the Monetary Board which are tainted with arbitrariness and bad faith. 5. XV. 14. 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. Plainly. Court of Appeals 20 that — . 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. create liabilities for the bank up to the insured amount of P40. and Sec. Sec. 15 the Central Bank. 17 We held that a previous hearing is nowhere required in Sec. Contrary to the notion of private respondent. .O. 4 (now par.A. the CB is further authorized to . as amended by E. Inc. having the required expertise and specialized competence to do so.A. due process does not necessarily require a prior hearing. a fiduciary relationship is created between the banking institutions and their depositors. v. Otherwise stated. Even in Banco Filipino. Court of Appeals. 20. Therefore. Inc. 183 SCRA 360 [1990]). v. as depositors or otherwise. 289) provides for the filing of a case within ten (10) days after the receiver takes charge of the assets of the bank. 1973 Constitution. Inc. and even destroy evidence of fraud or irregularity in the bank's operations to the prejudice of its depositors and creditors. Under both the 1973 and 1987 Constitutions. . is vested with exclusive authority to assess. are protected. 16 which was then in effect at the time the action was commenced. v. 596 was adopted without TSB being previously notified and heard. 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. banking and credit system of the Philippines. it shall have supervision over the operations of banks (Sec. is authorized to administer the monetary. 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. resort to judicial review may be had by filing an appropriate pleading with the court. a hearing or an opportunity to be heard may be subsequent to the closure. stockholders and the general public. It is enough that a subsequent judicial review be provided. as amended). it is unmistakable that the assailed actions should precede the filing of the case. 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. It may be emphasized that Sec. Court of Appeals. 29 is to repose in the Monetary Board exclusive power to determine the existence of statutory grounds for the closure and liquidation of banks. 18 We reiterated that Sec. or that its continuance in business would involve probable loss to its depositors or creditors. 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. the same is void for want of due process. since its action is subject to judicial scrutiny as provided by law. 265. In other words. it did not reflect the total financial condition of Banco Filipino. Clearly. Once again We refer to Rural Bank of Buhi. a matter long settled in this jurisdiction. this Court held that: . v.e. public faith in the banking system is certain to deteriorate to the prejudice of the national economy itself. the bank itself. Indirectly. The absence of prior notice and hearing cannot be deemed acts of arbitrariness and bad faith. Department II. For instance. 22 In Central Bank v. this is not the case before Us. As regards the second ground.. creditors and stockholders over the assets of the bank. Aurellano and Tiaoqui Reports contained unfounded assumptions and deductions which did not reflect the true financial condition of the bank. . Court of Appeals. and the general public. the status quo shall be maintained. not to mention the losses suffered by the bank depositors. "asking for the impossible. the bank is given full opportunity to prove arbitrariness and bad faith in placing the bank under receivership. 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. Court of Appeals. or conservatorship for that matter. and (c) prima facie showing that its continuance in business would involve probable loss to its depositors or creditors. perhaps it could have merely ordered its reorganization or rehabilitation. the arbitrariness. But.e. 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. the absence of notice and hearing is not a valid ground to annul a Monetary Board resolution placing a bank under receivership. Inc. . and not the arbitrariness which the conclusions of the Supervision and Examination Sector (SES). the bank shall continue to be under receivership.A. 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. to rule that only the receiver may bring suit in behalf of the bank is. but that the Monetary Board had no sufficient basis to arrive at a sound conclusion of insolvency to justify the closure. . 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. the Valenzuela. The procedure prescribed in Sec. otherwise. 265 is a sound legislation promulgated in accordance with the Constitution in the exercise of police power of the state. 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. not because of the absence of prior notice and hearing. Section 29 of R. on the basis thereof. creditors and the general public as well. to echo the respondent appellate court. Until such determination is made. [u]nless adequate and determined efforts are taken by the government against distressed and mismanaged banks. the Monetary Board had no valid reason to liquidate the bank. In sum. (b) report by said department to the Monetary Board. i. We would be subscribing to a situation where the procedural rights invoked by private respondent would take precedence over the substantive interests of depositors. the resolution may be properly nullified and the receivership lifted as the trial court may determine. abuse of discretion and bad faith in the closure of Banco Filipino by the Monetary Board. For here. At any rate. the depositors. and stockholders. 29 is truly designed to protect the interest of all concerned. 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. if need be. Philippine Veterans Banks (189 SCRA 14 [1990]. it is likewise intended to protect and safeguard the rights and interests of the stockholders. 23 We explained the purpose of the law — . We ruled in Banco Filipino that the closure of the bank was arbitrary and attendant with grave abuse of discretion. for it cannot be expected that the master. Common sense and public policy dictate then that the authority to decide on whether to contest the resolution should be . They are: (a) an examination made by the examining department of the Central Bank. i. there was in that case a manifest arbitrariness. the CB. In Philippine Veterans Bank Employees Union-NUBE v. creditors and stockholders. and the summary closure pales in comparison to the protection afforded public interest. The government cannot simply cross its arms while the assets of a bank are being depleted through mismanagement or irregularities. Furthermore.A. This power has been expressly recognized by this Court. As this Court found in that case.. Admittedly. will allow the receiver it has appointed to question that very appointment. who all deserve the protection of the government." Consequently. Consequently. an MB resolution placing a bank under receivership. Thus. what is being raised as arbitrary by private respondent is the denial of prior notice and hearing by the Monetary Board. Consequently. We rule that Sec. 29 of R. 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. the same reports showed that the total assets of Banco Filipino far exceeded its total liabilities. 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. 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. hence. . of the Central Bank were reached. in which event. . appeal to procedural due process cannot just outweigh the evil sought to be prevented. may only be annulled after a determination has been made by the trial court that its issuance was tainted with arbitrariness and bad faith. 21 and reiterate Our pronouncement therein that — . 265 should be viewed in this light.take the necessary steps against any banking institution if its continued operation would cause prejudice to its depositors. . creditors. the procedure stated therein should be followed and observed. respondents. which is hereby SET ASIDE. to be effective sixty (60) days after its approval (Sec. CARLOS EJERCITO. except insofar as it upholds the Order of the trial court of 11 November 1985 directing petitioner RAMON V. the case before the trial court should now take its natural course. 289.O .R.R. 596 of the Monetary Board was tainted with arbitrariness and bad faith and to decide the case accordingly. However. The implication is that before E. 1996] FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and MERCURIO RIVERA. TIAOQUI to restore the management of TRIUMPH SAVINGS BANK to its elected Board of Directors and Officers. Consequently. vs. any party in interest could institute court proceedings to question a Monetary Board resolution placing a bank under receivership. 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. 5). 115849. 289. the Decision of the Court of Appeals in CA-G. 07867 is AFFIRMED. COURT OF APPEALS. January 24. 289 was issued.O. Republic of the Philippines THIRD DIVISION [G. and JOSE JANOLO. SO ORDERED. No.O. after the effectivity of E.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. Let this case be remanded to the Regional Trial Court of Quezon City for further proceedings to determine whether the issuance of Resolution No. PREMISES considered. since the instant complaint was filed by parties representing themselves to be officers of respondent Bank (Officer-in-Charge and Vice President). in substitution of DEMETRIO DEMETRIA. SP No. DECISION . petitioners. After carefully deliberating on the aforesaid submissions. 1994 denying the motion for reconsideration.00. Laguna? Does the doctrine of “apparent authority” apply in this case? If so.000. 1995. for brevity) is a banking institution organized and existing under the laws of the Republic of the Philippines. for brevity) is of legal age and was. 1994 of the respondent Court of Appeals[1] in CA-G. for purposes of registration of the same deed and transfer of the six (6) titles in the names of the plaintiffs. to be assessed against defendant bank. to pay the plaintiffs the amount of P400. Head Manager of the Property Management Department of the petitioner Bank. said decision is hereby AFFIRMED. the Court assigned the case to the undersigned ponente for the writing of this Decision. to pay plaintiffs Jose A. inclusive. to set aside the Decision promulgated January 14.: In the absence of a formal deed of sale. to legally refer to the plaintiff-appellee Carlos C. Ejercito. 1991. “With costs against the defendants. jointly and severally. The dispositive portion of the said Decision reads: “WHEREFORE. 4 and 6 of its dispositive portion and the reduction of the award in paragraph 5 thereof to P75. inclusive. covered by and embraced in Transfer Certificates of Title Nos. and to immediately deliver to the plaintiffs the owner’s copies of T. Janolo and Demetrio Demetria the sums of P 200. the petition was given due course in a Resolution dated January 18. Sta.00. does the filing of a “derivative suit” by the majority shareholders and directors of the distressed bank to prevent the enforcement or implementation of the sale violate the ban against forum-shopping? Simply stated. on the other hand. is as follows: “WHEREFORE. Nos. more or less. herein and hereafter. Ordering the defendants to pay the plaintiffs. the decision of the lower court is MODIFIED by the elimination of the damages awarded under paragraphs 3. J. “2. rejoinder. to pay plaintiffs the sum of P 100. Laguna with an area of 101 hectares. of the Land Records of Laguna. 35756 and the Resolution promulgated June 14.00 each in moral damages. Ordering the defendants. for brevity) is of legal age and is the assignee of original plaintiffs-appellees Demetrio Demetria and Jose Janolo. Ordering the defendants. “6. reply.500. CV No. may the Central Bank-appointed conservator of Producers Bank (now First Philippine International Bank) repudiate such “apparent authority” after said contract has been deemed perfected? During the pendency of a suit for specific performance. “Costs against appellant bank. The Parties Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines.” After the parties filed their comment. jointly and severally.00 for and by way of attorney’s fees. jointly and severally.PANGANIBAN. Rosa. judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows: “1. The First Division transferred this case to the Third Division per resolution dated October 23. Ordering the defendants. “3. petitioner Bank.5 Million. “4. actual and moderate damages in the amount of P20.C.00 as exemplary damages. may commitments given by bank officers in an exchange of letters and/or in a meeting with the buyers constitute a perfected and enforceable contract of sale over 101 hectares of land in Sta. 1995. Respondent Carlos Ejercito (respondent Ejercito. these are the major questions brought before this Court in the instant Petition for review on certiorari under Rule 45 of the Rules of Court.000. “5.R. sur-rejoinder and reply to sur-rejoinder. “All references to the original plaintiffs in the decision and its dispositive portion are deemed. Declaring the existence of a perfected contract to buy and sell over the six (6) parcels of land situated at Don Jose.000. T-106932 to T-106937. upon finality of this decision and receipt from the plaintiffs the amount of P5. between the plaintiffs as buyers and the defendant Producers Bank for an agreed price of Five and One Half Million (P5. the parties filed their respective memoranda and reply memoranda. Ordering defendant Producers Bank of the Philippines.000. T106932 to T-106937. Rosa. premises considered.T.” The dispositive portion of the trial court’s[2] decision dated July 10.000. to execute in favor of said plaintiffs a deed of absolute sale over the aforementioned six (6) parcels of land. . at all times material to this case.000. Thence. Petitioner Mercurio Rivera (petitioner Rivera. jointly and severally.00) Pesos. Respondent Court of Appeals is the court which issued the Decision and Resolution sought to be set aside through this petition. In all other aspects. We shall be very glad to hear your position on the matter. wrote (Exh. The meeting was held pursuant to plaintiffs’ plan to buy the property (TSN of Jan.114 481. “C”): September 1. JANOLO Dear Sir: Dear Sir: Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta. “(2) In the early part of August 1987 said plaintiffs. Kindly contact me at Telephone Number 921-1344. “(3) On September 1. Please be informed however that the bank’s counter-offer is at P5.000.m. T106932 to T-106937. Best regards.m.). 1987. the defendant Producer Bank of the Philippines acquired six parcels of land with a total area of 101 hectares located at Don Jose. Rosa. following the advice of defendant Rivera. Jose Fajardo. plaintiff Janolo.899 52. 1987. Demetrio Demetria and Jose O.m. Rosa. After the meeting. 1990. with a total area of 101 hectares. My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3.m. Gentlemen: I have the honor to submit my formal offer to purchase your properties covered by titles listed hereunder located at Sta. September 17. as follows: August 30. Mr. 1987 The Producers Bank of the Philippines Makati. wanted to purchase the property and thus initiated negotiations for that purpose. Laguna. Metro Manila Attention: JOSE O. plaintiff Janolo. Doña Andres II Rosario. defendant Rivera made on behalf of the bank a formal reply by letter which is hereunder quoted (Exh. 1987 (Exh. Rivera Manager. AREA T-106932 T-106933 T-106934 T-106935 T-106936 T-106937 113.[3] as follows: “(1) In the course of its banking operations.5 million for more than 101 hectares on lot basis. Mercurio Q.246 96. sq.The Facts The facts of this case are summarized in the respondent Court’s Decision. Metro Manila Attn. pp.. Janolo. “(4)On September 17.481 sq.580 70. Property Management Dept. Rosa. and covered by Transfer Certificates of Title Nos. “B”). TCT NO. Manager of the Property Management Department of the defendant bank. 1987 J-P M-P GUTIERREZ ENTERPRISES 142 Charisma St. 7-10). made a formal purchase offer to the bank through a letter dated August 30.500. Laguna. met with defendant Mercurio Rivera. The property used to be owned by BYME Investment and Development Corporation which had them mortgaged with the bank as collateral fora loan.00) PESOS. Sta. sq. Laguna (formerly owned by Byme industrial Corp. The original plaintiffs. 16. sq. in cash. Metro Manila .768 187. sq. sq.m.m. 1987 Producers Bank Paseo de Roxas Makati. Pasig. responding to Rivera’s aforequoted reply. upon the suggestion of BYME Investment’s legal counsel. more or less. we are pleased to inform you that we are accepting your offer for us to purchase the property at Sta.00).” Defendants refused to receive both the payment and the letter. the parcels of land involved in the transaction were advertised by the bank for sale to any interested buyer (Exhs. “E”): The Producers Bank of the Philippines Paseo de Roxas. Rivera as well as Fajardo. Makati Metro Manila Dear Mr.5 million “pursuant to (our) perfected sale agreement. the Senior Vice-President of defendant bank. I would like to amend my previous offer and I now propose to buy the said lot at P4. 1987. 1987. the BYME lawyer. Laguna Gentlemen: Pursuant to our discussion last 28 September 1987.Attention: Gentlemen: Mr. Rivera: This is in connection with the offer of our client. 1987. to purchase your 101-hectare lot located in Sta. we believe that an agreement has been perfected. the conservator of the bank (which has been placed under conservatorship by the Central Bank since 1984) was replaced by an Acting Conservator in the person of defendant Leonida T. or on September 30. Instead. it appears that your counter-offer dated September 1. formerly owned by Byme In-vestment. Atty. As detailed by the trial court in its decision. Laguna. We were also informed that despite repeated follow-up to consummate the purchase. Rosa.5 million was accepted by our client thru a letter dated September 30. “F”): Attention: Dear Sir: Your proposal to buy the properties the bank foreclosed from Byme Investment Corp. 1987. Janolo. plaintiff Janolo sent to the bank. 1987. T-106932 to 106937. From the documents at hand. Jose O. located at Sta. For your information.000. you now refuse to honor your commitment. Producers Bank Paseo de Roxas. “(6) On October 12. 1987. and which are covered by TCT No. Two days later. Demetrio Demetria . Mr. Rosa Laguna. on November 17. Laguna is under study yet as of this time by the newly created committee for submission to the newly designated Acting Conservator of the bank. for a total price of PESOS: FIVE MILLION FIVE HUNDRED THOUSAND (P5. Plaintiffs demanded the execution by the bank of the documents on what was considered as a “perfected agreement. you have advertised for sale the same lot to others. “(5) There was no reply to Janolo’s foregoing letter of September 17. Rosa. Mercurio Rivera Manager. the following letter (Exh.500. plaintiffs through a letter to defendant Rivera (Exhibit “G”) tendered payment of the amount of P5. attended the meeting. which demands were in one form or another refused by the bank. through Rivera. What took place was a meeting on September 28. Instead.” Thus: Mr.250 million in CASH. In view of the above circumstances. Encarnacion. “H” and “H-1”). On November 4. 1987 between the plaintiffs and Luis Co. Mercurio Rivera In reply to your letter regarding my proposal to purchase your 101-hectare lot located at Sta. Hoping that this proposal meets your satisfaction. defendant Rivera wrote plaintiff Demetria the following letter (Exh. Thank you. Rosa. Laguna. Rosa. 1987 and was received by you on October 5. Mercurio Rivera Re: 101 Hectares of Land in Sta. 1987 of this same lot in the amount of P5. “(7) What thereafter transpired was a series of demands by the plaintiffs for compliance by the bank with what plaintiff considered as a perfected contract of sale. Makati Metro Manila Attention: Mr. we shall be constrained to file the necessary court action to protect the interest of our client.[7] petitioners summarized their position as follows: I. 106936 and 106937 and registered under Producers Bank. “(10) On May 16. NIDA ENCARNACION Central Bank Conservator Gentlemen: We are sending you herewith.: Atty.5 million at your advice.” On March 14. 1988 (Annex “4” of defendant’s answer to amended complaint). Henry Co did not appeal the denial of his motion for intervention. the Bank. petitioner Rivera and conservator Encarnacion appealed to the Court of Appeals which subsequently affirmed with modification the said judgment. this time through the Acting Conservator. with prejudice. Then. 1987. he had a substantial interest in resisting the complaint. On December 14. docketed as Civil Case No. the plaintiffs made a second tender of payment (Exhs. in-behalf of our client. plaintiff. and that there was no meeting of the minds as to the price. in view of the assignment of the latters’ rights in the matter in litigation to said private respondent. 1987 (Exh. through counsel Angara Abello Concepcion Regala and Cruz. JOSE O. During the pre-trial conference in the Second Case. against Encarnacion. The basis of the suit was that the transaction had with the bank resulted in a perfected contract of sale.”[5] Private respondent. its Manager Rivera and Acting Conservator Encarnacion. On July 8. 106932.”[4] In his answer. On that basis. defendant Encarnacion. Demetria and Janolo “to declare any perfected sale of the property as unenforceable and to stop Ejercito from enforcing or implementing the sale. Branch 134. acknowledged receipt of the foregoing letter and stated. “L” and “L-1”).5 Million as the purchase price of the said lots. the trial court issued an order denying the motion to intervene on the ground that it was filed after trial had already been concluded. filed an action (hereafter. 258387 in the amount of P5. 1988. Otherwise. Mr. Co (the brother of Luis Co). As recounted by the trial court (Original Record.with the Regional Trial Court of Makati.5 million as our agreed purchase price of the 101-hectare lot covered by TCT Nos. Henry Co and several other stockholders of the Bank. 1991. filed a motion to intervene in the trial court. On July 11. “The Court of Appeals erred in declaring that a contract of sale was perfected between Ejercito (in substitution of Demetria and Janolo) and the bank. “I”). averred that this motion is still pending in the Makati RTC. From the trial court’s decision. 1992. the defendants justified the refusal of the tenders of payment and the non-compliance with the obligations under what the plaintiffs considered to be a perfected contract of sale. . in his memorandum. alleging that as owner of 80% of the Bank’s outstanding shares of stock. the defendants through Acting Conservator Encarnacion repudiated the authority of defendant Rivera and claimed that his dealings with the plaintiffs. through counsel. that said letter has been “referred x x x to the office of our Conservator for proper disposition. 106935. we are making this formal demand upon you to consummate and execute the necessary actions/documentation within three (3) days from your receipt hereof We are ready to remit the agreed amount of P5. It also denied a motion for reconsideration filed thereafter. no response came from the Acting Conservator. Carlos Ejercito was substituted in place of Demetria and Janolo. “(9) The foregoing letter drew no response for more than four months. 106934. p. among others. plaintiffs filed a Motion for Leave of Court to Dismiss the Case Without Prejudice.5 Million are unauthorized or illegal.” However. made a final demand for compliance by the bank with its obligations under the considered perfected contract of sale (Exhibit “N”). in its communication of December 2. through counsel Sycip Salazar Hernandez and Gatmaitan. Please inform us of the date of documentation of the sale immediately. JANOLO. that plaintiff’s act of forum shopping justifies the dismissal of both cases. MBTC Check No. therefore. Janolo argued that the Second Case was barred by litis pendentia by virtue of the case then pending in the Court of Appeals. In the course of the proceedings in the respondent Court. Metro Manila Attn. In their Petition[6] and Memorandum. plaintiffs filed a suit for specific performance with damages against the bank. Kindly acknowledge receipt of our payment. 1988. particularly his counter-offer of P5. 92-1606. This is in connection with the perfected agreement consequent from your offer of P5. the “Second Case”) -purportedly a “derivative suit” . on May 3. Makati. in a reply letter dated May 12. through defendant Rivera. The defendants took the position that there was no such perfected sale because the defendant Rivera is not authorized to sell the property. We trust that you will be guided accordingly. 656). “(8) Defendant bank. “Private respondent opposed this motion on the ground. during the pendency of the proceedings in the Court of Appeals. 1991.In behalf of our client. 106933. Plaintiffs’ letter reads: PRODUCERS BANK OF THE PHILIPPINES Paseo de Roxas. Henry L. “The factual findings and conclusions of the Court of Appeals are supported by the evidence on record and may no longer be questioned in this case. Branch 134. IV. has no authority to revoke the contract of sale. involving a derivative suit filed by stockholders of petitioner Bank against the conservator and other defendants but which is the subject of a pending Motion to Dismiss Without Prejudice.”[10] On the other hand. private respondents prayed for dismissal of the instant suit on the ground[8] that: I. the issues in this case may be summed up as follows: 1) Was there forum-shopping on the part of petitioner Bank? 2) Was there a perfected contract of sale between the parties? 3) Assuming there was. II. petitioners have included a VERIFICATION/CERTIFICATION in their Petition stating “for the record(. (b) to the best of his knowledge. “Petitioners have engaged in forum shopping. 2891 requiring that a party “must certify under oath x x x [that] (a) he has not (t)heretofore commenced any other action or proceeding involving the same issues in the Supreme Court. the Court of Appeals. In fact. apart from being estopped from repudiating the agency and the contract. was the said contract enforceable under the statute of frauds? 4) Did the bank conservator have the unilateral power to repudiate the authority of the bank officers and/or to revoke the said contract? 5) Did the respondent Court commit any reversible error in its findings of facts? The First Issue: Was There Forum-Shopping? In order to prevent the vexations of multiple petitions and actions. petitioners are guilty of actual forum shopping because the instant petition pending before this Court involves “identical parties or interests represented. IV. no such action or proceeding is pending” in said courts or agencies. or any other tribunal or agency. A violation of the said circular entails sanctions that include the summary dismissal of the multiple petitions or complaints. III. “The Court of Appeals erred in declaring that the conservator does not have the power to overrule or revoke acts of previous management.”[9] Private respondent Ejercito vigorously argues that in spite of this verification.II. rights asserted and reliefs sought (as that) currently pending before the Regional Trial Court. Makati Branch 134 in the Second Case.” On the other hand. III.) the pendency of Civil Case No. To be sure. “The Court of Appeals has correctly held that the conservator. “The findings and conclusions of the Court of Appeals do not conform to the evidence on record. the issues in the two cases are so intertwined that a judgment or resolution in either case will constitute res judicata in the other.” The Issues From the foregoing positions of the parties. petitioners explain[11] that there is no forum-shopping because: . the Supreme Court promulgated Revised Circular No. “The Court of Appeals erred in declaring the existence of an enforceable contract of sale between the parties. 92-1606 before the Regional Trial Court of Makati. “The Court of Appeals correctly held that there was a perfected contract between Demetria and Janolo (substituted by respondent Ejercito) and the bank. This practice had not only resulted to (sic) conflicting adjudications among different courts and consequent confusion enimical (sic) to an orderly administration of justice. The principle applies not only with respect to suits filed in the courts but also in connection with litigations commenced in the courts while an administrative proceeding is pending.which is unethical professional legal practice. arising from the same set of facts. As to the first (choice of venues). has no jurisdiction “[18] The test for determining whether a party violated the rule against forum-shopping has been laid down in the 1986 case of Buan vs. the Rules of Court. including to secure procedural advantages. litigants.” . As to remedies. where the court in which the second suit was brought. of auter action pendant. This is specially so. 3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank president and attached to the Petition identifies the action as a “derivative suit. 86-36563 identity of parties. To combat these less than honorable excuses. in order to defeat administrative processes and in anticipation of an unfavorable administrative ruling and a favorable court ruling. culpa aquiliana or culpa criminal . or to select a more friendly venue. et al. And this necessitated or had given rise to the formulation of rules and canons discouraging or altogether prohibiting the practice. as a result of an adverse opinion in one forum. as well as identity of rights asserted and relief prayed for. are given a choice of pursuing civil liabilities independently of the criminal. forum-shopping exists where the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in the other. the Court had proscribed it in the Interim Rules and Guidelines issued on January 11. We rule for private respondent. through the encouragement of their lawyers. the Bank was impleaded as a defendant. or invoke all relevant remedies simultaneously. to annoy and harass the defendant. it was the plaintiff. instead of actually making a choice of the forum of their actions. amount to res adjudicata in the action under consideration: all the requisites. “Thus. Lopez. It had created extreme inconvenience to some of the parties to the action. promulgated Circular 28-91. for example. “Eventually.”[15] What therefore originally started both in conflicts of laws and in our domestic law as a legitimate device for solving problems has been abused and misused to assure scheming litigants of dubious reliefs. And even before that.” Hence.. and that is. Forum-shopping as “the filing of repetitious suits in different courts” has been condemned by Justice Andres R.each remedy being available independently of the others .” it “does not mean that it is one” and “(t)hat is a legal question for the courts to decide”. for example. et al. regardless of which party is successful. 2) “The derivative suit is not properly a suit for and in behalf of the corporation under the circumstances”.1) In the earlier or “First Case” from which this proceeding arose. whereas in the “Second Case” (assuming the Bank is the real party in interest in a derivative suit).[19] also by Chief Justice Narvasa. the Supreme Court. according to Words and Phrases. This was the original concept of the term forum shopping. in conflicts of law cases. at the election of the plaintiff” (Rule 4. as already mentioned. Narvasa (now Chief Justice) in Minister of Natural Resources. aggrieved parties. in fine. 4) Petitioners did not hide the Second Case as they mentioned it in the said VERIFICATION/CERTIFICATION. allow a plaintiff to commence personal actions “where the defendant or any of the defendants resides or may be found. A passenger of a public utility vehicle involved in a vehicular accident may sue on culpa contractual.[14] “a litigant is open to the charge of ‘forum shopping’ whenever he chooses a forum with slight connection to factual circumstances surrounding his suit. or where the plaintiff or any of the plaintiffs resides. Black’s Law Dictionary[13] says that forum-shopping “occurs when a party attempts to have his action tried in a particular court or jurisdiction where he feels he will receive the most favorable judgment or verdict. but also to a choice of remedies. however. ‘forum-shopping’ had acquired a different concept . or at least such parties as represent the same interests in both actions. file their actions in all available courts. vs. the principle of forum non conveniens was developed whereby a court.” In the Philippines. will. forum-shopping originated as a concept in private international law. as follows: “There thus exists between the action before this Court and RTC Case No.although he cannot recover more than once. Heirs of Orval Hughes. as in this case. 2 [b]). and the identity on the two preceding particulars is such that any judgment rendered in the other action. Sec. To avoid or minimize this unethical practice of subverting justice. the relief being founded on the same facts.[12] where non-resident litigants are given the option to choose the forum or place wherein to bring their suit for various reasons or excuses. “In either of these situations (choice of venue or choice of remedy). may refuse impositions on its jurisdiction where it is not the most “convenient” or available forum and the parties are not precluded from seeking remedies elsewhere. “as a reprehensible manipulation of court processes and proceedings x x x. as in this case. forum-shopping has acquired a connotation encompassing not only a choice of venues. 1983 and had struck down in several cases[16] the inveterate use of this insidious malpractice. to avoid overcrowded dockets. the litigant actually shops for a forum of his action. In this light. To begin with. a party seeks a favorable opinion (other than by appeal or certiorari) in another. as it was originally understood in conflicts of laws.”[17] When does forum-shopping take place? “There is forum-shopping whenever. and litigants should be encouraged to attempt to settle their differences without imposing undue expense and vexatious situations on the courts. italics supplied). Victoriano. and to overturn the letter-directive of the COA of October 10. but with the same objective. When the acts sought to be restrained took place anyway despite the issuance by the Trial Court of a temporary restraining order.[23] but with the same logic and vigor. whenever the officials of the corporation refuse to sue. 86-36563 promulgated on July 15.[22] this Court ruled that the filing by a party of two apparently different actions. The adoption of this latter recourse renders the petitioners amenable to disciplinary action and both their actions. identity of rights or causes and identity of reliefs sought. of interests represented. 86-36563.” In the instant case before us. Both actions unquestionably involve the same transactions. the ultimate objective in both actions is the same.xxx xxx xxx “As already observed. this is the very essence of a derivative suit: “An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holds stock in order to protect or vindicate corporate rights. Commission on Audit. and for the imposition of the other sanctions. they represent the same interest and entity. rights asserted and relief sought. In other words. and Secondly. as in the action before this Court. The petitioners’ claim of absence of identity simply because the PCGG had not been impleaded in the RTC suit. the majority stockholders. the original complaint in the court a quo which gave rise to the instant petition was filed by the buyer (herein private respondent and his predecessors-in-interest) against the seller (herein petitioners) to enforce the alleged perfected sale of real estate.” which is the petitioner herein. 1986. One can see that although the relief prayed for in the two (2) actions are ostensibly different. Although the plaintiffs in the Second Case (Henry L. is specious. Applying the foregoing principles in the case before us and comparing it with the Second Case. while in the complaint before the lower court petitioner seeks to enjoin the PNOC from conducting a rebidding and from selling to other parties the vessel “T/T Andres Bonifacio.”[24] Indeed. there is also identity of parties. a final judgment in one would constitute res judicata and thus would cause the dismissal of the rest. too. is the same. The application of this sanction will prevent any further delay in the settlement of the controversy which might ensue from attempts to seek reconsideration of or to appeal from the Order of the Regional Trial Court in Civil Case No. in representation of the Bank. the suing stockholder is regarded as a nominal party. as well as basis thereof.” and for an extension of time for it to comply with the paragraph 1 of the memorandum of agreement and damages. the validity of the contract to purchase and sell of September 1. and the suit did not involve certain acts which transpired after its commencement. the allegations of the complaint in the Second Case show that the stockholders are bringing a “derivative suit. the approval of the sale of vessel in favor of petitioner. or at least. constituted forum shopping: “In the attempt to make the two actions appear to be different. forum shopping could be cited by the other party as a ground to ask for summary dismissal of the two[20] (or more) complaints or petitions. 1986. much less are they direct parties in the assailed contract of sale. so as to include the PCGG as defendant and seek nullification of the acts sought to be enjoined but nonetheless done. In the RTC action. et al. the relief was the same: the prevention of such implementation and/or the restoration of the status quo ante. dismissible. for they have no direct personal interest in the matter in controversy. the complaint[21] in the Second Case seeks to declare such purported sale involving the same real property “as unenforceable as against the Bank. with the corporation as the real party in interest. and the propriety of implementing the same (by paying the pledgee banks the amount of their loans. Very simply stated. where a litigant (or one representing the same interest or person) sues the same party against whom another action or actions for the alleged violation of the same right and the enforcement of the same relief is/are still pending. The remedy was certainly not the institution of another action in another forum based on essentially the same facts. or are the ones to be sued or hold the control of the corporation. petitioner impleaded different respondents therein . the filing by the petitioners of the instant special civil action for certiorari and prohibition in this Court despite the pendency of their action in the Makati Regional Trial Court. the objective or the relief being sought. in this Court as well as in the Court a quo.” In the caption itself. namely. In such actions.” Consequently. obtaining the release of the pledged shares. they are not suing in their personal capacities. which are direct contempt of court. are seeking to accomplish what the Bank itself failed to do in the original case in the trial court. On the other hand. an identity as regards parties. and petitioners’ remedy in the premises was plain and patent: the filing of an amended and supplemental pleading in the RTC suit.) are not name parties in the First Case. to enable the petitioner Bank to escape from the obligation to sell the property to respondent.. or interests represented. Inc. whether or not it had been efficaciously rescinded. to a degree sufficient to give rise to the ground for dismissal known as auter action pendant or lis pendens. petitioner Bank. 47 [1979]. In either case. petitioners claim to have brought suit “for and in behalf of the Producers Bank of the Philippines. etc. and disciplinary action against the erring lawyer. it is obvious that there exist identity of parties or interests represented.” (italics supplied) In an earlier case. They are not principally or even subsidiarily liable. in the Second Case. . criminal prosecution. (Gamboa v. That same identity puts into operation the sanction of twin dismissals just mentioned. the RTC suit did not become functus oflcio.e. In brief. the defense of litis pendencia in one case is a bar to the others. and. though worded differently. 90 SCRA 40.) were the basic issues. So. there is between the action at bar and RTC Case No. namely. i. we held: “In other words. Petitioner asks this Court to set aside the questioned letter-directive of the COA dated October 10.PNOC in the case before the lower court and the COA in the case before this Court and sought what seems to be different reliefs. 1988 and to direct said body to approve the Memorandum of Agreement entered into by and between the PNOC and petitioner. Co. In Danville Maritime. the same essential facts and circumstances. 1988 disapproving the sale. It remained an effective vehicle for obtention of relief. vs. that is. which dismissed the petition upon grounds which appear persuasive. is a species of forum-shopping. because: Firstly. whether suing as the majority in direct actions or as the minority in a derivative suit. replied that there is a difference in factual setting between Victronics and the present suit. reasoning that it was brought. cannot be allowed to trifle with court processes. petitioners. whether they sued “derivatively” or directly. the veil with which the law covers and isolates the corporation from the members or stockholders who compose it will be lifted to allow for its consideration merely as an aggregation of individuals. It is definite that the plaintiffs wanted to purchase the property and it was precisely for this purpose that they met with defendant Rivera. Manager of the Property Management Department of the defendant bank. petitioners themselves (and particularly Henry Co. The lawyers who filed the Second Case are not before us. as will be discussed shortly. In this case. hold or control over 80% of the outstanding capital stock. petitioners filed a responsive pleading to the complaint ..” citing as authority Victronics Computers. Holding that a valid contract has been established. Ultimately. Regional Trial Court. Thus. Indeed. To rule otherwise would be to encourage corporate litigants to use their shareholders as fronts to circumvent the stringent rules against forum shopping. as underscored in the above-quoted Court ruling. the defendants did not file any responsive pleading in the first case. However. Finally. Jose Entereso. The procedure in the sale of acquired assets as well as the nature and scope of . on the other hand. The Second Issue: Was The Contract Perfected? The respondent Court correctly treated the question of whether or not there was. But the rulings of this Court are consistent: “When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing obligation.) as litigants are admonished to strictly follow the rules against forum-shopping and not to trifle with court proceedings and processes. let it be emphasized that this petition should be dismissed not merely because of forum-shopping but also because of the substantive issues raised. it could not have chosen the forum in said case. As testified to by the Bank’s Deputy Conservator. and the Petition’s VERIFICATION/CERTIFICATION contained sufficient allegations as to the pendency of the Second Case to show good faith in observing Circular 28-91.”[25] In addition to the many cases[26] where the corporate fiction has been disregarded. special and affirmative defenses or even counterclaims. even assuming arguendo that there is identity of parties. respondent Court stated: “There is no dispute that the object of the transaction is that property owned by the defendant bank as acquired assets consisting of six (6) parcels of land specifically identified under Transfer Certificates of Title Nos. what is truly important to consider in determining whether forum-shopping exists or not is the vexation caused the courts and parties-litigant by a party who asks different courts and/or administrative agencies to rule on the same or related causes and/or to grant the same or substantially the same reliefs.In the face of the damaging admissions taken from the complaint in the Second Case. Velhagen’s and King’s motion to dismiss Civil Case No. as in this case. So. They are warned that a repetition of the same will be dealt with more severely. this is exactly the problem: a decision recognizing the perfection and directing the enforcement of the contract of sale will directly conflict with a possible decision in the Second Case barring the parties from enforcing or implementing the said sale. It is likewise beyond cavil that the bank intended to sell the property. the issues were joined. in the process creating the possibility of conflicting decisions being rendered by the different fora upon the same issue. the bank was looking for buyers of the property. In the former.[28] The foregoing conclusion finding the existence of forum-shopping notwithstanding. Having said that. 912069 by no means negates the charge of forum-shopping as such did not exist in the first place. “because it (the Bank) was the defendant in the (first) case while it was the plaintiff in the other (Second Case). Branch 63. In other words.[27] where the Court held: “The rule has not been extended to a defendant who. a final decision in one would constitute res judicata in the other. sought to deny that the Second Case was a derivative suit. Indeed. Shareholders. a perfected contract of sale as the ultimate issue. specific denials. the only sanction possible now is the dismissal of both cases with prejudice. Inc. the petitioners became plaintiffs themselves in the original case. giving unto themselves the very remedies they repeated in the Second Case. as the other sanctions cannot be imposed because petitioners’ present counsel entered their appearance only during the proceedings in this Court. the achievement or perfection of a monopoly or generally the perpetration of knavery or crime. petitioner Bank argued that there cannot be any forum shopping.as a result of which. causes of action and reliefs sought. commences a new action against the plaintiff . T-106932 to T-106937. the corporation itself has not been remiss in vigorously prosecuting or defending corporate causes and in using and applying remedies available to it. but by Henry Co et al. Respondent. they did not make any denial or raise any defense or counter-claim therein. Petitioner also tried to seek refuge in the corporate fiction that the personality of the Bank is separate and distinct from its shareholders. in early August 1987.” (italics supplied) Petitioner pointed out that since it was merely the defendant in the original case. not by the minority shareholders. quite strangely.setting forth therein. as causes of action. That being so. who not only own. et al. we now add the instant case. thus the rudiments of due process prevent us from motu propio imposing disciplinary measures against them in this Decision. In the case before us however. and declare herewith that the corporate veil cannot be used to shield an otherwise blatant violation of the prohibition against forum-shopping. on the basis of the facts established. but also constitute the majority in the Board of Directors of petitioner Bank. then they really represent the Bank. there is undeniably an identity of interests/entity represented. the circumvention of statutes. Makati. vs.instead of filing a responsive pleading in the other case . etc. particularly where. by praying for affirmative reliefs and interposing counter-claims in their responsive pleadings. et al. for reasons known only to him.. can be had. the bank placed its official. 1990. and thus holds him out to the public as possessing power to do those acts.5 Million for more than 101 hectares on lot basis. to accept offer. and the bank Committee. “Parenthetically. therefore. that the P5.”[29] Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract as follows: “(1) Consent of the contracting parties. 7 SCRA 577. Tersely put. did you ask him point-blank his authority to sell any property? A: No. It is a familiar doctrine. Court of Appeals. Rivera informed plaintiffs by letter that “the bank’s counter-offer is at P5. I provide the Committee with necessary information about the property such as original loan of the borrower. If I am not mistaken Wednesday and in about two week’s (sic) time. 27-28): Q: When you went to the Producers Bank and talked with Mr.5 Million price was not discussed by the Committee and that it was merely quoted to start negotiations regarding the price. “The plaintiffs. having been made to understand by Rivera. under the established facts. I was instructed to advertise acquired assets for sale so on that basis. No. as determined by the Committee and approved by the Conservator. and considering further the discussion of price at the meeting of August resulting in a formal offer of P3.5 Million was.” such counter-offer price had been determined by the Past Due Committee and approved by the Conservator after Rivera had duly presented plaintiffs’ offer for discussion by the Committee of such matters as original loan of borrower. Court of Appeals. formal offer and upon having been offered. the appraised value at the time the property is being offered for sale and then the information which are relative to the evaluation of the bank to buy which the Committee considers and it is the Committee that evaluate as against the exposure of the bank and it is also the Committee that submit to the Conservator for final approval and once approved. “What transpired after the meeting of early August 1987 are consistent with the authority and the duties of Rivera and the bank’s internal procedure in the matter of the sale of bank’s assets. I present it to the Committee. “There were averments by defendants below. we have to execute the deed of sale and it is the Conservator that sign the deed of sale. with Jose Entereso as one of the members. 583-584.” . that the price will be submitted for approval by the bank and that the bank’s decision will be relayed to plaintiffs. as well as before this Court. 369-370. the agenda was the price of the property. the Committee referred to was the Past Due Committee of which Luis Co was the Head. GSIS. The bank cannot turn around and later say. as it now does. From the facts. A: He did not say that he had the authority(. 1987. the plaintiffs made a formal offer by a letter dated August 20. At any rate. the corporation will. The testimonies of Luis Co and Jose Entereso on this point are at best equivocal and considering the gratuitous and self-serving character of these declarations. G. sir. which testimony was relied upon by both the bank and by Rivera in their appeal briefs. the bank’s submission on this point does not inspire belief. 94 SCRA 357. pp. in a position of authority to accept offers to buy and negotiate the sale by having the offer officially acted upon by the bank. total claim of the bank. the doctrine of ostensible authority. Both Co and Entereso.) But he said he would refer the matter to the committee and he would relay the decision to me and he did just like that. 103957. June 14. that if a corporation knowingly permits one of its officers. this is not credible. It is important to note that negotiations on the price had started in early August and the plaintiffs had already offered an amount as purchase price. (3) Cause of the obligation which is established. Prudential Bank v. the official in charge of the negotiation. it being inherent in his authority.5 Million in cash. The letter was for the attention of Mercurio Rivera who was tasked to convey and accept such offers. 1993). to do acts within the scope of an apparent authority. on September 1. (2) Object certain which is the subject matter of the contract. total claim of the bank. at that meeting of August 1987 regarding their purpose of buying the property. as against any one who has in good faith dealt with the corporation through such agent. to accept offers and to present the offer to the Committee before which the said official is authorized to discuss information relative to price determination. or any other agent. 1987 stating that they would buy at the price of P3. In the same vein. “E”). in effect what he was saying he was not the one who was to decide. Rivera. the Conservator and ultimately the bank itself with the set price on the other. and market value. Thus (TSN of July 30. pp. there can be no other logical conclusion than that when. Necessarily. PNB v. I have to entertain offer. the amount of P5. But he would refer it to the committee and he would relay the decision of the committee to me. both Co and Entereso openly admit that they seldom attend the meetings of the Committee. he estopped from denying his authority (Francisco v. And Rivera confirmed his authority when he talked with the plaintiff in August 1987. as clearly worded in Rivera’s letter (Exh. It is the official bank price.R. claim that the offer of the plaintiff was never discussed by the Committee. as members of the Past Due Committee of the bank. and plaintiffs were dealing with the bank official authorized to entertain offers. (W)hen I asked him how long it would take because he was saying that the matter of pricing will be passed upon by the committee.5 Million in cash. the official and definitive price at which the bank was selling the property. Considering an aspect of the official duty of Rivera as some sort of intermediary between the plaintiffs-buyers with their proposed buying price on one hand. bid price during the foreclosure. too. As correctly characterized by the trial court. And when I asked him how long it will take for the committee to decide and he said the committee meets every week.the authority of Rivera on the matter is clearly delineated in the testimony of Rivera himself. 19-20): A: The procedure runs this way: Acquired assets was turned over to me and then I published it in the form of an interoffice memorandum distributed to all branches that these are acquired assets for sale. The testimony of plaintiff Demetria is clear on this point (TSN of May 31. sir. 1990. that what Rivera states as the bank’s action on the matter is not in fact so. bid price during foreclosure. Rivera is the officer from whom official information regarding the price. dealt with and talked to the right person. Necessarily. Not point blank although it came from him. Q: Please answer the question. Mercurio Rivera.5 Million has a definite significance. As advised by Rivera. the price of P5. Rivera was already the person in charge of the Bank’s acquired assets (TSN. there are questions of law which could be drawn from the factual findings of the respondent Court. more or less. p. August 6. et al. Laguna with an aggregate area of about 101 hectares.5 million was the final price of the Bank (TSN.are. nor will it be permitted to shirk its responsibility for such frauds. 40 ALR 1021). it is obvious that petitioner Rivera has apparent or implied authority to act for the Bank in the matter of selling its acquired assets. (c) Rivera received the buyers’ letter dated August 30. 1990. let us review the question of Rivera’s authority to act and petitioner’s allegations that the P5. to which the Bank counter-offered P5. April 26. 2. II-1 (p. p. 1987. January 16. vs.” By his own admission. 1990. April 26. “Application of these principles is especially necessary because banks have a fiduciary relationship with the public and their stability depends on the confidence of the people in their honesty and efficiency. Since there was no counter-offer by the Bank. We have perused the evidence but cannot find fault with the said Court’s findings of fact. the Bank referred to Rivera as the officer acting for the Bank in relation to parties interested in buying assets owned/acquired by the Bank. 11). and covered by Transfer Certificates of Title Nos.25 million revised offer of Janolo. July 30. 1990. 3) states that Rivera was “at all times material to this case. errors of fact -if there be any . 204 NW 818. 1987 containing the buyers’ proposal to buy the property for P4. in the particular case. 52 ND 752. resulting in prejudice to their depositors. There is. Intermediate Appellate Court. April 26.J. even though no benefit may accrue to the bank therefrom (10 Am Jur 2d.. 1990. 1990. confirmed that the P5. there was nothing for Ejercito (in substitution of Demetria and Janolo) to accept. p. 1987 offering to sell the property for P5. In fact.[32] the Court. however. A bank holding out its officers and agents as worthy of confidence will not be permitted to profit by the frauds they may thus be enabled to perpetrate in the apparent scope of their employment. a dispute on the first and third requisites. confirmed Rivera’s statement as to the finality of the Bank’s counter-offer of P5. p. affirmed the doctrine of apparent authority as it held that the apparent authority of the officer of the Bank of P. and in addition to the foregoing disquisitions by the Court of Appeals. 184 SCRA 166). Manager of the Property Management Department of the Bank. Verily. and any supposed counter-offer which Rivera (or Co) may have made is unauthorized. 21. (g) Rivera arranged the meeting between the buyers and Luis Co on September 28. a major shareholder and officer of the Bank. Rosa.5 million (TSN. Exhs. And during the initial meeting between the buyers and Rivera. This evidence includes the following: (a) The petition itself in par. “S” and “S-I”). 35). At said meeting. as a rule. 12). not reviewable. Petitioners allege that “there is no counter-offer made by the Bank. the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other person. The doctrine of “apparent authority. p. 18). The mere fact that respondent Court (and the trial court as well) chose to believe the evidence presented by respondent more than that presented by petitioners is not by itself a reversible error. p.25 million (TSN. 16-17). p. (f) Rivera. pp. for his own ultimate benefit (McIntosh v. The object of the questioned contract consists of the six (6) parcels of land in Sta. the latter suggested that the buyers’ offer should be no less than P3. Court of Appeals. Inc. Rivera was the officer mentioned in the Bank’s advertisements offering for sale the property in question (cf. 417). “A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of dealings of the officers in their representative capacity but not for acts outside the scope of their authority (9 C. p. T-106932 to T-106937. 1990.[31] where it was held that: “Conformably.I.” with special reference to banks. January 16.S. Such faith will be eroded where banks do not exercise strict care in the selection and supervision of its employees. we have declared in countless decisions that the principal is liable for obligations contracted by the agent. pp. (b) As observed by respondent Court. 114). such findings merit serious consideration by this Court. in fact.5 million (TSN. Court of Appeals. 30 July 1990. during which the Bank’s offer of P5.3 million (TSN. The agent’s apparent representation yields to the principal’s true representation and the contract is considered as entered into between the principal and the third person (citing National Food Authority vs. R. a banking corporation is liable to innocent third persons where the representation is made in the course of its business by an agent acting within the general scope of his authority even though. Here. In the very recent case of Limketkai Sons Milling. Accordingly. 8-9).5 million counter-offer was extinguished by the P4.5 million (TSN.. Co. 1987 offering P3. 11). The authority of a corporate officer in dealing with third persons may be actual or apparent. was laid out in Prudential Bank vs. pp. Melo. TSN. the land was definitely being sold by the Bank. (d) Rivera signed the letter dated September 1. in a telephone conversation. in . (e) Rivera received the letter dated September 17.There is no dispute on requisite no. through Justice Jose A. as in this case.. said courts carefully and meticulously discussed their findings.5 million was confirmed by Rivera (TSN. 1990. Dakota Trust Co. Be that as it may.” From the evidence found by respondent Court. 34-35).5 million. in a petition under Rule 45 such as this.5 million. (h) In its newspaper advertisements and announcements. This is basic.”[30] They disputed the factual basis of the respondent Court’s findings that there was an offer made by Janolo for P3. July 30. They also delve into the contractual elements of consent and cause. particularly where. 1987 was carried through during the meeting of September 28. since the issue is apparent authority. CA. there was a meeting of the minds.5 million.R. vs. 1987 was the Bank’s offer of P5. Such delay. Dulos Realty & Development Corp. pp. 1319 of the Civil Code[36] and related Supreme Court rulings starting with Beaumont vs. 77029.5 million was raised for the first time on appeal and should thus be disregarded. Indeed. and we repeat that.[37] However. on the basis of the evidence already in the record and as appreciated by the lower courts. Prieto. however.5 million under Annex ‘J’ (letter dated September 17. 157 SCRA 425 [1988].[34] They disputed the respondent Court’s finding that “there was a meeting of minds when on 30 September 1987 Demetria and Janolo through Annex ‘L’ (letter dated September 30. 74243.5 million. justice and due process (Dihiansan vs. if only to avoid deciding the case on purely procedural grounds. This is the conclusion consistent with human experience. CA. considered by a reviewing court.”[39] Hence. 1987) ‘accepted’ Rivera’s counter offer of P5. In fact.”[38] However.5 million price has been passed upon by the Committee and could no longer be lowered (TSN of April 27. “This Court in several decisions has repeatedly adhered to the principle that points of law. Jose Fajardo by Rivera and Co during their meeting on September 28. the evidence of actual authority is immaterial insofar as the liability of a corporation is concerned. Gevero vs. the Bank has not shown that they acted as its counsel in respect to any acquired assets. 1987. and the absence of any circumstance which might have justifiably prevented the Bank from acting earlier. the inevitable conclusion is simply that there was a perfected contract of sale. as they cannot be raised for the first time on appeal (Santos vs. 1986. particularly the latter’s counter-offer of P5. 1987 meeting “was meant to have the offerors improve on their position of P5. 1987 extinguished the Bank’s offer of P5. 1988 or more than seven (7) months after Janolo’s acceptance. 1987. To be sure. 1990. These pieces of evidence. they should be charged with actual knowledge of Rivera’s limited authority. 1987 meeting revived the said offer. No. IAC. Indeed. 1987 begins with “(p)ursuant to our discussion last 28 September 1987 x x x.5 million. IAC. Luis Co’s reiteration of the said P5.”[41] Since the issue was not raised in the pleadings as an affirmative defense. 175 SCRA 70 [1989]. the above-cited authorities and precedents cannot apply in the instant case because. But we passed upon the issue anyway. of which private respondent cannot be charged with knowledge. private respondent was not given an opportunity in the trial court to controvert the same through opposing evidence. 34-35). and ordinarily will not be.charge of acquired assets is borne out by similar circumstances surrounding his dealings with buyers.5 million as confirmed and reiterated to Demetria and Atty. this is a matter of due process. both the trial court and the Court of Appeals found petitioners’ testimonial evidence “not credible. as found by the respondent Court which reviewed the testimonies on this point. theories. Petitioners also alleged that Demetria’s and Janolo’s P4.that during the meeting on September 28. as being “unauthorized and illegal” came only on May 12. G. one of whose members (Atty. 1987 letter accepting this revived offer.25 million extinguished the offer of P5. we see no reason to disturb the lower courts’ (both the RTC and the CA) common finding that private respondents’ evidence is more in keeping with truth and logic .” and we find no basis for changing this finding of fact. IAC. Taken together. 145 SCRA 592).” citing the late Justice Paras. 1987).25 million counter-offer in the letter dated September 17. through Conservator Encarnacion. petitioners attempted to repudiate Rivera’s apparent authority through documents and testimony which seek to establish Rivera’s actual authority. Anchuelo vs. 12) had already made a factual finding that the buyers had no notice of Rivera’s actual authority prior to the sale. issues of fact and arguments not adequately brought to the attention of the trial court need not be. But the Court of Appeals in its Decision (p. respondent has proven that Demetria and Janolo merely associated with a loose aggrupation of lawyers (not a professional partnership). Note that the said letter of September 30. on the other hand.[35] Art. assuming arguendo that the counter-offer of P4. clearly characterizes the repudiation as nothing more than a last-minute attempt on the Bank’s part to get out of a binding contractual obligation. what was “accepted” by Janolo in his letter dated September 30. as the acceptance in said letter was absolute and unqualified. In any event.”[40] “xxx It is settled jurisprudence that an issue which was neither averred in the complaint nor raised during the trial in the court below cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play. Luis Co and Rivera “confirmed that the P5. 1987. August 30. the factual findings of the respondent Court point to an implied admission on the part of the petitioners that the written offer made on September 1. It also bears noting that this issue of extinguishment of the Bank’s offer ‘of P5. Ramos vs. of Rivera’s authority and action. 153 SCRA 713 [1987].5 million. We note that the Bank’s repudiation.[33] Petitioners also argued that since Demetria and Janolo were experienced lawyers and their “law firm” had once acted for the Bank in three criminal cases. IAC. The Third Issue: Is the Contract Enforceable? . are inherently weak as they consist of Rivera’s selfserving testimony and various inter-office memoranda that purport to show his limited actual authority.” Petitioners insist that the respondent Court should have believed the testimonies of Rivera and Co that the September 28. And by virtue of the September 30. 1990). truth and good faith. Susana Parker) acted in said criminal cases. the existence of which is borne out by the respondent Court’s findings.5 million price during the September 28. 147 SCRA 434 [1987]. November 14. 18-21.5 million. We agree that. 1987. constitute in law a sufficient memorandum of a perfected contract of sale. sir. Luis Co said that the amount cited by Mr. sir. Demetria told me to accompany him and we were able to meet Luis Co at the Bank. 1987. petitioners . [Direct testimony of Atty. he will make final acceptance. at pp. Still. the bank’s letter of September 1. the statute of frauds will not apply by reason of the failure of petitioners to object to oral testimony proving petitioner Bank’s counter-offer of P5. these letters constitute sufficient memoranda . 2 of Article 1403.5 million and we should indicate our position as soon as possible. 1987. 1987 letter. sir. QWhat is the reaction of the plaintiff Demetria to Luis Co’s statment (sic) that the defendant Rivera’s counter-offer of 5. Demetria asked Mr. Civil Code. in themselves.are deemed to have waived any defects of the contract under the statute of frauds. 1987 on the official price and the plaintiffs’ acceptance of the price on September 30.5 million pesos and Mr. Luis Co of the defendant Bank? AWe went straight to the point because he being a busy person. sir.5 million is aplenty -and the silence of petitioners all throughout the presentation makes the evidence binding on them thus: AYes. formal contracts of sale. What is the response of Mr. QAWhat do you mean? That is the amount they want. sir. Luis Co whether the price could be reduced. what transpired during this meeting with Luis Co of the Producers Bank? Atty. . such contract being binding in whatever form it may have been entered into (case citations omitted).5 million during the meeting of 28 September 1987. Jose Fajardo. January 16. memorandum or writing subscribed by the Bank to evidence such contract. Stated simply. 14) stated: “x x x Of course. I told him if the amount of P5. Hence. 1990. or by the acceptance of benefits under them.)” Upon the other hand. Demetria. are not. I think it was September 28. pursuant to Article 1405 of the Civil Code: “Art. sir. and it was this verbal offer that Demetria and Janolo accepted with their letter of 30 September 1987. referred to in No. They are however clear embodiments of the fact that a contract of sale was perfected between the parties. TSN. Contracts infringing the Statute of Frauds. Mercurio Rivera is the final price and that is the price they intends (sic) to have.there being no note.The petition alleged:[42] “Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5. Rivera stated. the terms and conditions of the contract. taken together. the contract produced thereby would be unenforceable by action . 1987 did constitute a “new” offer which was accepted by Janolo on September 30. oral testimony on the reaffirmation of the counter-offer of P5.] ----0---QWhat transpired during that meeting between you and Mr.” As private respondent pointed out in his Memorandum. But let it be assumed arguendo that the counter-offer during the meeting on September 28. 1987 and I was again present because Atty. Luis Co? He said he will wait for the position of Atty.5 million was the defendant’s bank (sic) final offer? AQAHe said in a day or two.by such utter failure to object . What price? AThe 5.5 million could still be reduced and he said that was already passed upon by the committee.since they include the names of the parties.” The respondent Court could have added that the written communications commenced not only from September 1. xxx QAQxxx xxx Now. What the bank expects which was contrary to what Mr. And he told me that is the final offer of the bank P5. the price and a description of the property as the object of the contract. the respondent Court in its Decision (p. taken together with plaintiffs’ letter dated September 30. (Please see Article 1403[2]. 1405. 1987 but from Janolo’s August 20. are ratified by the failure to object to the presentation of oral evidence to prove the same. the banks’ letter of September 1. 1987. actually repudiated or overruled said contract of sale. Co himself. Zarate Zarate Carandang Perlas & Ass. Fajardo and I and Mr. Mercurio [Rivera] was with us at the time at his office.] The Fourth Issue: May the Conservator Revoke the Perfected and Enforceable Contract? It is not disputed that the petitioner Bank was under a conservator placed by the Central Bank of the Philippines during the time that the negotiation and perfection of the contract of sale took place. Rivera. Noe C. 1988 “Atty. petition) which unilaterally repudiated .as this was not litigated in the trial court or Court of Appeals. sir. Metro Manila Dear Atty. Rodolfo Romey. 265 (otherwise known as the Central Bank Act) as follows: “Whenever. Pajardo (sic).0 ---QAccording to Atty.5 million was reached by the Committee? AIt was not discussed by the Committee but it was discussed initially by Luis Co and the group of Atty. justice and due process. As already stated earlier. Demetria. sir. and the management of that institution. Atty. What can you say to that statement that the amount of P5.banking functions is in a state of continuing inability or unwillingness to maintain a state of liquidity deemed adequate to protect the interest of depositors and creditors. Fajardo and I. He shall have the power to overrule or revoke the actions of the previous management and board of directors of the bank or non-bank financial intermediary performing quasi-banking functions. issues not raised and/or ventilated in the trial court. never objected to the sale of the property to Demetria and Janolo. in that September 28.” [Direct testimony of Mercurio Rivera. By Mr. Petitioners energetically contended that the conservator has the power to revoke or overrule actions of the management or the board of directors of a bank. Suite 323 Rufino Building Ayala Avenue. on the basis of a report submitted by the appropriate supervising or examining department. under Section 28-A of Republic Act No. this issue of the Conservator’s alleged authority to revoke or repudiate the perfected contract of sale was raised for the first time in this Petition . any provision of law to the contrary notwithstanding. Demetrio Demetria and Atty. Luis Co. at pp. your Honor please.] ---. will you tell this Court who was with Mr. there is absolutely no evidence that the Conservator.”[43] In the second place. the Monetary Board may appoint a conservator to take charge of the assets. the amount of P5. 34-36. Makati. 14-15.and which unarguably came months after the perfection of the contract. Co you are referring to? Mr. Luis Co? AI said that we are going to give him our answer in a few days and he said that was it.” In the first place. 30 July 1990.but the authority of Rivera to make a binding offer .5 million was reached by the Committee and it is not within his power to reduce this amount.” [Direct testimony of Atty. we did. reorganize the management thereof. pp. “cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play. Zarate: . Two days thereafter we sent our acceptance to the bank which offer we accepted. at the time the contract was perfected. and such other powers as the Monetary Board shall deem necessary. liabilities. QFor the record. 1987 (Annex V.Q- What was your response to the answer of Mr. Mr. did you and your partner accede on (sic) the counter offer by the bank? AYes. collect all monies and debts due said institution and exercise all powers necessary to preserve the assets of the institution. the offer of the bank which is P5. Demetrio Demetria.5 million. What petitioners are really referring to is the letter of Conservator Encarnacion. Said letter dated May 12.not the contract . 26 April 1990. TSN. The Bank’s acting conservator at the time. who took over from Romey after the sale was perfected on September 30. Atty. Co in his Office in Producers Bank Building during this meeting? AQAQMr. let alone in the Court of Appeals. TSN. and restore its viability. 1988 is reproduced hereunder: “May 12. the Monetary Board finds that a bank or a non-bank financial intermediary performing quasi . 1987 meeting. After this meeting with Mr. Luis Co. We believe that this is more than sufficient legal justification for refusing said alleged tender. 1988 on behalf of Attys. February 25.” Such powers. The Fifth Issue: Were There Reversible Errors of Fact? Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court. Moreover. as the same is patently violative of corporate and banking laws.e. 121 SCRA 865. Hence. reiterating a long line of decisions]. Manufacturers Hanover & Trust Corporation. 127 SCRA 596). G. voidable. the Central Bank law gives vast and far-reaching powers to the conservator of a bank.as he has already done so in the instant case. L27488.R. Andres I. 1984) to sell the aforesaid property to any of your clients. Jr. No. void. February 20. We deny that Producers Bank has ever made a legal counter-offer to any of your clients nor perfected a ‘contract to sell and buy’ with any of them for the following reasons. July 25. No.[45] we held: “x x x.R. under existing law. constrained to refuse any tender of payment by your clients. 58 SCRA 89. his power is not unilateral and he cannot simply repudiate valid obligations of the Bank.’ ‘The jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals is limited to reviewing and revising the errors of law imputed to it. 28-A of the Central Bank Act (Rep. Mercurio Rivera or any of his subordinates has no authority. Janolo and Demetria regarding the six (6) parcels of land located at Sta. In Andres vs. enormous and extensive as they are. power or right to make any alleged counter-offer. 1988. 158 SCRA 138. Our records do not show that Mr.) Leonida T.R. 1966. what took place were just preliminary discussions/ consultations between him and your clients. L-24426. 1984. Please be advised accordingly. G. otherwise they would infringe against the non-impairment clause of the Constitution. 23 and 36 of the Corporation Code of the Philippines (Batas Pambansa Blg. No. G. We are. 1986 addressed to and approved by former Acting Conservator Mr. 18 . while admittedly. the conservator merely takes the place of a bank’s board of directors. G. Rustia. it must be pointed out that such powers must be related to the “(preservation of) the assets of the bank. (the reorganization of) the management thereof and (the restoration of) its viability. deemed to be defective . or that they are so glaringly erroneous as to constitute serious abuse of discretion. findings of fact by the Court of Appeals are not reviewable by the Supreme Court. L-47531. a showing that the findings complained of are totally devoid of support in the record. Rest assured that we have nothing personal against your clients. Act No. legal and in accordance with law. Encarnacion LEONIDA T. at the expense of third parties. only the Board of Directors/Conservator may authorize the sale of any property of the corporation/bank. Corona vs. All our acts are official. G. its jurisdiction being limited to reviewing errors of law that might have been committed by the lower court’ (Tiongco v. December 17. as amended). Tibe. 1974. In short. (Sgd. Rivera was authorized by the old board or by any of the bank conservators (starting January. for this Court is not expected or required to examine or contrast the oral and documentary evidence submitted by the parties’ ‘[Santa Ana. No. Very truly yours. cannot extend to the post-facto repudiation of perfected transactions. unenforceable or rescissible. ENCARNACION Acting Conservator” In the third place. June 30. L-62482. 1983. 68) and Sec. No. Hernandez.’ ‘Barring. His authority would be only to bring court actions to assail such contracts .i. The rule regarding questions of fact being raised with this Court in a petition for certiorari under Rule 45 of the Revised Rules of Court has been stated in Remalante vs. What the said board cannot do .[44] If the legislature itself cannot revoke an existing valid contract. G. by simply getting the conservator to unilaterally revoke all previous dealings which had one way or another come to be considered unfavorable to the Bank. Section 28-A merely gives the conservator power to revoke contracts that are. therefore. its findings of the fact being conclusive’ ‘[Chan vs.R. Court of Appeals. Laguna. Court of Appeals. Apparently. Rosa. Pascua detailed the functions of Property Management Department (PMD) staff and officers (Annex A). This Court has emphatically declared that’ ‘it is not the function of the Supreme Court to analyze or weigh such evidence all over again. your lawyer-clients did not deal with the authorized officers of the bank. Neither by common sense.R. yielding nothing to perfected contractual rights nor vested interests of the third parties who had dealt with the Bank. 33 SCRA 737.the conservator cannot do either. A contrary understanding of the law would simply not be permitted by the Constitution. In the ‘Inter-Office Memorandum’ dated April 25. therefore. April 28. how can it delegate such nonexistent powers to the conservator under Section 28-A of said law? Obviously. Baniqued vs. 1970. such findings must stand.. We also have no personal interest in any of the properties of the Bank. vs. De la Merced. therefore. which everyone knows cannot bind the Bank’s Board or Conservator. thus: ‘The rule in this jurisdiction is that only questions of law may be raised in a petition for certiorari under Rule 45 of the Revised Rules of Court. Court of Appeals. 59514. To rule otherwise would be to enable a failing bank to become solvent.This pertains to your letter dated May 5. under Secs. you will immediately read that Manager Mr. L-16394.such as repudiating a contract validly entered into under the doctrine of implied authority .R. No. Producers Bank Senior Manager Perfecto M. 265. Ineluctably. ” (italics supplied) Petitioners. Indeed. After a careful study of the case at bench. when the findings went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee. 1987 between the plaintiffs.:[47] “The Court has consistently held that the factual findings of the trial court.5 Million for more than 101 hectares on lot basis.5 million. we find none of the above grounds present to justify the re-evaluation of the findings of fact made by the courts below. 1990. where the topic was the possible lowering of the price. but petitioners’ evidence was deemed insufficient by both the trial court and the respondent Court.[51] such suppression gives rise to the presumption that his testimony would have been adverse. Among the exceptional circumstances where a reassessment of facts found by the lower courts is allowed are when the conclusion is a finding grounded entirely on speculation.[46] we held: “The resolution of this petition invites us to closely scrutinize the facts of the case. CA Decision). 34-35)” (p. 15. Court of Appeals. But the petitioners are now asking this Court to disturb these findings to fit the conclusion they are espousing. however. vs. 1987. the ruling of this Court in the recent case of South Sea Surety and Insurance Company. The best that can be said in favor of petitioners on this point is that the factual findings of respondent Court did not correspond to petitioners’ claims. assailed the respondent Court’s Decision as “fraught with findings and conclusions which were not only contrary to the evidence on record but have no bases at all. The inferences and conclusions are reasonably based on evidence duly identified in the Decision. Court of Appeals. The respondent Court did not believe the evidence of the petitioners on this point. Court of Appeals. there are settled exceptions where the Supreme Court may disregard findings of fact by the Court of Appeals.5 million had been determined by the past due committee and approved by conservator Romey. Tersely put. 11. such as here. in Bernardo vs. 144-145. CA Decision) xxx xxx xxx “xxx. the appellate court patiently traversed and dissected the issues presented before it. The Supreme Court’s jurisdiction is limited to reviewing errors of law that may have been committed by the lower court. it was respondent’s submissions that were believed and became bases of the conclusions arrived at. x x x” As held in the recent case of Chua Tiong Tay vs. on September 1. Under the rules on evidence. the findings of the said Court are supported by a preponderance of competent and credible evidence. testimonial and documentary.SCRA 973] [at pp. adduced by the parties. during the meeting of September 28. the bank official refused it and confirmed that the P5. and considering the gratuitous and self-serving character of these declarations. On the contrary.[52] We have studied both the records and the CA Decision and we find no such exceptions in this case. the bank’s submissions on this point do not inspire belief. but were closer to the evidence as presented in the trial court by private respondent.]” Likewise. The argument deserves scant consideration. Inc. surmises or conjectures. as clearly worded in Rivera’s letter (Exh. et al. citing Philippine National Bank vs. under the established fact. characterizing it as “not credible” and “at best equivocal. This Court so held that it is not the function of the Supreme Court to analyze or weigh such evidence all over again. Court of Appeals and Goldrock Construction and Development Corp. the findings of both the trial court and the appellate court on the matter coincide. when the inference made is manifestly absurd. Rivera and Luis Co.” In the same vein.5 Million price had been passed upon by the Committee and could no longer be lowered (TSN of April 27. To be sure. The first point was clearly passed upon by the Court of Appeals.5 Million was. The Supreme Court is not a trier of facts. petitioners should have presented then Conservator Rodolfo Romey to testify on their behalf. the price of P5. and instead. lending credibility and dependability to its findings.[49] petitioners are asking us to review and reverse such factual findings.” (p. the senior vice-president of the bank. but a meeting on the already determined price of P5. Hon. relating to the sufficiency of evidence and the credibility of witnesses presented. the official and definitive price at which the bank was selling the property. mistaken or impossible.’ such counter-offer price had been determined by the Past Due Committee and approved by the Conservator after Rivera had duly presented plaintiffs’ offer for discussion by the Committee x x x. ‘E’). as he would have been in the best position to establish their thesis. when the judgment is premised on a misapprehension of facts. after Rivera presented the same for discussion” and (2) “the meeting with Co was not to scale down the price and start negotiations anew.[48] is equally applicable to the present case: “We see no valid reason to discard the factual conclusions of the appellate court. x x x (I)t is not the function of this Court to assess and evaluate all over again the evidence. But this alone is no reason to reverse or . This we cannot do. The second point was squarely raised in the Court of Appeals. In fine.” To become credible and unequivocal. are final and conclusive and may not be reviewed on appeal.[50] thus: “There can be no other logical conclusion than that when. pp. As pointed out by plaintiff.” Hence. it is quite evident that the legal conclusions arrived at from the findings of fact by the lower courts are valid and correct. if produced. when there is grave abuse of discretion in the appreciation of facts. Rivera informed plaintiffs by letter that ‘the bank’s counter-offer is at P5. particularly where. as well as the Court of Appeals.” specifically the findings that (1) the “Bank’s counter-offer price of P5. While the Supreme Court is not a trier of facts and as a rule we are not required to look into the factual bases of respondent Court’s decisions and resolutions. to enable it to escape its binding obligation and to reap the benefits of the increase in land values. Costs against petitioners. petitioner.which per se could justify the dismissal of the present case.J. Davide.[54] That the Bank procrastinated and refused to honor its commitment to sell cannot now be used by it to promote its own advantage. which must be upheld under the rule of law and blind justice. We did not limit ourselves thereto. petitioner Bank is REPRIMANDED for engaging in forum-shopping and WARNED that a repetition of the same or similar acts will be dealt with more severely.023 billion x x x and there were (other) offers to buy the subject properties for a substantial amount of money.as affirmed by the Court of Appeals . absent any serious abuse or evident lack of basis or capriciousness of any kind.5 million and the conservator’s powers to repudiate contracts entered into by the Bank’s officers] .5 million. Narvasa. Epilogue In summary. Certainly.R. finding no reversible error in the questioned Decision and Resolution. C. vs. conclusions of fact of a trial judge .. deposits and well as employment. through their respective eloquent counsel. This Court cannot just gloss over private respondent’s submission that. We are not unmindful of the tenacious plea that the petitioner Bank is operating abnormally under a government-appointed conservator and “there is need to rehabilitate the Bank in order to get it back on its feet x x x as many people depend on (it) for investments. Moreover. it is equally true that at the time of the transaction in 1987. magnitude and vigor by which the parties.the perfection of the contract of sale and its enforceability.. Jr. DECISION PANGANIBAN. non-impairment of obligations and sanctions against forum-shopping. To rule in favor of the Bank simply because the property in question has algebraically accelerated in price during the long period of litigation is to reward lawlessness and delays in the fulfillment of binding contracts. the Bank’s overdraft with the Central Bank had already reached P1. JJ. and Francisco. as in this case. LAND REGISTRATION AUTHORITY and OO KIAN TIOK. considering that the Bank acquired these properties at a foreclosure sale for no more than P 3. Indeed.are conclusive upon this Court.forum-shopping and the raising of issues for the first time on appeal [viz. the Court hereby DENIES the petition. WHEREFORE. As of June 1987. The assailed Decision is AFFIRMED. No. November 5. which required the determination of questions of fact. the Court cannot emotionally close its eyes to overriding considerations of substantive and procedural law. while the subject properties may currently command a much higher price. because the trial court is in a better position to observe the demeanor of the witnesses and their courtroom manner as well as to examine the real evidence presented. J. for we are only too aware of the depth. (Chairman). 117108. but delved as well into the substantive issues .. Melo. the price agreed upon of P5. 1997] DANIEL C. there are two procedural issues involved . the Court cannot stamp its imprimatur on such outrageous proposition.: May the Register of Deeds refuse to register an application for a notice of lis pendens on the ground that the applicant does not have any title or right of possession over the subject properties? The Case .5 million was reasonable. like respect for perfected contracts. VILLANUEVA.”[53] While we do not deny our sympathy for this distressed bank. the extinguishment of the Bank’s offer of P5. COURT OF APPEALS.ignore such factual findings. the trial court and the appellate court were in common agreement thereon. if only to find out whether there is reason to disturb any of its factual findings. Republic of the Philippines THIRD DIVISION [G. particularly where. respondents. at the same time. argued their positions before this Court. we did so just the same. SO ORDERED. concur. the bank foreclosed the mortgaged properties [and] sold the same to the Equitable Banking Corp. 92-2358. D. Moreover. Rizal... Oo Kian Tiok.[6] The Issues Petitioner assigns the following errors to Respondent Court: [7] "A. interests and participation of said properties to the herein oppositor. the issue is whether petitioner’s application for registration of the notice of lis pendens should be rejected on the ground that it affects a property which does not belong to him personally. SP No. Hence.. by Respondent Court. no Board Resolution has been submitted indicating that said Villanueva has been duly authorized by the former owner to file the notice of lis pendens’. pp. Villanueva is an officer of the owner-corporation. 273873 and 2777938 [sic] were issued in the name of Valiant Realty and Development Corporation and Filipinas Textile Mills." [3] The lis pendens sought to be registered is Civil Case No. Not finding that the petitioner duly raised the affirmative defense of ownership over the properties subject of Civil Case No. 2131. together with his sister Terry Villanueva-Yap. and are not merely asserting possession but also ownership over the subject properties contrary to the conclusion submitted by the Register of Deeds. and the same were mortgaged in favor of Equitable Banking Corp. filed a formal request with the Office of the Register of Deeds to annotate a corresponding Notice of Lis Pendens of Civil Case No. Oo Kian Tiok took possession up to the present time. except for a brief period of time when his possession was interrupted by the herein petitioner [who] together with armed goons. 273873 and 277938 is registrable. While it appears that Mr. Villanueva is merely asserting possession of the property not on the title or right over the property.Petitioner seeks reversal of the Decision[1] of Respondent Court of Appeals[2] promulgated on August 31.R. 273873 and 277938 but the same was denied registration based on the following grounds. Hence. In affirming the resolution of the Respondent Land Registration Authority in Consulta No. as counsel for Respondent Land Registration Authority. the petitioner elevated the matter on consulta [to Respondent Land Registration Authority] pursuant to Section 117 of P. mortgagors did not exercise the right of redemption and as a consequence thereof. on appeal. After the expiration of the redemption period. [and] Daniel Villanueva. the herein petitioner. Susan Villanueva and his brother Frank Villanueva are the lawful owners of the 63% of the beneficial shares of Filipinas Textile Mills. 92-2358.that Mr.. the Lis Pendens in question is not registrable since it seeks to affect property not belonging to the defendant [petitioner herein]. Immediately after acquiring the rights.[4]  The Facts The assailed Decision fairly narrates the facts as follows: [5] “Records show that TCT Nos.” The Solicitor General. 1994 in CA-G. the mortgagee sold all its rights. Inc. 92-2358 against Filipinas Textile Mills. et als. summarizes the issue:[8] “Whether or not the notice of lis pendens requested by petitioner to be annotated in the respective memorandum of encumbrances at the back of TCT Nos. which prompted Oo Kian Tiok to file Civil Case No. which answered the foregoing question in the affirmative: “In view of the foregoing. Not finding that the Respondent Land Registration Authority erred in assuming jurisdiction to determine the issue of ownership over the properties subject of civil case no. Not appreciating petitioner’s compliance with all the requirements set forth under the Land Registration Act and the Rules of Court. to wit: ‘. the latter is no longer the owner thereof but plaintiff Oo Tian [sic] Tiok. Upon failure of the mortgagors to comply with the terms and conditions of the mortgage. 262631. and the action of the Register of Deeds in denying the registration of the same is hereby sustained. B. Filipinas Textile Mills. being one of the defendants of the above-mentioned case. (Resolution. Inc. 262631. but is merely claimed by a corporation. 92-2358 in the respective Memorandum of Encumbrances of TCT Nos. the majority (63%) of which is owned by him and his brothers and sisters. Eden Villanueva. 92-2358 pending before Branch 74 of the Regional Trial Court of Antipolo. . Inc. 1529 on the grounds that the herein petitioner. titles and interests of the bank in said properties.” Stated simply. As a consequence. 1-2)” The consulta was decided against petitioner by Respondent Land Registration Authority and later. C.. 34449.D. as the highest bidder at public auction sale. Inc. this petition for review under Rule 45 of the Rules of Court. [and] without [any] court order swooped down on the properties and disarmed the security guards assigned therein and forcibly removed the 30 workers therefrom. for Recovery of Possession and Damages with Prayers for Writ of Preliminary Mandatory Injunction and/or Temporary Order. 262631. He did not attempt. a stranger. Inc. be deemed to have constructive notice of the pendency of the action. Notice of lis pendens. Respondent Court ruled:[9] “Even if the petitioner were able to comply with all the requirements (referring to the formalities) for the annotation of a notice of lis pendens. that a notice of lis pendens is not registrable if it seeks to affect property not belonging to the defendant. Branch 74. the plaintiff. to inquire into and try to resolve conflicting allegations of the claimants of the aforesaid property. The notice of lis pendens hereinabove mentioned may be cancelled only upon order of the court.[15] this Court enumerated the cases where a notice of lis pendens is proper: . it does not necessarily follow that he would ipso facto be entitled to such annotation. (FTMI). asserts:[12] “Based on the incontrovertible facts. It has been consistently held by public respondent LRA. may record in the office of the registrar of deeds of province in which the property is situated a notice of the pendency of the action. vs. after proper showing that the notice is for the purpose of molesting the adverse party.Respondent Court’s Ruling In dismissing petitioner’s appeal. The Register of Deeds did not attempt to go beyond what clearly appears in the aforementioned Transfer Certificates of Title.” [11] The Solicitor General. an affirmative relief of ownership is prayed for in the answer which sanctions registration of the notice of lis pendens. T. Rule 14 of the Rules of Court:[14] “Sec. and the defendant. containing the names of the parties and the object of the action or defense.he refused to annotate because it clearly appears from the documents submitted (specifically. although it may be conceded that Villanueva is in possession thereof. 273873 and 277938) that the subject parcels of land are registered not in the name of Villanueva but in the name of Valiant Realty and Development Corporation and co-defendant Filipinas Textile Mills. There could be no dispute as to the fact that Filipinas Textile Mills. From the time only of filing such notice for record shall a purchaser. Without such title or interest. of which petitioner is a stockholder. and serves as a warning that one who acquires an interest over said property does so at his own risk. The mere possession of a property does not give rise to the right to annotate. Inc. Villanueva is a third person. on the other hand. and in Consulta No. and a description of the property in that province affected thereby. 92-2358. as in Consulta No.C. before the law. weighed and resolved adversely to the herein petitioner.” The notice of lis pendens is an announcement to the whole world that a particular real property is in litigation. Inc.” The Court’s Ruling The petition is meritorious. Pedro del Rosario. There is need for him to show that he owns the subject property or that he has right or interest vis-à-vis its possession. As far as the said property is concerned. who is one of the defendants in Civil Case No. and only of its pendency against parties designated by their real names. the notice of lis pendens requested by petitioner to be annotated on the back of the aforesaid certificates of title is not registrable. Sole Issue: Registration of Lis Pendens Who May Register Notice of Lis Pendens? Petitioner contends that a notice of lis pendens may be filed in relation to actions “affecting the title to or possession of real property. which owns the properties in question. “repeatedly and emphatically” allege that it is Filipinas Textile Mills. at the time of filing his answer. Thus. two separate and distinct persons. 430. it would appear that his possession is illegal which would not result in vesting in him any right or interest over the above-cited property. 24. defendants in Civil Case No. “which the latter had already considered. among whom is petitioner. because the registration will affect the property obviously not belonging to petitioner. this is exactly what the Register of Deeds of Rizal did . the Register of Deeds of Sorsogon. Inc. The Land Registration Authority in its assailed resolution had aptly pointed out that petitioner Villanueva had not produced a board resolution of Filipinas Textile Mills. authorizing him to take possession of the litigated property. Hence. Nos. or that he gambles on the result of the litigation over said property. Inc. Indubitably Villanueva is not Filipinas Textiles Mills. 92-2358 filed before the Regional Trial Court of Antipolo. at the time of filing the complaint. or incumbrancer of the property affected thereby. Court of Appeals. respondent.” In the instant petition. or at any time afterwards.T. when affirmative relief is claimed in such answer. whence would his right to annotate come from? The petitioner contends that the determination of registrability of a notice of lis pendens is ministerial as far as the Register of Deeds is concerned. petitioner versus the Register of Deeds of Quezon City. petitioner.[10] Private Respondent Oo Kian Tiok counters10 that the errors and arguments raised in the petition at bar are “mere repetitions of those already discussed in [the] petition for review” submitted before Respondent Court.[13] The registration of a notice of lis pendens is governed by Section 24. Inc. 146. On the basis of the evidence on record. or that it is not necessary to protect the rights of the party who caused it to be recorded. (in the name of which the contested parcels of land are registered) and Villanueva are. In an action affecting the title or the right of possession of real property. as the petitioner would imply.” In Magdalena Homeowners Association. 262631. an extrajudicial one. b) An action to quiet title thereto.. it is essential that there be in existence a pending action. the defendants in Civil Case No. or warn. The cancellation of such a precautionary notice is therefore also a mere incident in the action. Francisco wrote:[17] “x x x to all suits or actions which directly affect real property and not only those which involve the question of title. Rep.” To annotate a notice of lis pendens. all people who deal with the property that they so deal with it at their own risk. is an action for “recovery of possession and damages with prayer for writ of preliminary mandatory injunction and/or temporary restraining order. (b) the court must have jurisdiction both over the person and the res. suit or proceeding. Hence. viz.“According to Section 24. title and interest whatsoever” to Equitable Bank as the highest bidder and thence to private respondent as buyer. former Senator Vicente J. [fn: 54 C. 577-578] It is not sufficient that the title or right of possession may be incidentally affected. 92-2358. and may well be inferior and subordinate to those which may finally be determined and laid down therein. and (c) the property or res involved must be sufficiently described in the pleadings. Thus a proceeding to forfeit the charter of a corporation does not deprive it of the power to dispose of its property. the defendants in the civil case directly opposed the recovery of possession prayed for by the plaintiff and in fact challenged the very validity of the title of private respondent. there being in some cases a lis pendens. and may be ordered by the Court having jurisdiction of it at any given time. to be sure. and e) Any other proceedings of any kind in Court directly affecting the title to the land or the use or occupation thereof or the buildings thereon. that real property is involved in an action--is ordinarily recorded without the intervention of the court where the action is pending.19 What private respondent sought to recover was not just possession de facto but possession de jure. in specific real property or to enforce any lien. The notice is but an incident in an action. nor does it place such property within the rule of lis pendens. a notice of lis pendens is proper in the following cases. It is intended merely to constructively advise.e. (b) The defendant -1) at the time of filing his answer (when affirmative relief is claimed in such answer) 2) or at any time afterwards (See Sec. It has also been held to apply in the case of a proceeding to declare an absolute deed a mortgage. Rule 14)” Petitioner is one of the defendants in Civil Case No.at the time of filing the complaint. In explaining the first requirement. which petitioner sought to annotate.[16] Only the first requisite is at issue in this case. Rule 14 of the Rules of Court and Section 76 of Presidential Decree No. The notice of lis pendens--i.. 1529. 583]” Civil Case No.R. 24 Pac. the following may file a notice of lis pendens:22 “(a) The plaintiff -.J. 10 L. or right. 92-2358.A. is it necessary for him to prove to the Register of Deeds that the properties to which he seeks annotation of the notice of lis pendens belong to him as required by Respondent . so that purchasers thereof may lose the property or right to the possession through the appointment of a receiver. Equitable Banking Corporation and Respondent Oo Kian Tiok. c) An action to remove clouds thereon. 92-2358 alleged in their answer that there was fraud committed among Bernardino Villanueva. or to redeem from a foreclosure sale.S. In effect. claim. charge. and there can be no lis pendens because of the fact that an action or suit is contemplated. or to suits for the settlement and adjustment of partnership interests. 84 Cal. interest.” That civil case is an accion publiciana or a plenary action in an ordinary civil proceeding to determine the better and legal right to possess (independently of title).S.20 On the other hand. the second and the third requisites are not.: a) An action to recover possession of real estate. thereby sufficiently satisfying the first requisite and placing the case squarely within the parameters set by Magdalena. 121.21 In our jurisdiction. It does not affect the merits thereof. but also those which are brought to establish an equitable estate. And its continuance or removal--like the continuance or removal of a preliminary attachment or injunction--is not contingent on the existence of a final judgment in the action. [fn: 54 C. although at the commencement of the suit there is no present vested interest. St. Both contentions of the parties thus directly put the properties under the coverage of the rule.J. d) An action for partition. 24.23 Now. such that the real estate mortgage was invalid.. and whatever rights they may acquire in the property in any voluntary action transaction are subject to the results of the action. 18 Am. the following elements must be present: (a) the property must be of such character as to be subject to the rule. or to establish a trust. Superior Court. 327. or encumbrance against it. and ordinarily has no effect on the merits thereof. 192. 627 x x x] In order that the doctrine of lis pendens may apply. so that purchaser of property may be bound by the judgment or decree rendered. [fn: Havemeyer vs. or lien in or on the property which it seeks to charge. the subsequent auction of the mortgaged property transferred “no right. Cainta. 92-2358 insist that fraud attended the agreement among Bernardino Villanueva. and interpretation would be resorted to only where a literal interpretation would be either impossible or absurd or would lead to an injustice.30 In the case at bar. Petitioner in this case was impleaded by private respondent as one of the defendants in the trial court. the material allegations of the complaint would nevertheless prevent or bar recovery by the plaintiff. We cannot find any valid reason why we should add to the requirements set in the Rules. Respondent Court concluded: “it would appear that his possession is illegal which would not result in vesting in him any right or interest over the above-cited properties. the truth being that such compound is owned by defendant FTMI being covered by the titles of the Subject Properties which are registered in the name of defendant FTMI. Even though an affirmative defense contains allegations inconsistent with those of the complaint. the latter must.3.24 We stress that although it is not necessary for the applicant to prove his ownership or interest over the property sought to be affected by lis pendens.Court? We do not believe so. Wary that the properties which were mortgaged and auctioned would be dissipated and/or passed to innocent purchasers for value. if proven true. discharge in bankruptcy. 92-2358. Barangay San Roque. as alleged by private respondent. Rodriguez Avenue. As settled. Such fraud. facts different from those averred by the plaintiff which. real property. because he did not have any right. statute of frauds. His status as a mere stockholder can no longer be questioned in this case. The Rule merely requires an affirmative relief to be claimed in the answer to enable a defendant to apply for the annotation of the notice. The settled doctrine in statutory construction is that legal intent is determined principally from the language of the statute. the truth being that plaintiff has no right. the defendants in Civil Case No. the truth being that the occupation of the compound by said defendants was lawful because they are duly elected and authorized directors. the law is applied according to its express terms. officers and/or representatives of defendant FTMI which is the registered owner thereof. in the complaint or answer filed in the subject litigation.27 There is no requirement that the applying defendant must prove his right or interest over the property sought to be annotated. Equitable Banking Corporation and Respondent Oo Kian Tiok.4. Rodriguez Avenue. assert a claim of possession or title over the subject property in order to give due course to his application. he falls under the definition of the Rules as a party claiming affirmative relief. The compound located on Amang E. situated in Barangay San Roque. which affects the title to. or at least those not necessarily denied by the interposition of the affirmative defense itself. Rizal is owned by plaintiff. Artemio Tuquero. in the absence of denials. On the other hand.”28 This conclusion of Respondent Court was premature.3. thus. It serves merely as a warning to a person who purchases or contracts on the subject property that he does so at his peril and subject to the result of the pending litigation. Cainta. Frankie Villanueva. payment.26 The registration of the notice of lis pendens is done without leave of court.25 Be it remembered that a notation of lis pendens does not create a nonexistent right or lien. Rather. title or interest whatsoever over them. The compound located on Amang E. estoppel. not the legal standing of petitioner to represent the corporation in the said case. Rizal. considering that there was. Terry Villanueva-Yu. specifically deny the following allegations in the original Complaint dated 08 May 1992: xxx xxx xxx 3.4. an affirmative relief or defense is an allegation of a new matter which. lis pendens may be annotated only where there is an action or proceeding in court. Where the language of a statute is clear and unambiguous. In deciding the issue of whether the application by petitioner is registerable. will defeat or bar the claim of said respondent and benefit the defendants. Cainta. Susan Villanueva. Eden Villanueva. title and interest whatsoever in the said properties. former recovery. a reading of the allegations in the answer will readily show that defendants (herein petitioner included) were not merely asserting a right of possession over the disputed properties.31 In any event. expressly or impliedly.1. Dimat and Bienvenido Bulaong. or possession of. insofar as it is alleged that: 3. 3.that is. We emphasize that the issue at bar is the right to annotate the pendency of Civil Case No. as it preempted the trial on the merits of the main case sought to be registered. He correctly acted.1. An affirmative defense admits the facts alleged by the plaintiff. statute of limitations. and . nevertheless be taken as admitted in the defense. for the reasons and facts stated herein and in their Affirmative Allegations and Affirmative Defenses. claiming that plaintiff (herein private respondent) was “not entitled at all to their possession. an intra-corporate controversy which effectively barred a common action by the management of the corporation. Affirmative defenses include fraud.29 An affirmative defense may be an allegation of new matters -. they were insisting on their ownership over the said real estate.4 Paragraph 5.”32 The following allegations in the answer illustrate the claim of petitioner for affirmative relief:33 “Answering Defendants. much less his capacity to sue on the mere pretext that he was not authorized by the corporation to litigate on its behalf. if true. Mel P. petitioner initiated the move to annotate the lis pendens to protect the corporation’s right. xxx xxx xxx 3. while admitting. The law does not require such proof from the defendant. Barangay San Roque. Rizal was being unlawfully occupied by defendants Daniel Villanueva. release. Plaintiff is the lawful owner of three (3) parcels of land together with the properties and improvements that may be found therein. illegality. destroys or negates the plaintiff’s right of action. and other matters alleged by way of confession and avoidance. the applicant must. xxx xxx xxx 3.. to redeem the Subject Properties. in order to favor defendant Bernardino Villanueva.1. thereby defeating the very purpose and rationale of the registration. and 277938 of the Registry of Deeds for the Province of Rizal. 262631. C. Paragraph 15.12. and then sold at public auction auction [sic] in favor of EBC.6 Paragraph 7. No costs. that: 3. on official leave.2.6. Vicente A. Romero. in reality. xxx xxx .3.8 Paragraph 10. 273873 and 277938. JJ. the truth being that since the Subject Properties were never validly mortgaged nor foreclosed. Garcia. with all the buildings. a party questioning the ownership of the registered owner will litigate his or her case without an assurance that the property will be protected from unwanted alienation during the pendency of the action. the truth being that the action taken on 04 April 1992 was a valid exercise by defendant FTMI and/or its authorized representatives of its power of administration over its own properties. 3.00) from EBC. the truth being that the alleged mortgage was never authorized by defendant FTMI’s board of directors and therefore. The Land Registration Authority is hereby ORDERED to annotate the application for a notice of lis pendens in TCT Nos. (Chairman). Register of Deeds of Pasig.1 Defendant FTMI obtained a loan of Twenty Five Million Pesos (P25. concur. insofar as it is stated that defendant FTMI had one (1) year from 01 August 1988. attached as Annex ‘B’ to the Complaint proves that plaintiff Oo Kian Tiok purchased the rights and interests over the titles of defendant FTMI from EBC. in so far as it is made to appear that defendant FTMI is the former-owner of the three (3) lots covered by T.C. the truth being that the loan purportedly obtained by defendant Bernardino Villanueva ostensibly on behalf of defendant FTMI was not duly authorized by defendant FTMI’s board of directors. 262631. 3. machineries and equipment thereon. The action taken on 04 April 1992 is merely an offshoot of an intra-corporate controversy between the owners and stockholders of defendant FTMI. the truth being that plaintiff is conniving and colluding with defendant Bernardino Villanueva in order to wrest ownership and possession of the Subject Properties from its registered owner. improvements.12.2 Defendant FTMI mortgaged the Subject Properties.5 Paragraph 6. not binding upon defendant FTMI.  WHEREFORE. Narvasa.000. In such case. 3. SO ORDERED.4. the truth being that such a Certification merely shows that defendant Bernardino Villanueva connived and colluded with EBC and plaintiff whereby the Subject Properties were illegally mortgaged.12. Melo.” To require that an applicant must prove his ownership or his interest over the property sought to be affected with the notice of lis pendens will unduly restrict the scope of the rule. xxx 3. no period within which to redeem the Subject Properties. to EBC on 14 July 1982. there was. and thereafter allegedly purchased by Oo Kian Tiok through a Redemption Contract. and thus not binding upon defendant FTMI.2. the petition is hereby GRANTED. 273873.J.000. or until 01 August 1989. insofar as it is alleged. and Francisco. Plaintiff is an innocent bystander and is allegedly being helplessly dragged into the controversy. the truth being that defendant FTMI remains as the registered owner of the aforementioned three (3) lots.T. Nos. defendant FTMI. 3. The Certification dated 06 April 1992 of Mr. insofar as it is made to appear that: 3.6.. The assailed Decision is REVERSED and SET ASIDE. 2005] ABACUS REAL ESTATE DEVELOPMENT CENTER. to wit: 1. Manila Bank’s then acting president. and 2. The petition is casts against the following factual backdrop: Respondent Manila Banking Corporation (Manila Bank. seeks to set aside the following issuances of the Court of Appeals in CA-G. was held in abeyance pending the outcome of the earlier suit filed by Manila Bank regarding the legality of its closure. started scouting for possible investors who could finance the completion of the building earlier mentioned. Consequently. petitioner. with MEQCO thereafter subleasing the property to the Laureano group. the bank encountered financial difficulties that rendered it unable to finish construction of the building. Inc. 2003. Renan V. Renan V. ordered the liquidation of Manila Bank and designated Atty. a wholly-owned subsidiary of Manila Bank. Laureano (hereafter referred to as Laureano group). Likewise. Resolution of February 17. . vs. INC. by virtue of Monetary Board (MB) Resolution No. the Central Bank of the Philippines. 1989. represented by Calixto Y. however. the letter-offer stated that in consideration of advancing the construction cost. On November 11. respondent. DECISION GARCIA. however.: Thru this appeal by way of a petition for review on certiorari under Rule 45 of the Rules of Court. petitioner Abacus Real Estate Development Center.Republic of the Philippines THIRD DIVISION [G. Makati City and covered by Transfer Certificate of Title (TCT) No.[2] denying petitioner’s motion for reconsideration. 505. On August 18. the designation of Atty. ordered the closure of Manila Bank and placed it under receivership. Branch 59. THE MANILA BANKING CORPORATION. now Bangko Sentral ng Pilipinas. Santos as Liquidator was amended by the Central Bank on December 22. wrote Vicente G.435-square meter parcel of land located along Gil Puyat Avenue Extension. 162270. Santos as Liquidator. the group wanted to be given the “exclusive option to purchase” the building and the lot on which it was constructed. in an action for specific performance and damages thereat commenced by the petitioner against the herein respondent Manila Banking Corporation. for brevity). 1987. Jr. Decision dated May 26..R. 1988. In the interim. CV No.[1] reversing an earlier decision of the Regional Trial Court at Makati City. 1988 to that of Statutory Receiver. being initially appointed as Receiver. 2004. Not long after. with the advanced cost to be amortized and offset against rental payments during the term of the lease. owns a 1. Puyat offering to lease the building for ten (10) years and to advance the cost to complete the same. No. 132935 of the Registry of Deeds of Makati. an arrangement was thought of whereby the property would first be leased to Manila Equities Corporation (MEQCO. the Central Bank. The liquidation. On May 22. 64877. the bank began constructing on said land a 14-storey building. Since no disposition of assets could be made due to the litigation concerning Manila Bank’s closure. Puyat. the late Vicente G. The legality of the closure was contested by the bank before the proper court. a group of investors. with Feliciano Miranda. Prior to 1984. in a bid to save the bank’s investment.R. April 06. J. for brevity). Ordering the DISMISSAL of defendant’s counterclaim. the Court of Appeals. 96-1638 and raffled to Branch 59 of the court. or on October 31. Abacus would later join Manila Bank in submitting the case for summary judgment.[4] the trial court rendered judgment for Abacus in accordance with the latter’s prayer in its complaint. in a decision dated May 26. 4. Bitanga would later allege that because of the substantial amount involved. Manila Bank refused to honor the same. 64877. Abacus sent a letter to Manila Bank informing the latter of its desire to exercise its “exclusive option to purchase”. in a decision dated May 27.500. On March 30. Such was the state of things when. transfer and convey unto it for P150. the trial court granted the motion to dismiss filed by the Estate of Vicente G. in Makati City. unable to finish the building due to the economic crisis brought about by the failed December 1989 coup attempt. Puyat Ave. plus payment of damages and attorney’s fees.000. situated along Sen. Puyat accepted the Laureano group’s offer and granted it an “exclusive option to purchase” the lot and building for One Hundred Fifty Million Pesos (P150.00). and With costs against the defendant. . inter alia. followed a month later by its co-defendant Estate of Vicente G. Before plaintiff Abacus could adduce evidence but after pre-trial. followed by a Supplement to Motion for Partial Summary Judgment.000. a corporation formed by the Laureano group for the purpose. judgment is hereby rendered in favor of the plaintiff as follows: 1. plaintiff Abacus prayed for a judgment ordering Manila Bank. Abacus Real Estate Development Center. MEQCO subleased the property to petitioner Abacus Real Estate Development Center. filed separate motions to dismiss the complaint. thus: WHEREFORE. 1999. he first had to talk with Atty. the Laureano group transferred and assigned to Bitanga all of its rights in Abacus and the “exclusive option to purchase” the subject land and building. SO ORDERED. Puyat. SO ORDERED. Branch 59 is REVERSED and SET ASIDE. docketed as Civil Case No. at the price of One Hundred Fifty Million (P150.000. Cost of the appeal to be paid by the appellee. in the Regional Trial Court (RTC) at Makati. On March 1. Puyat. the Laureano group offered its rights in Abacus and its “exclusive option to purchase” to Benjamin Bitanga (Bitanga hereinafter).00) Pesos in accordance with the said exclusive option to purchase.000. however. Bitanga further alleged that.000. 1999. under identical provisions as that of the October 31.000. The Decision dated May 27. 2003. 2.[6] reversed and set aside the appealed decision of the trial court. filed a complaint[3] for specific performance and damages against Manila Bank and/or the Estate of Vicente G. Renan Santos.00). Atty. 1996. In its complaint. (Abacus. the building was leased to MEQCO for a period of ten (10) years pursuant to a contract of lease bearing that date. On account thereof. for Twenty Million Five Hundred Thousand Pesos (P20. 1995. 3. to sell.R. the Receiver appointed by the Central Bank. Ordering the defendant [Manila Bank] to immediately sell to plaintiff the parcel of land and building. over lunch.435 square meters and covered by TCT No. Its motion for reconsideration of the aforementioned decision having been denied by the trial court in its Order of August 17. On September 16. Eventually. the appeal is GRANTED.000. Subsequently. Ordering the defendant [Manila Bank] to pay plaintiff the amount of Two Million (P2. for short).000. 1990. but denied that of Manila Bank and directed the latter to file its answer. Later. premises considered. 1989. As stated at the threshold hereof. 132935 of the Makati Registry of Deeds. Santos then verbally approved his entry into Abacus and his take-over of the sublease and option to purchase.In a letter dated August 30. thus: WHEREFORE.00) Pesos representing reasonable attorney’s fees. defendant Manila Bank. and to execute the appropriate deed of sale therefor in favor of plaintiff. CV No. In an Order dated April 15. 1999 of the Regional Trial Court of Makati City. 1989 lease contract between Manila Bank and MEQCO. While initially opposed. The Laureano group was. finding serious reversible error.00 the land and building in dispute “free from all liens and encumbrances”. Puyat. However. Vicente G. with an area of 1.000. 1994. defendant Manila Bank filed a Motion for Partial Summary Judgment.[5] Manila Bank then went on to the Court of Appeals whereat its appellate recourse was docketed as CA-G. Gil J. Inc. on November 10. 1990. to discuss Abacus’ offer. Inc. 1989. for lack of merit. Having sent a copy of its Motion for Reconsideration to the trial court with still two (2) days left to appeal. Luy based his data only on page 3 of the 1995 Civil Case Docket Book without reference to the original records which were already with the Court of Appeals. “the period of appeal shall be interrupted by a timely motion for new trial or reconsideration”. Abacus filed a Motion to Dismiss Appeal. 1999. Under Section 3. The aforecited reference in the manifestation to the mailing of the motion for reconsideration on July 6. so much so that when it received on August 23. as claimed by the appellant. Although the appellee argues that the handwritten annotations of what were contained by the envelopes at the time of mailing was easily self-serving. 1999. was within the reglementary period. with leave of court. 1999 RTC decision on June 22. the certification issued on October 2. namely: WHETHER OR NOT RESPONDENT BANK’S APPEAL TO THE COURT OF APPEALS WAS FILED ON TIME. As respondent bank appealed the decision of the trial court only on August 25. 1999 (“7/6/99”). by an Amended Motion for Reconsideration. Hence. the fact remains that the envelope addressed to the appellee’s counsel appears thereon to have been received on July 6. 1999. petitioner submits that respondent bank’s appeal to the Court of Appeals from the adverse decision of the trial court was belatedly filed. 1633 Makati P. denying petitioner’s motion for reconsideration: Firstly. respondent filed its Motion for Reconsideration on the last day of the period to appeal. As we see it. due to lack of material time and messenger to effect personal service and filing. Inc. two (2) days after receiving the Order of the trial court denying its Motion for Reconsideration. Fourthly. which enhances the probability of the motion for reconsideration being mailed. as well as the entry of appearance. 2003. and WHETHER OR NOT PETITIONER ABACUS HAS ACQUIRED THE RIGHT TO PURCHASE THE LOT AND BUILDING IN QUESTION. indicate that the contents were the motion for reconsideration and the formal entry of appearance. Branch 59. Explained that court in its Resolution of February 17. . respondent then claims that its filing of an appeal on August 25. and served a copy thereof to the plaintiff. the file copy of the motion for reconsideration contains the written annotations “Registry Receipt No. it had until August 25. As a counterpoint. hence filed. Defendant [Manila Bank] also filed with this Honorable Court a Motion for Reconsideration of the Decision dated 27 May 1999 promulgated by this Honorable Court in this case. according to petitioner. in light of the handwritten annotations adverted to herein. on July 6. petitioner thus argues that respondent’s appeal was filed out of time. has no consequence because Atty. Abacus filed a Motion for Reconsideration. respondent bank had only up to August 24. as amended. through registered mail. Elaborating thereon. 1999. Petitioner alleges that respondent furnished the trial court with a copy of its Motion for Reconsideration only on July 7. to wit: 2. Fifthly. Thirdly. 1999. Agreeing with respondent. hence. followed. 1999. 1999. 2004. 1633. found in pages 728 and 729 of the rollo. the appellate court declared that respondent’s appeal was filed on time. this recourse by petitioner Abacus Real Estate Development Center. In its Resolution of February 17. renders beyond doubt the appellant’s insistence of filing through registered mail on July 6. 2004. Jayme M. petitioner alleges that respondent bank received a copy of the May 27. by personal service. the last day for filing an appeal. 1999. 7-6-99” in its page 13. two (2) issues commend themselves for the resolution of the Court. [7] therein praying for the dismissal of Manila Bank’s appeal from the RTC decision of May 27. Branch Clerk of Court. RTC in Makati City. 1999. Rule 41 of the 1997 Rules of Civil Procedure. Secondly. 1999. it only had one (1) more day within which to file an appeal.[8] the appellate court denied Abacus’ aforementioned motion for reconsideration. by registered mail yesterday. 3.On June 25. In order for this Honorable Court to be able to review defendant [Manila Bank’s] Motion for Reconsideration without awaiting the mailed copy. Since. 1999 within which to perfect its appeal from the decision of the RTC because 2 days remained in its reglementary period to appeal. 1999 a copy of the trial court’s order denying its Motion for Reconsideration. respondent alleges that it sent the trial court a copy of its Motion for Reconsideration on July 6. since the appellant received the denial of the motion for reconsideration on August 23. It is not disputed that the appellant filed its notice of appeal and paid the appellate court docket fees on August 25. or only up to July 7. 1999 within which to file the corresponding appeal. Luy. contending that said appeal was filed out of time.O. The presence of the annotations proves that the motion for reconsideration was truly filed by registered mail on July 6. 2003 by Atty. 1999 within which to take an appeal from the same decision or move for a reconsideration thereof. Pending resolution of its motion for reconsideration. 1999. the registry return cards attached to the envelopes separately addressed and mailed to the RTC and the appellee’s counsel. defendant [Manila Bank] is now furnishing this Honorable Court with a copy of said motion. 1999 contains the following self-explanatory statements. 1999 through registry receipt no. We rule for respondent Manila Bank on both issues. petitioner had 15 days. 6 July 1999. Addressing the first issue. the appellant’s manifestation filed in the RTC personally on July 7. With respondent bank having been already placed under receivership. It is evident that the issue raised by petitioner relates to the correctness of the factual finding of the Court of Appeals as to the precise date when respondent filed its motion for reconsideration before the trial court. to bind the bank under such exclusive option. Puyat.[10] save for the most compelling and cogent reasons. and in this respect. Granting or approving an “exclusive option to purchase” is not an act of administration. a contract unenforceable for lack of authority by one of the parties may be ratified by the person in whose name the contract was executed. such authority being reposed in the receiver. was himself bereft of any authority. is beyond the province of this Court to review. who. Owing to this defining reality. It is not the function of the Court to analyze or weigh all over again the evidence or premises supportive of such factual determination. Section 30 of the New Central Bank Act[15] expressly provides that “[t]he receiver shall immediately gather and take charge of all the assets and liabilities of the institution. Congress itself has recognized that a bank receiver only has powers of administration. 1999 through registered mail.[9] The Court has consistently held that the findings of the Court of Appeals and other lower courts are. it shall be the duty of the department head concerned forthwith. pursuant to Central Bank’s MB Resolution No. must be affirmed. then acting president of Manila Bank. that if it were true that respondent filed its Motion for Reconsideration by registered mail and then furnished the trial court with a copy of said Motion the very next day. it shall be disclosed that the condition of the same is one of insolvency. Puyat. Section 29 of the Central Bank Act. Going to the second issue. in writing. petitioner insists that the option to purchase the lot and building in question granted to it by the late Vicente G. however. supported as it is by substantial evidence. involving. upon finding the statements of the department head to be true. (Emphasis in the original) Petitioner would. the appellate court was correct in declaring that Vicente G. at the time the late Vicente G. Renan Santos. then the rollo should have had two copies of the Motion for Reconsideration in question. but not limited to. Respondent. with the exception of administrative expenditures. respondent bank’s receiver was without any power to approve or ratify the “exclusive option to purchase” granted by the late Vicente G.These circumstances preponderantly demonstrate that the appellant’s appeal was not late by one day. the so-called “approval” by Atty. as it does. the factual conclusion of the appellate court that respondent filed its appeal on time. approved the “exclusive option to purchase” granted by Vicente G. Renan Santos. was binding upon the latter. in the first place.[14] pertinently provides: Sec. Puyat was and still is unenforceable against Manila Bank. and the Board may. a bank receiver not being authorized to do so on his own. the appointment of a receiver operates to suspend the authority of the bank and of its directors and officers over its property and effects. Not being an act of administration. 505 dated May 22. however. Atty. stating. On the other hand. The invocation by the appellate court of the following pronouncement in Villanueva vs. as a rule. even assuming. the latter having been placed under receivership by the Central Bank at the time of the granting of the “exclusive option to purchase.[11] As nothing in the record indicates any of such exceptions. Petitioner’s argument is tenuous at best. to inform the Monetary Board of the facts. accorded great weight. administer the same for the benefit of its creditors. its officers.[13] Petitioner. forbid the institution to do business in the Philippines and shall designate an official of the Central Bank as receiver to immediately take charge of its assets and liabilities. as amended. Puyat. 29. or that its continuance in business would involve probable loss to its depositors or creditors. Vicente G. upon examination by the head of the appropriate supervising and examining department or his examiners or agents into the condition of any banking institution. however. bringing suits and foreclosing mortgages in the name of the banking institution. Proceedings upon insolvency. but an act of strict ownership. pay or commit any act that will involve the transfer or disposition of any asset of the institution…” In all. Concededly. Such issue. the “exclusive option to purchase” granted by Vicente G. Respondent Manila Bank may not thus be compelled to sell the land and building in question to petitioner Abacus . Clearly then. the same would still be of no force and effect. However. Puyat was without authority to grant the exclusive option to purchase the lot and building in question. the receivership is equivalent to an injunction to restrain the bank officers from intermeddling with the property of the bank in any way. among other things. if not binding upon it. during a lunch meeting held with Benjamin Bitanga in March 1990. Court of Appeals[12] was apropos. 1987. Thus. that Atty. Renan Santos amounts to no approval at all. to say the least: … 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. inclusive of its acting president. insists that it indeed filed a Motion for Reconsideration on July 6. asseverates that the “exclusive option to purchase” was ratified by Manila Bank’s receiver. contest the above findings of the appellate court. exercising all the powers necessary for these purposes including. – Whenever.” There can be no quibbling that respondent Manila Bank was under receivership. as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors. the disposition of property of the bank. Manila Bank’s receiver. Puyat granted the “exclusive option to purchase” to the Laureano group of investors. and exercise the general powers of a receiver under the Revised Rules of Court but shall not. the receiver appointed by the Central Bank to take charge of the properties of Manila Bank only had authority to administer the same for the benefit of its creditors. were no longer authorized to transact business in connection with the bank’s assets and property. in gratia argumenti. For sure. (Emphasis supplied) Clearly. Puyat had no authority to act for and represent Manila Bank. on the other hand. Puyat. respondent has consistently maintained that the late Vicente G. : . petitioner. Republic of the Philippines FIRST DIVISION [G.R. COURT OF APPEALS (Special Twelfth Division) and PAIC SAVINGS AND MORTGAGE BANK. the instant petition is DENIED and the challenged issuances of the Court of Appeals AFFIRMED. October 8. WHEREFORE. MANALO. No. DECISION PUNO. J. 141297. vs. 2001] DOMINGO R. Costs against petitioner.under the terms of the latter’s “exclusive option to purchase”. SO ORDERED. respondents. respondent petitioned the Regional Trial Court. involving 450 square meters. While this was awaiting resolution. S. 6076 of the Registry of Deeds of Pasay City. 1983. or the statutory period extended by law to a mortgagor to exercise his/her right of redemption. Branch 112. The respondent then caused the annotation of the corresponding Sheriff’s Certificate of Sale[3] on the title of the land on December 4. represented by its liquidator. One of the lots. S. During the pendency of Civil Case No. Pasay City. 1994.[13] The writ was subsequently issued on April 24.[16] It bears mentioning. (a) The lease is for a period of ten year lease (sic). Petitioner then sought relief with the Court of Appeals. the appellate court upheld the assailed judgment and declared the said mortgage and foreclosure proceedings to be in accord with law.”[2] S. filed their opposition thereto. for the issuance of a writ of possession for the subject property in Civil Case No. by said LESSEE be surrendered in favor of the LESSOR (sic). Pertinent provisions of the lease agreement[10] state: “3. on June 22.[12] On April 21. the Central Bank of the Philippines filed a Petition[4] for assistance in the liquidation of the respondent with the Regional Trial Court. title was consolidated in respondent’s name for failure of Vargas to redeem. still representing herself to be the lawful owner of the property. SP. 1998. On appeal. Manalo on August 25. This is in view of the consolidation of its ownership over the same as mentioned earlier. respectively. the pertinent portion of which reads:[14] “NOW THEREFORE you are hereby commanded that you cause oppositors THERESE VILLANUEVA VARGAS and S. Vargas filed a case for annulment of mortgage and extra-judicial foreclosure sale before Branch 116 of the Pasay City Regional Trial Court. 9011 dated December 9.m. 1984.000. located in Pasay City with an area of nine hundred nineteen square meters (919 sq. 1998. After the lapse of one year. After which. 9011. the court a quo denied the Motion to Quash and Motion to Intervene filed respectively by Vargas and petitioner. On July 22. over the . obtained a loan of three million pesos (P3. and any and all persons claiming rights or title under them. 1993. On October 29. you are hereby further ordered to take possession and deliver to the petitioner PAIC SAVINGS AND MORTGAGE BANK the subject parcel of land and improvements. the court rendered a decision[6] dismissing the complaint and upholding the validity of the mortgage and foreclosure sale. On October 4. The petition was given due course in an Order[5] dated May 19. The negotiations.00) and one million pesos (P1. which affirmed an Order issued by the Regional Trial Court. on December 23. 50341 promulgated December 23.R. x x x (d) The LESSEE has to introduce into the said 450 square meter premises improvements thereon (sic) consisting of one story building to house a Karaoke Music Restaurant Business. 1998. INC. 9011 (for the issuance of a writ of possession). 6076. assigned his rights therein to petitioner.[8] In the meantime.) and covered by TCT No. 1998. represented by its president. however.” Shortly. docketed as Civil Case No. 1987.000. the court a quo granted the petition for the issuance of the Writ of Possession.00) from the respondent PAIC Savings and Mortgage Bank and the Philippine American Investments Corporation (PAIC). is the subject of the present case. Inc. 1984. To secure payment of both debts. Vargas executed in favor of the respondent and PAIC a Joint First Mortgage[1] over two parcels of land registered under her name. in Civil Case No.A. he had separately instituted a Complaint for Mandamus.[15] Thereafter on June 25. 1998. Notwithstanding this sale.000. 1986. Despite repeated demands from the respondent. petitioner. No.”[11] Later. 1991. Vargas. Therese Villanueva Vargas. to forthwith vacate and surrender the possession of subject premises in question known as that parcel of land and improvements covered by TCT No.-G. as buyer of the property. after tendering the highest bid. of Pasay City. he entered into another lease agreement. fizzled out as Vargas cannot afford the repurchase price fixed by the respondent based on the appraised value of the land at that time.[19] this time with the respondent. Villanueva Enterprises defaulted in paying the amortizations due. on the strength of the lease contract and Deed of Assignment made in his favor. herein court a quo. trial ensued. Vargas. Villanueva Enterprises. On October 7. were similarly denied on December 9. transferring.[7] This decision of the Court of Appeals subsequently became final and executory when we summarily dismissed Vargas’s Petition for Review on Certiorari for having been filed beyond the reglementary period. on June 29. Accordingly. upon the termination of the lease contract. Villanueva Enterprises and Vargas moved for its quashal. It appears that from the years 1986 to 1991. submitted a Permission to File an Ex-parte Motion to Intervene. 1998. 1997. the Central Bank) for the repurchase of the foreclosed property. the Pasay City property was sold at a public auction to the respondent itself. Villanueva Enterprises. 1999. On July 19. however. 1992. it failed to settle its loan obligation. Section 2 of the mortgage contract states that “the properties mortgaged therein shall include all buildings and improvements existing on the mortgaged property at the time of the execution of the mortgage contract and thereafter. 1998. filing therein a Petition for Certiorari. Branch 112. on May 8. leased the same to petitioner Domingo R. respondent instituted extrajudicial foreclosure proceedings over the mortgaged lots. 1992. executed a Deed of Absolute Sale[9] selling. that before petitioner sought intervention in the present case. which improvements constructed therof (sic). VILLANUEVA ENTERPRISES. Vargas negotiated with the respondent (through its then liquidator. 98-0868 before another branch[17] of the Pasay City RTC to compel PAIC Bank to allow him to repurchase the subject property. Armando Angsico.This petition for certiorari seeks the review of the Decision of the Court of Appeals in C. a portion of the above 919 square meter property.000. however. Vargas and S.[18] A Motion for Reconsideration and a Supplemental Motion for Reconsideration were filed by the petitioner which. and conveying ownership of the disputed lot in favor of a certain Armando Angsico. On August 22. Whether or not the public respondent committed grave abuse of discretion and/or was patently in error in affirming the ruling of the trial court. The power to hear the same. Whether or not the petitioner is estopped from questioning private respondent’s ownership when it entered into a contract of lease involving the property in question.”[20] Hence. the Petition for Certiorari and Prohibition is hereby DISMISSED and the assailed December 9. he accuses. the respondent. 265. I. It does not cover the reverse situation where it is the bank which files a claim against another person or legal entity.[23] where we held that “if there is a judicial liquidation of an insolvent bank.m. totally disregarding the arguments raised in petitioner’s supplemental motion for reconsideration only through a minute order and without taking into consideration the fact that there is a pending action in another court (RTC. only one court. subject of the instant Petition for Certiorari and Prohibition. SO ORDERED. file a petition in the Regional Trial Court reciting the proceedings which have been taken and praying the assistance of the court in the liquidation of such institution. otherwise known as The Central Bank Act. IV. as amended. all claims against the bank should be filed in the liquidation proceeding. The pertinent portion of Section 29 states: “x x x The liquidator designated as hereunder provided shall. portion of the lot. The legal provision only finds operation in cases where there are claims against an insolvent bank. III. Petitioner postulates that the lower court should have dismissed respondent’s “Ex-Parte Petition for Issuance of Writ of Possession” in Civil Case No. 1999. dismissing the petition. respondent PAIC Bank. The contract fixed a period of one month beginning January 28. The requirement that all claims against the bank be pursued in the liquidation proceedings filed by the Central Bank is intended to prevent multiplicity of actions against the insolvent bank and designed to establish due process and orderliness in the liquidation of the bank. It was filed upon the instance of the respondent’s liquidator in order to take possession of a tract of land over which it has ownership claims. thus: “All told. In fine. by the Solicitor General. 1998 Order is AFFIRMED in all respects. Pro. . Pasay City.”[21] We will first resolve the jurisdictional and procedural questions raised by the petitioner. the appellate court rendered the impugned Decision. he insists.[25] The lawmaking body contemplated that for convenience. Branch 231) which presents a prejudicial question to the case at bar. 9011 is not in the nature of a disputed claim against the bank. being a lessee and an assignee of the property subject matter of this case. These contentions can not pass judicial muster. Whether or not public respondent acted without or in excess of its jurisdiction and/or was patently in error when it affirmed the denial of petitioner’s motion for intervention. Republic Act No.) Petitioner apparently failed to appreciate the correct meaning and import of the above-quoted law. The court shall have jurisdiction in the same proceedings to assist in the adjudication of disputed claims against the bank or non-bank financial intermediary performing quasi-banking functions and the enforcement of individual liabilites of the stockholders and do all that is necessary to preserve the assets of such institution and to implement the liquidation plan approved by the Monetary Board. Court of Appeals. exclusively vests with the Liquidation Court pursuant to Section 29 of Republic Act No. to obviate the proliferation of litigations and to avoid injustice and arbitrariness. is guilty of forum shopping. No.same 450 sq.” For going to another court.[26] It then ought to follow that petitioner’s reliance on Section 29 and the Valenzuela case is misplaced. x x x”[24] (emphasis supplied. M-1280) which is exclusively vested with jurisdiction to hear all matters and incidents on liquidation pursuant to Section 29. II. in issuing its questioned Order. On December 23. it is an action instituted by the respondent bank itself for the preservation of its asset and protection of its property. WHEREFORE. P-9011 for want of jurisdiction over the subject matter of the claim. docketed as Spec. Branch 57. otherwise known as The Central Bank Act. 1999. renewable for another month at the exclusive option of the lessor. where petitioner raises and argues the following legal issues: “I. if possible. Whether or not the public respondent committed grave abuse of discretion when it held that what are required to be instituted before the liquidation court are those claims against the insolvent banks only considering that the private respondent bank is legally dead due to insolvency and considering further that there is already a liquidation court (Regional Trial Court of Makati. 265. WE find the Order. committed no grave abuse of discretion amounting to lack of jurisdiction. This interpretation of Section 29 becomes more obvious in the light of its intent. this appeal. to be not without rational bases and we observe that the court a quo. On the contrary. the exclusive jurisdiction of the liquidation court pertains only to the adjudication of claims against the bank. despite the fact that he has a legal interest. The Petition for the Issuance of a Writ of Possession in Civil Case No. should pass upon the claims against the insolvent bank and that the liquidation court should assist the Superintendents of Banks and regulate his operations.[22] He then cites our decision in Valenzuela v. assuming both are pending. 98-0868 and the present one are both civil in nature and therefore no prejudicial question can arise from the existence of the two actions. the execution of a judgment adverse to his interests. we now come to the merits of the case.[36] it is apparent that the former action was instituted merely to frustrate the Court’s ruling in the case at bar granting the respondent the right to possess the subject property. furnishing bond in an amount equivalent to the use of the property for a period of twelve months. suffice it to state here that the doctrine only ponders situations where two (or more) cases are pending before different tribunals.To be sure. 1998. he automatically acquires interest over the subject matter of the litigation. 98-0868 in Branch 231 of Pasay City RTC. sixteen days after the lower court granted respondent’s petition and thirteen days after it issued the writ. is entitled to a writ of possession after the statutory period for redemption has expired. In such situation. then this will necessarily negate the possessory writ issued by the court a quo. banks in liquidation would lose what justly belongs to them through a mere technicality. being under liquidation. to the exclusion of other courts. we are not persuaded. Having disposed of the jurisdictional and procedural issues. The argument is devoid of merit. to give him possession thereof during the redemption period.[30] Inasmuch as the case at bar is the only one filed by the respondent for the issuance of a writ of possession over the subject property. Act 3135. II. as the purchaser in the extra-judicial foreclosure proceedings. x x x”[28] (emphasis supplied) Since the land subject of this controversy is located in Pasay City. The rationale behind the principle of prejudicial question is to avoid two conflicting decisions. then the city’s RTC should rightly take cognizance of the case. if not prevent. He argues that the primary issue therein constitutes a prejudicial question in relation to the present case in that if the Court therein will grant petitioner’s prayer. respectively. no suit for or against an insolvent entity would prosper. while that in the latter is merely whether the respondent. city.[27] entitled An Act to Regulate the Sale of Property Under Special Powers Inserted In or Annexed To Real Estate Mortgages. can proceed separately and take their own direction independent of each other. Petitioner next casts doubt on the capacity of the respondent to continue litigating the petition for the issuance of the writ. or municipality where the property subject thereof is situated. respondent bank is already a “dead” corporation that cannot maintain the suit in the RTC. The two cases.[29] Well to point.[32] That the law allows a bank under liquidation to participate in an action can be clearly inferred from the third paragraph of the same Section 29 of The Central Bank Act earlier quoted. He asserts that. thus: “Section 7. 98-0868 must be considered determinative of Case No. may be compelled to have the property repurchased or resold to a mortgagor’s successor-in-interest (petitioner). This interest is coupled . The basic issue in the former is whether the respondent. mandates that jurisdiction over a Petition for Writ of Possession lies with the court of the province. It cannot then possibly prejudice a decided case. we have laid down the yardstick to determine whether a party violated the rule against forum shopping as where the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in the other.[34] It generally comes into play in a situation where a civil action and a criminal action are both pending and there exists in the former an issue which must be preemptively resolved before the criminal action may proceed. the purchaser may petition the Court of First Instance of the province or place where the property or any part thereof is situated. It is but a canny and preemptive maneuver on the part of the petitioner to delay. At any rate.) It is therefore beyond dispute that respondent was legally capacitated to petition the court a quo for the issuance of the writ. Hence. which authorizes or empowers a liquidator to institute actions. to indemnify the debtor in case it be shown that the sale was made without violating the mortgage or without complying with the requirements of this Act. In any sale made under the provisions of this Act. Anent petitioner’s auxiliary contention that respondent should be held guilty of forum shopping for not filing the case in the liquidation court. A bank which had been ordered closed by the monetary board retains its juridical personality which can sue and be sued through its liquidator. because howsoever the issue raised in the civil action is resolved would be determinative juris et de jure of the guilt or innocence of the accused in the criminal case. Again. Petitioner seeks intervention in this case by virtue of the lease agreement and the deed of assignment executed in his favor by the mortgagor (Vargas) and an alleged buyer (Angsico) of the land.[31] Otherwise. there is no occasion for the doctrine to apply. as the purchaser in the extra-judicial foreclosure proceedings.”[33] (emphasis supplied. He posits that as a lessee and assignee in possession of the foreclosed real estate. and the cognizance of which pertains to another tribunal.[35] Here. no writ may be issued in its favor. Petitioner likewise proffers one other procedural obstacle. it taxes our imagination why the questions raised in Case No. which is the pendency of Civil Case No. institute such actions as may be necessary in the appropriate court to collect and recover accounts and assests of such institution or defend any action filed against the institution. the liquidator took the proper course of action when it applied for a writ in the Pasay City RTC. thus: “x x x and he (liquidator) may in the name of the bank or non-bank financial intermediary performing quasi-banking functions and with the assistance of counsel as he may retain. It bears stressing that the complaint for mandamus was filed only on May 7. 9011. A prejudicial question is one which arises in a case the resolution of which is a logical antecedent of the issue involved therein. The only limitation being that the prosecution or defense of the action must be done through the liquidator. This is sanctioned by Section 7 of the said Act. The said action is the complaint he filed against the respondent for the latter to receive and accept the redemption price of eighteen million pesos for the subject property. aside from the fact that Civil Case No. Rule 19 of the 1997 Rules of Civil Procedure requires: “Section 2. The court shall consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties. While it is true that on May 8. should not be allowed to do so. the tribunal should not limit itself to inquiring whether “a person (1) has a legal interest in the matter in litigation. it will not be warranted anymore.000. 1998. Enforcing the writ.000. (2) or in the success of either of the parties. Section 2. he adds. becomes a litigant therein to enable him to protect or preserve a right or interest which may be affected by such proceeding.[43] Taking into account these fundamental precepts. 1985. .”[41] Just as important.[44] Its issuance to a purchaser in an extra-judicial foreclosure is merely a ministerial function. the allowance or disallowance of a motion to intervene is addressed to the sound discretion of the court. x x x” After the lapse of this period. Rule 19 of the 1997 Rules of Civil Procedure. not originally impleaded in the proceeding. with leave of court.”[38] Intervention is not a matter of right but may be permitted by the courts only when the statutory conditions for the right to intervene is shown. Rule 19. Vargas and S. she loses all her interests over it. the latter has already been stripped of all her rights over the land when she. the lower court had already granted respondent’s petition for the writ in an Order dated April 21.[48] Even if he anchors his intervention on the purported interest he has over the land and the improvements thereon. She could not have lawfully sold the land to Angsico nor leased it to petitioner for her own account. whether judicially or extrajudicially. we have. for failure of the mortgagor to redeem. It is axiomatic that one can not transmit what one does not have. it must meet the consequence of denial. Villanueva Enterprises moved to quash the writ. and whether or not the intervenor’s rights may be fully protected in a separate proceeding. intervention is not an independent action but is ancillary and supplemental to an existing litigation.[46] If only to stress the writ’s ministerial character. Time to intervene. the mortgagor or debtor whose real property has been sold at public auction. for the simple reason that as early as December 4. thus: “Section 1. basically.[45] As such. furthermore. as mortgagor.[49] After that period. In the first place. This is because. or an interest against both. too late.[50] viz. judicially or extrajudicially. allegedly to the tune of fifteen million pesos (P15. Court of Appeals. or in the success of either of the parties. or is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof may.with the fact that he introduced improvements thereon. (4) or when is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof.[39] Thus.[47] just as we have held that issuance of the same may not be stayed by a pending action for annulment of mortgage or the foreclosure itself. 1998. Petitioner cannot validly predicate his supposed interest over the property in litigation on that of Vargas.A person who has a legal interest in the matter in litigation.[40] In determining the propriety of letting a party intervene in a case. and whether or not the intervenor’s rights may be fully protected in a separate proceeding. of any mortgage on real estate which is security for any loan granted before the passage of this Act or the provisions of this Act.[52] It ought to follow that petitioner could not have acquired any right or interest from Vargas.[37] The pertinent provision is stated in Section 1. petitioner. Intervention is a remedy by which a third party. for the full or partial payment of an obligation to any bank. petitioner’s Ex-parte Permission to File a Motion to Intervene was submitted to the RTC only on June 25.[42] is the function to consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties. For that reason alone. having been filed only at the execution stage.00).: “x x x In the event of foreclosure.The motion to intervene may be filed at any time before the rendition of judgment by the trial court. to redeem the property by paying the amount fixed by the court in the order or execution x x x. consisting of a one-storey building which houses a karaoke-music restaurant. still. Allowing petitioner to intervene. (3) or an interest against both. that did not in any way affect the nature of the RTC’s Order as an adjudication on the merits. Vargas can not legitimately convey any to some other person. The period within which a person may intervene is also restricted. 1998. we rule that the petitioner may not properly intervene in the case at bar. He admits that he is a mere lessee and assignee. will serve no other purpose but to unduly delay the execution of the writ. as we have stated in Big Country Ranch Corporation v. Therein lies the precariousness of his title. At that stage. in previous cases. banking or credit institution. Who may intervene. . from whom he leased the lot. Whatever possessory rights he holds only emanate from that of Vargas. It had issued the Writ of Possession on April 24. disallowed injunction to prohibit its issuance. Petitioner’s motion then was clearly out of time. without hearing his side would be an injustice to him. A mortgagor has only one year within which to redeem her foreclosed real estate.) Being herself bereft of valid title and rights.”[51] (emphasis supplied. and from whom his assignor/predecessor-in-interest bought it. within one year after the sale of the real estate mortgage as a result of the foreclosure of the respective mortgage. . 1998. This cannot be countenanced considering that after the consolidation of title in the buyer’s name. the writ of possession becomes a matter of right. This is in consonance with Section 78 of the General Banking Act. failed to redeem it. The issuance of the Order is in essence a rendition of judgment within the purview of Section 2. the court neither exercises its official discretion nor judgment. within the purview of this Act shall have the right. to the prejudice of the respondent. His insistence to participate in the proceeding is an unfortunate case of too little. be allowed to intervene in the action. This brings us to petitioner’s final point. On March 23. 1995. CESAR A. Cebu City. There. SO ORDERED. On April 26.[3] On August 23.00 as of August 15.Withal.[8] On April 17. IN VIEW WHEREOF. vs. petitioners. 98-0868 or the complaint for mandamus he filed before Branch 231 of the Pasay City RTC. 1985. 1998. 1985. 1984.345. The possible legal implication of the lease on the petitioner’s act of trying to redeem the disputed lot is a question which. Hence. respondent. . the RTC rendered its decision. 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. PHILIPPINE VETERANS BANK.00. he can ventilate his side to a fuller extent as that would be the more appropriate venue for elucidating whatever legal basis he alleges in compelling the respondent to sell to him the currently disputed land. 1995. October 1. 1981. finding no cogent reason to disturb the assailed Decision. the respondent bank went bankrupt and was placed under receivership/liquidation by the Central Bank from April 25. [2] The following facts are uncontroverted: On March 3.R. Likewise the compulsory counterclaim of defendant is dismissed for being unmeritorious.[7] In the pre-trial conference. he likewise perpetually barred himself from redeeming the same is a matter which can be addressed most aptly in that pending action. Whether by acknowledging the legality of the respondent’s claim and title over the land at the time of the execution of the contract.”[4] which pertains to the insurance premiums advanced by respondent bank over the mortgaged property of petitioners. Cebu City. due and demandable on February 27.000. respondent bank filed a petition for extrajudicial foreclosure of mortgage of petitioners’ property.[5] On August 23. 1998. 1980. 135706. the fallo of which reads: WHEREFORE. more than fourteen years from the time the loan became due and demandable. 1998. Branch 24. in our opinion. dated April 17. LARROBIS. JR. through Francisco Go.: Before us is a petition for review of the decision of the Regional Trial Court (RTC). petitioner spouses contracted a monetary loan with respondent Philippine Veterans Bank in the amount of P135. He briefly asserts that his act of entering into a lease contract with the respondent should not affect his right to redeem the subject property. the property was sold in a public auction by Sheriff Arthur Cabigon with Philippine Veterans Bank as the lone bidder. to declare the extra-judicial foreclosure and the subsequent sale thereof to respondent bank null and void. 2004] SPS. premises considered judgment is hereby rendered dismissing the complaint for lack of merit. J. 1996. the instant petition is hereby DENIED. No.[6] On October 18. Whether the agreement must be construed as a waiver on his part of exercising his purported right of redemption is an issue best left for the court therein to decide. 1985 until August 1992. petitioners filed a complaint with the RTC. raising pure questions of law. He can still fully protect his rights in Civil Case No. 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.[9] It reasoned that: …defendant bank was placed under receivership by the Central Bank from April 1985 until 1992. DECISION AUSTRIA-MARTINEZ. there is presently no need for us to squarely rule on this ultimate point. evidenced by a promissory note. LARROBIS. and secured by a Real Estate Mortgage executed on their lot together with the improvements thereon. all is not lost for the petitioner. IV. and VIRGINIA S. sent the spouses a demand letter for “accounts receivable in the total amount of P6. Republic of the Philippines SECOND DIVISION [G.[1] and the order denying petitioner’s motion for reconsideration dated August 25. the bank. can best be resolved in the mandamus complaint. consequently. Indeed. the Supreme Court said. 1986 to compel petitioner to release the mortgage carried with it the mistaken notion that petitioner’s own suit for foreclosure has prescribed. the period of ten years within which to foreclose under Art. 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. 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. which was fourteen years from the date the obligation became due on February 27. despite the absence of such legal or physical hindrance.[11] Thus.[13] the court a quo’s reliance on the case of Provident Savings Bank vs. thus. II …IN RULING THAT THE WRITTEN EXTRA-JUDICIAL DEMAND MADE BY RESPONDENT ON PETITIONERS WIPED OUT THE PERIOD THAT HAD ALREADY ELAPSED. 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. 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. otherwise.a continuity of commercial dealings and arrangements and contemplates to that extent.[16] Said provision reads: Section 29. when the closure of the petitioner was set aside in 1981. the present petition for review where petitioners claim that the RTC erred: I …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. 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.” Even assuming that the liquidation of defendant bank did not affect its right to foreclose the plaintiffs’ mortgaged property. 1981. 29 of R. Court of Appeals[14] is misplaced since they have different sets of facts.C. until the directive of the Board was nullified in 1981. III …IN DENYING PETITIONERS’ MOTION FOR RECONSIDERATION OF ITS HEREIN ASSAILED DECISION.)[10] Petitioners filed a motion for reconsideration which the RTC denied on August 25. 65 would be rendered nugatory.. No. Court of Appeals.[12] Petitioners argue that: since the extra-judicial foreclosure of the real estate mortgage was effected by the bank on October 18. 224 SCRA 175. it shall be the duty of the department head .C. was not interrupted by the time during which the respondent bank was placed under receivership. Doing business as construed by Justice Laurel in 222 SCRA 131 refers to: “…. the ten-year prescriptive period which started on February 27. the action filed on August 21. 265 as amended by Executive Order No.” In the case of Provident Savings Bank vs. defendant bank was restrained from doing its business. 18-19). respondent bank’s receiver or liquidator failed to foreclose petitioners’ property and therefore such inaction should bind respondent bank. 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. Then on March 24.” 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. 1995. all the benefits acquired so far from the possession cease and when prescription starts anew. it shall be disclosed that the condition of the same is one of insolvency. NCC) When prescription is interrupted.[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. the specific mandate to foreclose mortgages under Sec. pp. 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. it will be entirely a new one. 222 SCRA 131.A. began to run and. 1142 of the N. C. It is noteworthy to mention at this point in time. 1998. 1154. Commentaries and Jurisprudence on the Civil Code of the Philippines 1991 ed. in the present case. therefore. 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. or that its continuance in business would involve probable loss to its depositors or creditors. 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.A.1992. 1981. 1995 defendant bank through its officer-in-charge Llanto made the second extrajudicial demand. the questioned extrajudicial foreclosure was well within the ten (10) year prescriptive period. (Art. From April 1985 until July 1992. that defendant bank through authorized Deputy Francisco Go made the first extrajudicial demand to the plaintiffs on August 1985. the period during which the obligee was prevented by a caso fortuito from enforcing his right is not reckoned against him. “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. 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. . it is also not one of the instances enumerated by Art.concerned forthwith. to receive collectibles and preserve the assets of the bank in substitution of its former management. the person designated as receiver shall immediately take charge of the bank’s assets and liabilities. it was specifically restrained and immobilized from doing business which includes foreclosure proceedings. within such period. 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. While it is true that foreclosure falls within the broad definition of “doing business.00 as exemplary damages and P100. Anent the first issue. 1985. upon finding the statements of the department head to be true.00. This we made clear in Banco Filipino Savings & Mortgage Bank vs.[21] To resolve this petition.[22] Respondent’s claims that because of a fortuitous event. 1995 wiped out the period that has already lapsed and started anew the prescriptive period.[18] Petitioners then prayed that respondent bank be ordered to pay them P100. provides that when a bank is forbidden to do business in the Philippines and placed under receivership. 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. Petitioners further contend that: the demand letter.00 as moral damages. as expeditiously as possible. and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution.” are without merit.[20] In their Reply. i. but not limited to. respondent through its authorized deputy Francisco Go made the first extra-judicial demand on the petitioners on August 23. 1995. P50. exercising all the powers necessary for these purposes including.000. through the Monetary Board. it could not foreclose the mortgage on petitioners’ property within such period since foreclosure is embraced in the phrase “doing business. then takes control and possession of its assets for the benefit of the bank’s creditors. determines whether to proceed with the liquidation or reorganization of the financially distressed bank. exercising all the powers necessary for these purposes including.” that is: …a continuity of commercial dealings and arrangements and contemplates to that extent. One characteristic of a fortuitous event. was sent after the ten-year prescriptive period. 1985 until August 1992. the Central Bank. and that since it was banned from pursuing its business and was placed under receivership from April 25. Central Bank of the Philippines[24] where we explained that: Section 29 of the Republic Act No. 265. to inform the Monetary Board of the facts. and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution. The Board may. who concurrently represents the bank. 1115 of the Civil Code when prescription is interrupted. however. 1985 letter by Francisco Go demanding P6. the extrajudicial demand it made on March 24. bringing and foreclosing mortgages in the name of the bank. 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. 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. and (2) Whether or not the demand letter sent by respondent bank’s representative on August 23.000.00 as attorney’s fees. but not limited to. A receiver.[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.000. forbid the institution to do business in the Philippines and designate the official of the Central Bank or a person of recognized competence in banking or finance. collect and gather all the assets and administer the same for the benefit of its creditors. in a legal sense and consequently in relations to contract. in writing. A . thus it cannot be deemed to have revived a period that has already elapsed. 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. as amended known as the Central Bank Act. 1985 is sufficient to interrupt the running of the prescriptive period.[25] This is consistent with the purpose of receivership proceedings. refers to the insurance premium on the house of petitioners. dated March 24. collect and gather all the assets and administer the same for the benefit of its creditors. as expeditiously as possible.e. as receiver to immediately take charge its assets and liabilities.[17] and the August 23. 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. is that its occurrence must be such as to render it impossible for a party to fulfill his obligation in a normal manner. Monetary Board. 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. it was not able to exercise its right to foreclose the mortgage on petitioners’ property.345. bringing and foreclosing mortgages in the name of the bank. advanced by respondent bank.[23] it should not be considered included. we answer in the negative. in the acts prohibited whenever banks are “prohibited from doing business” during receivership and liquidation proceedings. 1972. Court of Appeals. the time it was under receivership. the ruling laid down in the Provident case cannot apply in the case at bar. to foreclose mortgages securing such debts.[37] Having reached the conclusion that the period within which respondent bank was placed under receivership and liquidation proceedings does not constitute a fortuitous event which interrupted the prescriptive period in bringing actions. 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. shows that the Court arrived at said conclusion.[35] a labor case which also involved respondent bank. 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. 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.345.liquidator meanwhile assumes the role of the receiver upon the determination by the Monetary Board that the bank can no longer resume business. … all the acts of the receiver and liquidator pertain to petitioner. when there is a written extra-judicial demand by the creditors. 1985. such ruling does not find application in the case at bar. through Francisco Go. both having assumed petitioner’s corporate existence. which is an exception to the general rule. 1985 for “accounts receivable in the total amount of P6. pursuant to Section 29 of the Central Bank Act on insolvency of banks. A close scrutiny of the Provident case. Petitioner cannot disclaim liability by arguing that the non-payment of MOLINA’s just wages was committed by the liquidators during the liquidation period.[31] (Emphasis supplied. As correctly pointed out by petitioner. but for its creditors as well.[27] In Provident Savings Bank vs. 1766 on September 15. 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. the bank’s majority stockholders immediately went to the Court of First Instance of Manila. on August 23. 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. 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. to grant new loans or to accept new deposits. Thus. there was no legal prohibition imposed upon herein respondent to deter its receiver and liquidator from performing their obligations under the law.[34] As we held in Philippine Veterans Bank vs. respondent was even able to send petitioners a demand letter.[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. In said case. Contrary to the position of the respondent and court a quo however. through Francisco Go. until the directive of the Board was nullified in 1981.) 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.e. i. which was instructed to take charge of the assets of the bank in the name of the Monetary Board. 1984” for the insurance premiums advanced by respondent bank over the mortgaged property of petitioners. Prescription of actions is interrupted when they are filed before the court. The decision was appealed to and affirmed by this Court in 1981. 364 on April 25.[29] (Emphasis supplied. Thus. the Superintendent of Banks.345. the receiver of the bank is obliged to collect pre-existing debts due to the bank. In both receivership and liquidation proceedings. the receiver of the bank is in fact obliged to collect debts owing to the bank. declaring null and void the resolution and ordering the Central Bank to desist from liquidating Provident. prohibiting it from doing business in the Philippines.00. and take steps to prevent dissipation of such assets. 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. due to the peculiar circumstances of Provident Savings Bank at the time. The receiver or liquidator meanwhile acts not only for the benefit of the bank. which pertained to the insurance premiums advanced by the bank over the mortgaged property. NLRC. There is also no truth to respondent’s claim that it could not continue doing business from the period of April 1985 to August 1992.00 as of August 15. 1985 for the amount of P6. that bank would not be able to do new business. However. 1974.. which debts form part of the assets of the bank. and when there is any written acknowledgment of the debt by the debtor.) 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.[36] However. and in connection therewith.[32] In this case. The receiver must assemble the assets and pay the obligation of the bank under receivership. we now turn to the second issue on whether or not the extra-judicial demand made by respondent bank. on August 23. 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. which prompted the trial court to issue its judgment dated February 20. Settled is the principle that a bank is bound by the acts.[38] . or failure to act of its receiver. [33] Unlike Provident Savings Bank. Again. we answer this question in the negative. constitutes a valid extra-judicial demand which interrupted the running of the prescriptive period. Accordingly.[30] This is being invoked by the respondent and was used as basis by the trial court in its decision. PHILIPPINE CURRENCY WITH INTEREST AT THE RATE OF FOURTEEN PER CENT (14%) PER ANNUM FROM THIS DATE UNTIL FULLY PAID. Costs against respondent. The arguments of respondent bank on this point must therefore fail. respondent. in the amount of P6. Larrobis. which may validly interrupt the running of the prescriptive period. dated April 17.000.00) PESOS ONLY Philippine Currency in favor of the herein Mortgagee.000. we find no sufficient basis to award the same. DEVELOPMENT BANK OF RIZAL. also states that: …FOR VALUE RECEIVED. and Virginia S. For moral damages to be awarded.R. we find no reason to grant the same. the same formed part of the latter’s total loan obligation with respondent under the mortgage instrument. As to petitioners’ claim for damages. legal and equitable justification for its award. the claimant must satisfactorily prove the existence of the factual basis of the damage and its causal relation to defendant’s acts. the decision of the Regional Trial Court. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. and therefore.00.000. Court of Appeals.[43] Exemplary damages meanwhile. OR ORDER. No. PROMISE TO PAY THE PHILIPPINE VETERANS BANK.[45] Since the bases for these claims were not adequately proven by the petitioners. 1995. . vs. which are imposed as a deterrent against or as a negative incentive to curb socially deleterious actions. Jr. 1998 are hereby REVERSED and SET ASIDE. 73884 September 24. constitutes a valid extra-judicial demand which interrupted the running of the prescriptive period. may be awarded only after the claimant has proven that he is entitled to moral.00. Branch 24. JOINTLY AND SEVERALLY. WHEREFORE.00 which is the principal loan of petitioners plus interest.[39] The promissory note.345. where it does not appear from the records that the notes are covered by the mortgage contract.[44] Finally. I/WE.[40] Considering that the mortgage contract and the promissory note refer only to the loan of petitioners in the amount of P135. Cebu City. 1998. SO ORDERED. petitioners. They pertain only to the amount of P135. 1985 pertained to the insurance premium it advanced over the mortgaged property of petitioners. AT ITS OFFICE AT CEBU CITY THE SUM OF ONE HUNDRED THIRTY FIVE THOUSAND PESOS (P135. however.000. it is clear that the advanced payment of the insurance premiums is not part of the mortgage contract and the promissory note signed by petitioners. which was the subject of the August 1985 demand letter. Larrobis in the amount of ONE HUNDRED THIRTY FIVE THOUSAND (P135. is not plausible. The real estate mortgage signed by the petitioners expressly states that: This mortgage is constituted by the Mortgagor to secure the payment of the loan and/or credit accommodation granted to the spouses Cesar A. we have no reason to hold that the insurance premiums.[42] In this case. is hereby declared null and void and respondent is ordered to return to petitioners their owner’s duplicate certificate of title. as to attorney’s fees. temperate or compensatory damages.00). and the order denying petitioners’ motion for reconsideration dated August 25. it is demanded that there be factual. The extra-judicial foreclosure of the real estate mortgage on October 18.[41] we held that the notices of foreclosure sent by the mortgagee to the mortgagor cannot be considered tantamount to written extrajudicial demands. executed by the petitioners.Respondent’s claim that while its first demand letter dated August 23. should be considered as pertaining to the entire obligation of petitioners. 1987 SPOUSES ROMEO LIPANA and MILAGROS LIPANA. In Quirino Gonzales Logging Concessionaire vs. Respondent judge cannot legally stay execution of judgement that has already become final and executory. 1986 (Ibid. while respondent bank filed its Memorandum on September 25. 1985 Order of the Regional Trial Court of Pasig denying petitioners' Motion to Lift Stay of Execution in Civil Case No. 111) but in an Order dated March 6. the instant petition (Rollo. 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. pp.: This is a petition for review on certiorari of the August 30. 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. a writ of attachment dated March 20. pp. 98-101).. pp. respondent bank filed its Comment on June 9. opposed by respondent bank (Ibid. 1984. in its Resolution No. p.. p. J. 119-122). opposed by respondent bank (Ibid. petitioners filed a Motion for Execution Pending Appeal (Rcd. in a resolution dated May 5. 76-83). In compliance therewith. The placing under receivership by the Central Bank of the respondent bank. 102-105). 4. p.. The Second Division of the Court. ordered the issuance of a writ of attachment.. and the case was considered submitted for deliberation in the Resolution dated October 8. p. On August 7. pp. the sum equivalent to 15% of the amount due as attorney's fees.32. 33). Demands for the payment of both time and savings deposits having failed. Metro Manila long before the receivership took place render inapplicable the doctrine laid down by this Honorable Supreme Court in the said Morfe case. 1984. 1986. On February 11. On December 27. 1984. rendered judgment in favor of petitioners. 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.. petitioners were not able to cash them but instead were issued a manager's check which was dishonored upon presentment. The petition was given due course in a resolution dated August 11.. 1984. 88) Petitioners raised the following issues: 1. 123-127). petitioners filed a Motion to Lift Stay of Execution (Ibid. 1985. respondent bank filed a Motion for Reconsideration of order dated January 29. p. opposed by petitioners (Ibid. In an order dated January 29. 1984 was issued in favor of the petitioners (Ibid. The indefinite stay of execution without a ruling as to how long it will last. respondent judge stayed the execution (Ibid. petitioners filed their Memorandum on September 19. pp. 68-73). Morfe (63 SCRA 113). Respondent Judge... p. 94-96). 3.. pp.. p. p. p. On July 23.. respondent judge ordered the issuance of a writ of execution (Ibid. 52). 6375)... docketed therein as Civil Case No. p. in an Order dated March 19. 1984. 58-61). Meanwhile. and the parties were required to file their respective memoranda (Ibid. pp. and costs of suit. p. 1985. 106). 1984. pp. and in an Order dated August 30. the Court renders judgment in favor of the plaintiffs. 1985 (Ibid. 1985 and to Stay Writ of Execution (Ibid.737. 1984 (Ibid. 1986 (Ibid. amounts to deprivation of petitioners of their property without due process of law. pp. 2. which was opposed by respondent bank (Ibid. 1985. 1984. 3-11). long after the complaint was filed removed it from the application of the doctrine in Re: Central Bank vs. 91-93). 1985. decided to place it under receivership (Rollo. 113). 109-110). p. to which respondent bank filed its Rejoinder on January 1. 50802 (Record.. 50802. The dispositive portion of the said Decision. the Monetary Board..32 plus stipulated interest. . 19-21). On June 27. 53-58). 1986 (Ibid. During the period from 1982 to January. on March 14. reads: IN VIEW OF ALL THE FOREGOING. 1009. for lack of merit. On December 7.PARAS. 1985. but respondent judge. The filing of the complaint for a sum of money With damages against respondent bank and the subsequent attachment of its property in Pasig.. 1986 (Ibid. In compliance therewith.. on August 10. and pursuant thereto. ordering the defendant to pay the total sum of P939..737. respondent bank filed its Answer (Ibid. resolved to require the respondent to comment (Ibid. 130). 61).. respondent judge denied the said motion (Ibid. petitioners filed their Reply to the opposition (Ibid.. 1984. p. 1986. The counterclaim is dismissed. 84). petitioners filed a Motion For Judgment on the Pleadings (Ibid. in a Decision dated November 13.. 8-17). 74-76). pp. Hence.. pp. When some of the Time Deposit Certificates matured. pp. it is the ministerial duty of the court to order its execution. and not give priority over other depositors and creditors. 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.. or when certain facts and circumstances transpired after the judgment became final which could render the execution of the judgment unjust (Cabrias vs. No. after the Monetary Board has declared that a bank is insolvent and has ordered it to cease operations. Moreover. the remedy of the depositors is to intervene in the liquidation proceedings. It is the execution that win obviously prejudice the other depositors and creditors. 81). among others. and the liquidator or his deputy will authorize payments to all claimants concerned in accordance with the approved project of distribution. Yap (Chairman). JJ. which reads: The circumstance that the Fidelity Savings Bank. To execute the judgment would unduly deplete the assets of respondent bank to the obvious prejudice of other depositors and creditors. 1969. et al. the stay of the execution of judgment is warranted by the fact that respondent bank was placed under receivership. 33302). and the Decision of respondent judge is dated November 13. one cannot obtain an advantage or a preference over another by an attachment. In fact. the filing of a petition in the Regional Trial Court praying for assistance of said court in the liquidation of the bank. 1984. What was directly prohibited should not be encompassed indirectly. as stated in the said Morfe case. SO ORDERED. and after its insolvency. 1985 and ordered. in line with the ruling in the aforesaid Morfe case. having stopped operations since February 19. the Board becomes the trustee of its assets for the equal benefit of all the creditors. likewise. 85 Phil. (Rollo. . 135 SCRA 354). p. was able to obtain a writ of preliminary attachment against the original defendant Island Savings Bank. 579). 1984 in G. Apart from the fact that the stay of execution is not only in accordance with law but is also supported by jurisprudence. 4-33 approved the liquidation of respondent bank on April 26. Said contention.G. as aptly stated in Central Bank of the Philippines vs. the instant petition is hereby DISMISSED. The time of the filing of the complaint is immaterial. In the instant case. 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.. . Padilla and Sarmiento. (Resolution of this Court dated September 17. the effect of the judgment is only to fix the amount of the debt. execution or otherwise. such staying of execution is not without a time limit. Moreover. It is the contention of petitioners. III. Suffice it to say that in the case of Central Bank of the Philippines. 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. The staying of the writ of execution will be lifted after approval by the liquidation court of the project of distribution. 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. Adil. Court of Appeals. 164). it will be noted that respondent bank was placed under receivership on August 10. the Monetary Board. et al. including depositors. The rule that once a decision becomes final and executory.R. is devoid of merit. in its resolution No. II. 1984. This contention is untenable.The instant petition is without merit. It is also contended by the petitioners that the indefinite stay of execution without ruling as to how long it will last. IV. Geronimo. Morfe (63 SCRA 114). I. vs. wherein the original plaintiff Algue Inc. Melencio-Herrera.. PREMISES CONSIDERED. 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. Accordingly. The assets of the insolvent banking institution are held in trust for the equal benefit of all creditors. this Court refused to recognize any preference resulting from such attachment and ruled that after a declaration of insolvency. petitioners 'complaint should have been dismissed. The answer is in the affirmative. whenever it is necessary to accomplish the aims of justice (Pascual vs. since. however. Tan. 59 O. amounts to a deprivation of their property without due process of law. concur. C. 2. including private respondent Dr.756.08 x 15 mos.319.20 broken down as follows: WO# NCR-01 & 01-A WO# NCR-02 & 02-A P17.000. the respondents [members of herein petitioner’s liquidation team] are hereby directed to pay the complainant [MOLINA] the total sum [sic] of P112. respondents. 2. its employees. the complaint demanded the implementation of Wage Orders Nos. whose re-employment commenced on 15 June 1985. JR.20 WO# NCR-02 (Jan.31.) P12.000 in moral damages and attorney’s fees. HON. NCR-01 and NCR-02 (hereafter W. In their position paper. MOLINA.754. POTENCIANO CAÑIZARES. On the other hand.[6] Docketed as NLRC-NCR Case No. P2. Jose Teodorico V.O. 1990 ~ Jan. were terminated from work and given their respective separation pay and other benefits.[5] Pacifico U.R. members of the liquidation team. No. Consequently. W.00 x 365  12 = P517. and a special allowance of P900. 130439.501. 1 and W. TEODORICO V. among them MOLINA. On appeal. where he continued to receive a monthly salary of P3. petitioner seeks to set aside the resolution[1] of the National Labor Relations Commission (NLRC) in NLRC Case No.000 as representation and transportation allowance (RATA).00/day Nov.O.00 x 13 mos. the NLRC sustained the labor arbiter’s ruling after concluding that MOLINA was a regular employee of petitioner with a basic monthly salary of P3. adopting instead the factor of “365 days. 1 took effect on 10 November 1990. mandated a P12-increase in the daily wage of employees whose monthly salary did not exceed P4. 2) as well as moral damages and attorney’s fees in the amount of P300. petitioner Philippine Veterans Bank was placed under receivership by the Central Bank (now Bangko Sentral)[3] by virtue of Resolution No.60 as basic compensation.1992 (Date of termination) Wage Differential: WO# NCR-01 (Nov. In his decision. 1990 – Jan. W. When petitioner was placed under liquidation in 1985. 1991 – Jan.00/day P12. 1992 ~ 13 mos. October 26. They were also required to pay him P100. they were ordered to pay MOLINA P4. Cañizares. the NLRC decreed thus: WHEREFORE. On 11 May 1991. which became effective on 8 January 1991. 05-02940-91 and its order[2] denying the motion for reconsideration thereof.60. DECISION DAVIDE. 1992 ~ 15 mos.00 x 365  12 = P365. 1991 Jan. To assist in the liquidation. 8. Molina (MOLINA).. rejected the 26.60 broken down as follows: P3. and DR.16 factor used by the liquidators in computing the daily wage of MOLINA. Cervantes and Alfredo L.745. MOLINA alleged that he started working for petitioner as a legal assistant on 17 March 1974.: In this petition for certiorari under Rule 65 of the Rules of Court. 8. Petitioner was subsequently placed under liquidation on 15 June 1985. 7.60 at the time of his dismissal on 31 January 1992.64 and P2. Jr. ~ P7. Meanwhile.[7] Labor Arbiter Potenciano S.J.08.O.) P17. 31. In its assailed resolution of 7 April 1997. MOLINA filed a complaint[4] against Renan V.00 .16. Santos. entitled to the wage increases mandated by the aforesaid wage orders.O. JR.” Consequently.802.. some of petitioner’s former employees were rehired.O. 05-02940-91.654.190 representing the wage differentials due him under W. In 1983.Republic of the Philippines FIRST DIVISION [G. Dizon. 1999] PHILIPPINE VETERANS BANK. 31.754. 334 issued by the Monetary Board. prescribing a P17-increase in the daily wage of employees whose monthly salary did not exceed P3. ~ P4. vs. MOLINA claimed that his salary should have been adjusted in compliance with said wage orders.O. the liquidation team countered that MOLINA was not entitled to any salary increase because he was already receiving a monthly salary of P6. In his position paper. He was. he was retained as Manager II in the Legal Department. therefore. 1991 ~ Jan. 1 and W.754.136. HONORABLE NATIONAL LABOR RELATIONS COMMISSION. petitioner. Total Wage Differential Moral Damages & Attorney’s Fees TOTAL AWARD SO ORDERED.[8] P 12,501.20 P100,000.00 P112,501.20 As MOLINA moved for the execution of the NLRC resolution, petitioner, in turn, moved for its reconsideration. In its order of 27 June 1997, the NLRC denied petitioner’s motion, prompting the latter to file the instant petition with a prayer for the issuance of a temporary restraining order and writ of preliminary injunction. In this action, petitioner questions the propriety of its substitution as a party-respondent below on the pretext that it was thereby deprived of its right to due process. Second, MOLINA was alluding to acts committed by the representatives of the then Central Bank. Petitioner emphasizes that he was rehired only to assist in the liquidation process.[9] In fact, all its employees were dismissed and given their corresponding separation pay and benefits. At that moment, the employeremployee relationship between petitioner and MOLINA ceased to exist. Third, petitioner maintains that MOLINA is estopped from claiming that it continued to be his employer during the rehabilitation period since the admissions in his pleadings, one of which is that the liquidators were his employers, are binding and conclusive. Nonetheless, petitioner reiterates the arguments raised by the original respondents, particularly that the factor of 26.16 should have been applied in determining MOLINA’s daily wage. Doing so would show that MOLINA’s daily pay exceeded the minimum wage and, therefore, was beyond the scope of the wage orders. Petitioner also avers that the award of P100,000 in moral damages and attorney’s fees was inappropriate since the complaint did not specify the same, and it was clearly excessive, considering that the case was decided based on the pleadings and without the benefit of trial. In fact, MOLINA failed to prove his claim for both moral damages and attorney’s fees. Even if due, the amount far surpassed any actual damage that MOLINA may have suffered. In any event, moral damages may only be recovered in labor cases when the dismissal is attended by bad faith or fraud, or when it constitutes an act oppressive to labor or committed in a manner contrary to good morals, good customs or public policy. MOLINA’s dismissal was made in the ordinary course of business. On the other hand, MOLINA primarily asserts that upon petitioner’s rehabilitation it assumed all the rights and obligations of the liquidator, including the NLRC’s monetary award arising from the labor complaint he filed against the liquidation team. The Office of the Solicitor General supports the NLRC’s finding that MOLINA was entitled to the wage increases because it was never disputed that his salary of P3,754.60 was clearly covered by the wage orders. The liquidators, however, used the 26.16 instead of the 365 factor in computing his daily wage. The OSG cites the ruling of the National Wages Council in its letter[10] to the Philippine Veterans Bank Retained Employees, where the Council opined that the retained employees were entitled to the wage increase computed on the basis of 365 days. It also agrees with the NLRC’s conclusion that MOLINA is entitled to moral damages and attorney’s fees, although they must be separately specified. Finally, the OSG opines that upon the rehabilitation of petitioner, it assumed all the assets, liabilities, rights and obligations of the liquidation team. This would include the salaries of the employees hired for liquidation purposes, such as MOLINA. In its reply, petitioner insists that when it was placed under liquidation, it lost its juridical personality, such that it could no longer enter into contracts or transact business. All its assets and liabilities were turned over to the Central Bank. MOLINA’s complaint pertained to acts committed during liquidation and so was correctly filed against the liquidation team. Its substitution as party-respondent was clearly erroneous. Hence, the issues to be resolved are: (1) Are W.O. 1 and W.O. 2 applicable to MOLINA? (2) Is MOLINA entitled to moral damages and attorney’s fees? (3) If so, who is liable to pay MOLINA’s claims? We see no reason to disturb the factual finding of the labor arbiter, and affirmed by the NLRC, that MOLINA’s salary was within the coverage of the cited wage orders. Well-settled is the rule that the findings of fact of quasi-judicial bodies are generally accorded respect and finality where they are supported by substantial evidence.[11] Indeed, MOLINA’s monthly salary of P3,754.60 was never at issue. What was in dispute was the computation of his daily wage. W.O. 1 expressly states that employees having a monthly salary of not more than P3,802.08 are entitled to receive the mandated wage increase. Undeniably, MOLINA was receiving a monthly salary of P3,754.60. This fact alone leaves no doubt that he should benefit from said wage order. On the other hand, W.O. 2 raised the ceiling for entitlement to the wage increase. If MOLINA was covered by the earlier wage order, with more reason should the later wage order apply to him. Worth mentioning is the opinion[12] rendered by the National Wages Council on the query of the Philippines Veterans Bank Retained Employees, on whether they were entitled to a wage increase under Republic Act No. 6640,[13] viz.: The documents attached to your query show that the Bank has been consistently using the factor of 365 days in computing your equivalent monthly salary prior to its being placed under receivership by the Central Bank. This is evident in the wage and allowance increases granted under previous Presidential Decrees and Wage Orders, which were given by the Bank on monthly basis, i.e., where the rest days are unworked [sic] but paid. This is also indicated in the appointment and service records of bank personnel who started out as daily paid employees and were eventually promoted as permanent employees with fixed monthly salaries. However, when R.A. 6640 went into force, the Bank unilaterally reduced the factor to 262 instead of maintaining factor 365 as was the practice/policy long before the effectivity of the Act. And when R.A 6727 took effect, the Bank reverted to the old practice/policy of using factor 365 days in computing your equivalent monthly rate salary. xxx May we add that the old practice of the bank in using factor 365 days in a year in determining your equivalent monthly salary cannot unilaterally be changed by your employer without the consent of the employees, such practice being now a part of the terms and conditions of your employment. An employment agreement, whether written or unwritten, is a bilateral contract and as such either party thereto cannot change or amend the terms thereof without the consent of the other party thereto. From the foregoing, it is clear that you are entitled to the wage increase under R.A. 6440 computed on the basis of 365 paid days and to the corresponding salary differentials as a result of the application of this factor. [Emphasis supplied] Evidently, the use of the 365 factor is binding and conclusive, forming as it did part of the employment contract. Petitioner can no longer invoke the 26.16 factor after it voluntarily adopted the 365 factor as a policy even prior to its receivership. To abandon such policy and revert to its old practice of using the 26.16 factor would be a diminution of a labor benefit, which is prohibited by the Labor Code.[14] It cannot be doubted that the 365 factor favors petitioner’s employees, including MOLINA, because it results in a higher determination of their monthly salary. As to the second issue, we agree with the NLRC that MOLINA is entitled to moral damages and attorney’s fees. He may have omitted such claims in his complaint, but he certainly included them in his position paper. We hold that such allegation is sufficient to enable the complainant to seek an award thereof. The complaint being pro forma, MOLINA’s omission to specify a claim for damages does not bar recovery thereof especially when, as in this case, such a claim was prayed for in his position paper.[15] The NLRC, however, did not distinguish between attorney’s fees and moral damages in affirming the award of P100,000 to MOLINA. We hold that awards for moral damages and attorney’s fees cannot be consolidated for they are different in nature and each must be separately determined.[16] Since the Labor Code limits attorney’s fees to ten percent of the wages awarded,[17] and the total wage differential due MOLINA was computed at P12,501.20, only P1,250.12 should have been awarded as attorney’s fees. Moving on to the issue of moral damages, the records show that MOLINA based his claim on the alleged failure of the liquidation team to implement the benefits of the wage orders, without submitting any proof in support thereof. It is basic, however, that for moral damages to be awarded, the claimant must satisfactorily prove its factual basis and causal connection with the respondent’s acts.[18] In this, MOLINA failed, for which reason the award of moral damages must be deleted. Finally, we rule that the payment of MOLINA’s claims devolves upon petitioner, not the liquidation team. When a bank is declared insolvent and placed under receivership, the Monetary Board of the Central Bank determines whether to proceed with the liquidation or reorganization of the financially distressed bank.[19] A receiver takes control and possession of the assets of the bank for the benefit of its creditors[20] and concurrently represents the bank.[21] On the other hand, a liquidator 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 its obligations in accordance with their legal priority.[22] In both receivership and liquidation proceedings, the bank retains its juridical personality notwithstanding the closure of its business; in fact, the bank may even be sued.[23] Its corporate existence is assumed by the receiver or liquidator. The latter, however, acts not only for the benefit of the bank, but for the bank’s creditors as well. [24] In the instant case, petitioner was initially closed and put under receivership and liquidation. Subsequently, its rehabilitation was effected by virtue of Republic Act No. 7169[25] and Monetary Board Resolution No. 348 dated 10 April 1992. Rehabilitation contemplates a continuance of corporate life and activities in an effort to restore and reinstate the corporation to its former position of successful operation and solvency.[26] Upon its rehabilitation, petitioner assumed the rights and obligations of the receiver and liquidator. This includes MOLINA’s claim for unpaid wages. It must be borne in mind that 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. WHEREFORE, this case is DISMISSED. The assailed Resolution of 7 April 1997 and Order of 27 June 1997 of the National Labor Relations in NLRC Case No. 05-02940-91 are AFFIRMED with the MODIFICATION that the award of moral damages is deleted and the award of attorney’s fees is reduced to ONE THOUSAND TWO HUNDRED FIFTY & 12/100 PESOS (P1,250.12). No pronouncement as to costs. SO ORDERED. Kapunan, Pardo, and Ynares-Santiago, JJ., concur. Puno, J., on official leave. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 97218 May 17, 1993 PROVIDENT SAVINGS BANK, petitioner, vs. COURT OF APPEALS, Former SPECIAL EIGHTH DIVISION and WILSON CHUA, respondents. Gonzales, Batiller, Bilog & Associates for petitioner. Resty R. Villanueva for private respondent. MELO, J.: The error, if error it be, of respondent Court of Appeals which petitioner seeks to rectify via the petitioner for certiorari before us refers to respondent court's major conclusion arrived at in CA-G.R. CV No. 21312 (Javellana (P), Kalalo, Dayrit, JJ) barring petitioner from foreclosing the subject realty on account of prescription. Petitioner begs to differ, insisting that the period during which it was placed under receivership by the Central Bank is akin to a caso fortuito and should not thus be reckoned against it. Both petitioner and private respondent accepted the synthesized factual backdrop formulated by respondent court, to wit: This an appeal by both plaintiff and defendant from the decision of the Regional Trial Court of the National Capital Judicial 29 September 1988, in Civil Case No. 977-NW, which directed plaintiff-appellant to pay defendant-appellant the personal obligation of the spouses Guarin to defendant-appellant in the amount of P62,500.00, together with the interest, penalties, and bank charges due thereon, and ordering defendantappellant thereafter to: (1) release the real estate mortgage executed by the spouses Lorenzo K. Guarin and Liwayway J. Guarin in favor of defendant bank on 16 February 1967; (2) return to surrender to plaintiffappellant, as successor-in-interest of the spouses Guarin, the latter's Owner's Duplicate of Title No. 177014; (3) pay plaintiff-appellant P20,000.00 as and for attorney's fees; and, (4) pay the costs of suit. The established fact are: On 16 February 1967, the spouses Lorenzo K. Guarin and Liwayway J. Guarin (Guarins) obtained a loan from defendant-appellant in the amount of P62,500.00 payable on or before 20 June 1967. As security for the loan, they executed a real estate mortgage in favor of defendant-appellant over a parcel of land covered by TCT No. 177014. (Exhs. C and D). In September, 1972, defendant-appellant was placed under receivership by the Central Bank of the Philippines until 27 July 1981 when the receivership was set aside by the Honorable Supreme Court. (Exh.. 6) On 3 August 1987. and attorney's fees of P50.750.80. 1986 as tantamount to an explicit acknowledgement that the obligation was outstanding and had not .K. which intervened between June 20. but that the mortgaged title could not be released to him even after the payment of the obligation of P591.) Concerning the challenge posed by Provident Saving Bank against the personality of Wilson Chua to initiate the action to compel the release of the real estate mortgage and the delivery of the owner's duplicate copy of the certificate of title. 35-37. Guarin in his personal capacity and as president of the corporation.000. Guarin Manufacturing Co. 3) On 20 May 1986. 2) On 26 February 1986. informed defendantappellant that it had lost whatever right or action had against the Guarins because of prescription. the mortgaged property had been sold to him by the Guarins. (Exh. One was account of Lorenzo K. 5) In reply.27 (Attachment to Exh. Respondent court did not also heed the suggestion of the petitioner bank to interpret Wilson Chua's assumption of the mortgage on July 10. to defendant-appellant which was undertaken by Lorenzo K.088. (2) return or surrender to plaintiff-appellant. Guarin in the amount of P591. Rollo. 177014. 1).80 as it also served as security for the indebtedness of L. F) On 21 August 1986. Defendant-appellant answered the complaint thereof and setting up special and affirmative defenses. . On 5 August 1986. judgment was rendered as stated in the opening paragraph hereof from which both parties appealed . Inc. Q-47465 entitled. as evidenced by the Deed of Sale enclosed for guidance and information of defendant-appellant. Guarin. . Q-47645. Thus. (pp. moral damages as may be proved during the trial. as well and defendant-appellant's letter to Mr. respondent court gave a negative response on account of the absence of proof to indicate that the bank was precluded from collecting indebtedness while it was under receivership from September. plaintiff-appellant filed a complaint against defendant-appellant to compel the latter to: (1) release the real estate mortgaged executed by the Guarins in favor of defendant-appellant on 16 February 1967. posterior to the change of obligors.1981. Guarin so that the title could be released by defendant-appellant. on 11 August 1986. "Wilson Chua vs. to foreclose the mortgage which had become stale through sheer lapse of time. plaintiff-appellant informed defendant-appellant that as a result of the judgment in Civil Case No.80. otherwise.00. 177014 in the possession of defendant-appellant be released to him so that he can register the sale and have the title to the property transferred in his name.287. (Exh.000. and June 20. he would be constrained to bring the matter to court. Guarin Manufacturing Co.(Exh. Guarin wrote defendant-appellant stating that he was ready and willing to pay his obligation in the total amount of P591. the date the mortgage matured. Guarin Manufacturing Co. Lorenzo K. the latter's owner's duplicate of TCT No. Inc.380. (Exh. B). assured he and his wife had every intention of paying their obligation and requesting for a recomputation of their account and a postponement of the foreclosure sale.088. exemplary damages as may be reasonably assessed by the court. 1967. After trial.088.Y. To the question of whether petitioner can still foreclose the subject realty. E) Defendant-appellant replied on 10 August 1987 stating the reasons why they could not comply with plaintiff-appellant's demands. Guarin". Metro Manila.. On 10 February 1986. (Exh. and (3) pay plaintiff-appellant P2. 4) On 10 July 1986. defendant-appellant. informed plaintiff-appellant that his request could be granted if he would settle the obligation of L. Inc.00.00 and plaintiff-appellant undertook to assume the mortgaged obligation of the Guarins with defendant-appellant which as of 15 February 1985 amounted to P591. said respondent court. He likewise. Lorenzo K. The matter of novation in the form of substitution of the debtor without corresponding acquiesence of the mortgagee was viewed by respondent court to be legally inconsequential due to the demeanor of the mortgagee-bank in requiring Wilson Chua to pay the indebtedness of Lorenzo Guarin. .. which act was construed as equivalent to consent. and requesting for defendant-appellant's conformity to the assignment and expressing his willingness to pay for the obligation of Mr. as mortgagee.80 as recomputed by defendant-appellant whenever defendant-appellant was already to receive the payment and inquiring as to when his mortgaged title would be available for him to pick up. (Exh. 1972 until July 20.On 11 December 1984. 2) Defendant-appellant replied on 27 February 1986 that Lorenzo K.K. there was no legal interruption of the pres-criptive period to speak of. the Guarins received a Statement of Account from defendant-appellant showing two outstanding accounts as of 15 February 1986. respondent court noted that Wilson Chua can be considered a real-property-in-interest because he is the successor-ininterest of the Guarins who is naturally entitled to the realty as against the so-called right of Provident Savings Bank. counsel for plaintiff-appellant addressed a letter to defendant-appellant informing that plaintiff-appellant had purchased the mortgaged property from the Guarin's and requesting that the owner's copy of TCT No. in reply to the letter of latter's counsel informing that the mortgaged property would be sold at public auction on 27 December 1984. (Exh..00 as actual and/or consequential damages. Guarin dated 27 February 1986.088. He requested that he be allowed to pay the loan secured by the mortgaged. Lorenzo K. the Guarins and plaintiff-appellant executed a Deed of Absolute Sale With Assumption of Mortgaged whereby the Guarins sold the mortgaged property to Guarins sold the appellant for the sum of P250. Guarin may make payment at its office in Makati. plaintiff-appellant wrote defendant-appellant saying that the mortgaged property of the Guarins had been offered to him as payment of the judgment he obtained against the Guarins in Civil Case No. and the other was the account of L. as successor-in-interest of the Guarins. 1977 the last day within which petitioner could have foreclosed the mortgage. (Exh. in the amount of P6.. Inc. 150) was rendered. 36-37.. vs. When a bank is prohibited to do business by the Central Bank and a receiver is appointed for such bank. What exacerbates the situation is the letter of private respondent requesting petitioner on August 6. The receiver must assemble the assets and pay the obligation of the bank under receivership.. 1986 that private respondent be allowed to pay the loan secured by the mortgage as the result of the Deed of Sale executed by the Guarins in his favor on July 10.125) that the appointment of a receiver does not dissolve the corporation nor does it interfere with the exercise of its corporate rights. 4 Tolentino.. and in progressive prosecution of. the receiver of the bank is obliged to collect debts owing to the bank. p. Indeed. the petitioner at bar. Contrary to respondent court's prescription of the existence of novation. 39. Rollo). Rollo). The prerogative of a bank to foreclose is implicit from and is even necessary to enforce collection of secured debts under Section 36(11) and 45 of the Corporation Code. New Civil Code. so speak. at p. petitioner insists that it can not be blamed for not lifting a finger.. the exercise of some of the words or the normally incident to. 18-19). Like any other banking institution. vs.e. objections that the receiver did not report the collection made before the beginning of his receivership. What seems to have escaped respondent court's attention was the condition . to grant new loans or to accept new deposits. Philippine Law Dictionary. the receiver is liable to the bank for culpable or negligent failure to collect the assets of such bank and to safeguard said assets. 1972 from transacting business until this Court affirmed on July 27. Following the unfavorable judgment. Consistent with its theory premised on fuerza major. Consequently. et al. Commentaries and Jurisprudence on the Commercial Laws of the Philippines. petitioner is vested with the usual attributes and powers of a corporation under Section 36 of the Corporation Code (Vitug. 1991 ed. However. 14 Phil.. Second ed. we believe that a foreclose is deemed embraced by the phrase "doing business" as a preparatory measure to acquiring or holding property for petitioner as a saving bank under Section 34 of the General Banking Act.. Rama. Rollo). and contemplates to that extent. the term was construed by Justice Laurel to refer to: . 50).. supra at p. emphasis supplied. Pandect of Commercial Law and Jurisprudence. Comment. But this principles is. Mangaliman. Rollo).yet prescribed. 1986 to compel petitioner to release the mortgage carried with it the mistaken notion that petitioner's own suit foreclosure had prescribed. Accordingly. the bank filed a motion for reconsideration and a motion for new trial premised on newly discovered evidence relative to a statement of account unearthed by the bank's liaison officer from the loose folders on October 18. Having arrived at the conclusion that the foreclosure is part of bank's business activity which could not have been pursued by the receiver then because of the circumstances discussed in the Central Bank case. pp. And this piece of document necessarily estops private respondent from setting up prescription vis-a-vis his unfounded supposition that acknowledgment of the debt is of no moment because the right of the petitioner to foreclose had long prescribed in 1977 (p. But respondent court was unperturbed. Petition. In Mentholatum Co. during the period when it was enjoined by the Central Bank on September 15. respondent court reversed the decision of the trial court insofar as it ordered Wilson Chua to pay the sum of P591. p. vs. a continuity of commercial dealings and arrangements. 1990 ed. Court of Appeals (106 SCRA 143 [1981]. when the closure of was set aside in 1981. to foreclose mortgages securing debts. 325). in conjunction with Section 29 of the General Banking Act (6 Fletcher.1981 the decision of the Court of Appeals annulling the proscription against petitioner in Central Bank vs. p. 204 [1939]. the period during which the obligee was prevented by a caso fortuito from enforcing his right is not reckoned against him (Article 1154. 1990 which it believed to be of legal significance to the case. p. Commentaries and Jurisprudence on the Civil Code of the Philippines.088. 45. which debts form part of the assets of the bank. this written communication is synonymous to an express acknowledgment of the obligation and had the effect of interrupting the prescription for the second time (Article 1155. 1766 until 1981 when the decision in Central Bank vs. we are thus convinced that the prescriptive period was legally interrupted by fuerza mayor in 1972 on account on the prohibition imposed by the Monetary Board against petitioner from transacting business. 1972 through Monetary Board Resolution No. Osmeña vs. 524 [1941]. of course. Commentaries and Jurisprudence on the Philippine Commercial Laws. 186). At the same time.) Withal. (p. This is not to ignore The Philippine Trust Co. 1986 Revised ed. (72 Phil.80 to the bank and affirmed the other dispositions made the court of origin (p. the action filed on August 21. It would follow that the bank is bound by the acts. 7. 42. We are not unaware of the rule laid down in Teal Motor Co. Court of Appeals (supra. or failure to act. applicable to a situation where there is no restraint imposed on the corporation. Agbayani. it will be entirely a new one. HSBC (67 Phil. As a result of these observations. i. the purpose ands object of its organizations. The question which immediately crops up is whether a foreclose proceeding falls within the purview of the phrase "doing business".. considering that the statement of account sprouted the same day the liaison officer was advised to take an inventory of the records ( p. and take steps to prevent dissipation of such assets. et al. that bank would not be able to do new business. 549 [1928]. 1986 (pp. 528. for in that case. Martin. In point of law. p. 475). until the directive of the board was nullified in 1981. all the benefits acquired so far from the possession cease and when prescription starts anew. Court of First Instance of Manila (51 Phil. 99 [1909]. Rollo). and in connection therewith. of the receiver. the the receiver of the bank is obliged to collect pre-existing debts due to the bank. New Civil Code). Hence. therefore. that is. 206. the evidence at hand does not buttress a finding along this line from the mere fact that petitioner supposedly did not question the substitution when the bank reacted to private respondent's offer to pay the loan (p. 13. the period of ten years within which to foreclose under Article 1142 of the New Civil Code began to run again and. the Court simply rejected the objections of certain creditors to the report of a receiver. 1972. This concept should not be equated with suspension where the past period is included in the computation being added to the period after prescription is resumed (4 Tolentino. Moreno. unlike in the case at bar where petitioner Provident Savings Bank was specifically forbidden and immobilized from doing business in the Philippines on September 15. observing that the vital piece of document could have been located in the course of trial had the slightest degree of prudence been exercised. 1990 ed. . 19 and 58. When prescription is interrupted. . pp. . we need not discuss the other issues raised in the petition. 1990. JJ.37. No. 1 ordering herein petitioner to pay private respondents the following amounts: .. 84800. CENZON. WHEREFORE. J.Arellano Law Foundation Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. of the decision rendered by the Court of First Instance of Manila (now Regional Trial Court). 1990 FIDELITY SAVINGS AND MORTGAGE BANK. Bidin.imposed by the petitioner that it will grant private respondent's request if the latter will also shoulder the obligation incurred by Lorenzo Guarin in his capacity as president of the corporation (p. Eslao for petitioner.. 1991 of respondent court are hereby set aside and another one entered dismissing Wilson Chua's complaint. With the conclusions reached. The decision dated August 31. Agapito S. vs.R. No special pronouncement is made to costs. J. respondents. Fajardo and Marino E. was thus erroneously appreciated. concurs in the result. Leovillo C. and Romero. Feliciano. Branch XL. on December 3. petitioner. as creditor. concur. Jr. the petition is hereby GRANTED. on pure questions of law. Rollo). Agustin Law Offices for private respondents. HON. The Lawphil Project . in his capacity as Presiding Judge of the Court of First Instance of Manila (Branch XL) and SPOUSES TIMOTEO AND OLIMPIA SANTIAGO. REGALADO. PEDRO D. including the resolution dated February 6. 1976 in Civil Case No.: The instant petition seeks the review. L-46208 April 5. The consent of the petitioner to the substitution. Davide. (a) P90,000.00 with accrued interest in accordance with Exhibits A and B until fully paid; (b) P30,000,00 as exemplary damages; and (c) P10,000.00 as and for attorney's fees. The payment by the defendant Fidelity Savings and Mortgage Bank of the aforementioned sums of money shall be subject to the Bank Liquidation Rules and Regulations embodied in the Order of the Court of First Instance of Manila, Branch XIII, dated October 3, 1972, Civil Case No. 86005, entitled, "IN RE: Liquidation of the Fidelity Savings Bank versus Central Bank of the Philippines, Liquidator." With costs against the defendant Fidelity Savings and Mortgage Bank. SO ORDERED. Private respondents instituted this present action for a sum of money with damages against Fidelity Savings and Mortgage Bank, Central Bank of the Philippines, Eusebio Lopez, Jr., Arsenio M. Lopez, Sr., Arsenio S. Lopez, Jr., Bibiana E. Lacuna, Jose C. Morales, Leon P. Cusi, Pilar Y. Pobre-Cusi and Ernani A. Pacana. On motion of herein private respondents, as plaintiffs, the amended complaint was dismissed without prejudice against defendants Jose C. Morales, Leon P. Cusi, Pilar Y. Pobre-Cusi and Ernani A. Pacana. 2 In its aforesaid decision of December 3, 1976, the court a quo dismissed the complaint as against defendants Central Bank of the Philippines, Eusebio Lopez, Jr., Arsenio S. Lopez, Jr., Arsenio M. Lopez, Sr. and Bibiana S. Lacuna. Back on August 10, 1973, the plaintiffs (herein private respondents) and the defendants Fidelity Savings and Mortgage Bank (petitioner herein), Central Bank of the Philippines and Bibiana E. Lacuna had filed in said case in the lower court a partial stipulation of facts, as follows: COME NOW herein plaintiffs, SPOUSES TIMOTEO M. SANTIAGO and OLIMPIA R. SANTIAGO, herein defendants FIDELITY SAVINGS AND MORTGAGE BANK and the CENTRAL BANK OF THE PHILIPPINES, and herein defendant BIBIANA E. LACUNA, through their respective undersigned counsel, and before this Honorable Court most respectfully submit the following Partial Stipulation of Facts: 1. That herein plaintiffs are husband and wife, both of legal age, and presently residing at No. 480 C. de la Paz Street, Sta. Elena, Marikina, Rizal; 2. That herein defendant Fidelity Savings and Mortgage Bank is a corporation duly organized and existing under and by virtue of the laws of the Philippines; that defendant Central Bank of the Philippines is a corporation duly organized and existing under and by virtue of the laws of the Philippines; 3. That herein defendant Bibiana E. Lacuna is of legal age and a resident of No. 42 East Lawin Street, Philamlife Homes, Quezon City, said defendant was an assistant Vice-President of the defendant fidelity Savings and Mortgage Bank, 4. That sometime on May 16, 1968, here in plaintiffs deposited with the defendant Fidelity Savings Bank the amount of FIFTY THOUSAND PESOS (P50,000.00) under Savings Account No. 16-0536; that likewise, sometime on July 6, 1968, herein plaintiff,- deposited with the defendant Fidelity Savings and Mortgage Bank the amount of FIFTY THOUSAND PESOS (P50,000.00) under Certificate of Time Deposit No. 0210; that the aggregate amount of deposits of the plaintiffs with the defendant Fidelity Savings and Mortgage Bank is ONE HUNDRED THOUSAND PESOS (P100,000.00); 5. That on February 18, 1969, the Monetary Board, after finding the report of the Superintendent of Banks, that the condition of the defendant Fidelity Savings and Mortgage Bank is one of insolvency, to be true, issued Resolution No. 350 deciding, among others, as follows: 1) To forbid the Fidelity Savings Bank to do business in the Philippines; 2) To instruct the Acting Superintendent of Banks to take charge, in the name of the Monetary Board, of the Bank's assets 6. That pursuant to the above-cited instructions of the Monetary Board, the Superintendent of Banks took charge in the name of the Monetary Board, of the assets of defendant Fidelity Savings Bank on February 19, 1969; and that since that date up to this date, the Superintendent of Banks (now designated as Director, Department of Commercial and Savings Banks) has been taking charge of the assets of defendant Fidelity Savings and Mortgage Bank; 7. That sometime on October 10, 1969 the Philippine Deposit Insurance Corporation paid the plaintiffs the amount of TEN THOUSAND PESOS (P10,000.00) on the aggregate deposits of P100,000.00 pursuant to Republic Act No. 5517, thereby leaving a deposit balance of P90,000.00; 8. That on December 9, 1969, the Monetary Board issued its Resolution No. 2124 directing the liquidation of the affairs of defendant Fidelity Savings Bank; 9. That on January 25, 1972, the Solicitor General of the Philippines filed a "Petition for Assistance and Supervision in Liquidation" of the affairs of the defendant Fidelity Savings and Mortgage Bank with the Court of First Instance of Manila, assigned to Branch XIII and docketed as Civil Case No. 86005; 10. That on October 3, 1972, the Liquidation Court promulgated the Bank Rules and Regulations to govern the liquidation of the affairs of defendant Fidelity Savings and Mortgage Bank, prescribing the rules on the conversion of the Bank's assets into money, processing of claims against it and the manner and time of distributing the proceeds from the assets of the Bank; 11. That the liquidation proceedings has not been terminated and is still pending up to the present; 12. That herein plaintiffs, through their counsel, sent demand letters to herein defendants, demanding the immediate payment of the aforementioned savings and time deposits. WHEREFORE, it is respectfully prayed that the foregoing Partial Stipulation of Facts be approved by this Honorable Court, without prejudice to the presentation of additional documentary or testimonial evidence by herein parties. Manila, Philippines, August 10, 1973. 3 Assigning error in the judgment of the lower court quoted ab antecedents, petitioner raises two questions of law, to wit: 1. Whether or not an insolvent bank like the Fidelity Savings and Mortgage Bank may be adjudged to pay interest on unpaid deposits even after its closure by the Central Bank by reason of insolvency without violating the provisions of the Civil Code on preference of credits; and 2. Whether or not an insolvent bank like the Fidelity Savings and Mortgage Bank may be adjudged to pay moral and exemplary damages, attorney's fees and costs when the insolvency is caused b the anomalous real estate transactions without violating the provisions of the Civil Code on preference of credits. There is merit in the petition. It is settled jurisprudence that a banking institution which has been declared insolvent and subsequently ordered closed by the Central Bank of the Philippines cannot be held liable to pay interest on bank deposits which accrued during the period when the bank is actually closed and non-operational. In The Overseas Bank of Manila vs. Court of Appeals and Tony D. Tapia, 4 we held that: It is a matter of common knowledge, which We take judicial notice of, that what enables a bank to pay stipulated interest on money deposited with it is that thru the other aspects of its operation it is able to generate funds to cover the payment of such interest. Unless a bank can lend money, engage in international transactions, acquire foreclosed mortgaged properties or their proceeds and generally engage in other banking and financing activities from which it can derive income, it is inconceivable how it can carry on as a depository obligated to pay stipulated interest. Conventional wisdom dictates this inexorable fair and just conclusion. And it can be said that all who deposit money in banks are aware of such a simple economic proposition. Consequently, it should be deemed read into every contract of deposit with a bank that the obligation to pay interest on the deposit ceases the moment the operation of the bank is completely suspended by the duly constituted authority, the Central Bank. This was reiterated in the subsequent case of The Overseas Bank of Manila vs. The Hon. Court of Appeals and Julian R. Cordero. 5 and in the recent cases of Integrated Realty Corporation, et al. vs. Philippine National Bank, et al. and the Overseas Bank of Manila vs. Court of appeals, et al. 6 From the aforecited authorities, it is manifest that petitioner cannot be held liable for interest on bank deposits which accrued from the time it was prohibited by the Central Bank to continue with its banking operations, that is, when Resolution No. 350 to that effect was issued on February 18, 1969. The order, therefore, of the Central Bank as receiver/liquidator of petitioner bank allowing the claims of depositors and creditors to earn interest up to the date of its closure on February 18, 1969, 7 in line with the doctrine laid down in the jurisprudence above cited. Although petitioner's formulation of the second issue that it poses is slightly inaccurate and defective, we likewise find the awards of moral and exemplary damages and attorney's fees to be erroneous. The trial court found, and it is not disputed, that there was no fraud or bad faith on the part of petitioner bank and the other defendants in accepting the deposits of private respondents. Petitioner bank could not even be faulted in not immediately returning the amount claimed by private respondents considering that the demand to pay was made and Civil Case No. 84800 was filed in the trial court several months after the Central Bank had ordered petitioner's closure. By that time, petitioner bank was no longer in a position to comply with its obligations to its creditors, including herein private respondents. Even the trial court had to admit that petitioner bank failed to pay private respondents because it was already insolvent. 8 Further, this case is not one of the specified or analogous cases wherein moral damages may be recovered. 9 There is no valid basis for the award of exemplary damages which is supposed to serve as a warning to other banks from dissipating their assets in anomalous transactions. It was not proven by private respondents, and neither was there a categorical finding made by the trial court, that petitioner bank actually engaged in anomalous real estate transactions. The same were raised only during the testimony of the bank examiner of the Central Bank, 10 but no documentary evidence was ever presented in support thereof. Hence, it was error for the lower court to impose exemplary damages upon petitioner bank since, in contracts, such sanction requires that the offending party acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. 11 Neither does this case present the situation where attorney's fees may be awarded. 12 In the absence of fraud, bad faith, malice or wanton attitude, petitioner bank may, therefore, not be held responsible for damages which may be reasonably attributed to the non-performance of the obligation. 13 Consequently, we reiterate that under the premises and pursuant to the aforementioned provisions of law, it is apparent that private respondents are not justifiably entitled to the payment of moral and exemplary damages and attorney's fees. While we tend to agree with petitioner bank that private respondents' claims should he been filed in the liquidation proceedings in Civil Case No. 86005, entitled "In Re: Liquidation of the Fidelity Savings and Mortgage Bank," pending before Branch XIII of the then Court of First Instance of Manila, we do not believe that the decision rendered in the instant case would be violative of the legal provisions on preference and concurrence of credits. As the trial court puts it: . . . But this order of payment should not be understood as raising these deposits to the category of preferred credits of the defendant Fidelity Savings and Mortgage Bank but shall be paid in accordance with the Bank Liquidation Rules and Regulations embodied in the Order of the. Court of First Instance of Manila, Branch XIII dated October 3, 1972 (Exh. 3). . . . 14 WHEREFORE, the judgment appealed from is hereby MODIFIED. Petitioner Fidelity Savings and Mortgage Bank is hereby declared liable to pay private respondents Timoteo and Olimpia Santiago the sum of P90,000.00, with accrued interest in accordance with the terms of Savings Account Deposit No. 16-0536 (Exhibit A) and Certificate of Time Deposit No. 0210 (Exhibit B) until February 18, 1969. The awards for moral and exemplary damages, and attorney's fees are hereby DELETED. No costs. SO ORDERED. Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur. Republic of the Philippines EN BANC [G.R. No. 137348. June 21, 2004] PEOPLE OF THE PHILIPPINES, appellee, vs. WILLIAM ONG y LI and CHING DE MING @ ROBERT TIU, appellants. DECISION PUNO, J.: “… the allowance of the privilege to withhold evidence that is demonstrably relevant in a criminal trial would cut deeply into the guarantee of due process of law and gravely impair the basic function of the courts.” [1] Chief Justice Warren E. Burger The case at bar involves the clash of two classic values - - - the need for the State to stop crimes and preserve the peace against the right of an individual to confront material witnesses to establish his innocence. In balancing the two values, we shall scrutinize and set the parameters that ought to guide prosecution when to disclose the identity of confidential informers. On July 27, 1998 accused William Ong y Li and Ching De Ming @ Robert Tiu were charged with violation of Section 15, Article III, in relation to Section 2, Article I, of Republic Act No. 6425, otherwise known as The Dangerous Drugs Act of 1972, as amended. The Information[2] reads: That on or about the 24th day of July, 1998 in Quezon City, Philippines, the said accused, conspiring together, confederating with and mutually helping each other not having been authorized by law to sell, dispense, deliver, transport or distribute any regulated drug, did then and there willfully and unlawfully sell or offer for sale 980.50 grams of Methyl Amphetamine Hydrochloride, which is a regulated drug. CONTRARY TO LAW. . 1998 at 6th Street corner Gilmore Avenue. They returned to the car. testified that the specimen she examined had a net weight of 980. Police Inspector Grace M. The person pointed at him saying “maybe he is the one. The boodle money was prepared consisting of six (6) bundles of cut bond paper with a marked P1.000. two (2) men answering to Ong Sin’s description approached accused Ong. 2004 at 3:00 A. Chief Inspector Ferro decided to conduct a buy-bust operation. 1998. later identified as accused Ching De Ming @ Robert Tiu alighted. Quezon City.00 consideration.M. A little while. SPO1 Gonzales as poseur-buyer and the rest as back-up support. at Camp Crame. While waiting at Jollibee. SPO1 Gonzales and the CI saw a green Toyota Corolla coming. There he met the other accused Ching De Ming for the first time. On his part. walked a few steps and then waved his right hand to somebody. claimed that he came to the Philippines in 1997 to look for a job. the two (2) accused. SPO1 Gonzales showed him the slightly opened plastic bag containing the boodle money. SPO1 Gonzales then demanded to see the shabu. Two (2) weeks prior to his arrest. went out of the car. When they reached a certain place. In the course of the trial.. On July 24. When they returned to the car. PNP Crime Laboratory.. accused Ong approached their car. The team. the companion of the driver poked a gun at him. Suddenly. corroborated his story.000. a regulated drug. Her testimony was supported by her Physical Sciences Report. SPO1 Gonzales gave to accused Ong the boodle money placed in a “W.M. while waiting inside his car for his girlfriend and her mother who just went in a townhouse at 8th Street. The driver got out of the car and accused Ong followed him. The CI rode with SPO1 Gonzales. accused De Ming was nowhere to be found. accused Ching De Ming testified that he is a legitimate businessman engaged in the RTW business. between 4:00 and 5:00 A. they removed his blindfold. on the same day. After its inspection. In June 1998. pled not guilty.Upon arraignment. Subsequently. SPO1 Gonzales opened it and inside was one (1) sealed plastic bag with a white crystalline substance. The two (2) accused were subjected to a physical and mental examination as required. After walking two (2) blocks. Avelina Cardoz. After an evaluation of the confidential information. He denied knowing accused Ong and the charge of conspiring with him to deliver shabu in New Manila. Quezon City. He claimed that he gets his products from Baclaran and sells them to customers in the cities of Naga and Daet in Bicol. He constituted a team of eight (8) with Police Inspector Medel N. Thereafter. a Chinese citizen from the People’s Republic of China. The records do not show whether they had sufficient knowledge of the English language. Ong Sin called up and set a meeting with accused Ong at the Tayuman branch of Jollibee the next day. proceeded to the meeting place and arrived there at around 1:30 P. SPO1 Gonzales himself arrested accused Ong while the CI and the back-up agents arrested accused De Ming. On July 22. 1998 at around 5:00 P.[4] Appellants denied the story of the prosecution. Ferro about the alleged illicit drug activities of a certain William Ong and an unidentified Chinese male partner. approached accused Ong and handed to him a gift-wrapped package. One of them went to the car parked at his back. Instead. through the testimony of SPO1 Rodolfo S. and a divine healer. placed an order for one (1) kilo of shabu and agreed to a P600. the two (2) accused were given the services of a Chinese interpreter. The rest of the team posted themselves at their back and their right side. Accused Ong excused himself. While accused Ong was walking back to the car. She testified that she requested accused De Ming to drive her to a townhouse at 8th Street. Accused William Ong. New Manila. After a few hours. Quezon City. The CI likewise agreed to meet with his contact on July 24. Several hours later. accused Ong demanded for its payment. They asked him what he was doing there. On July 23. Ong Sin was on the line and informed him that the driver would accompany him to the bihon factory. He was arrested. The CI introduced him to SPO1 Gonzales who told accused Ong in broken Tagalog to get in the car. PNP Narcotics Group. They parked their car along 6th Street corner Gilmore Avenue. the CI called up the alleged pusher. The prosecution. They took his clutch bag. Gonzales. a confidential informant (CI) of the Special Operations Division (SOD). ordered somebody inside to get out and take a good look at him. reported to Chief Inspector Albert Ignatius D. They were found to be free from any external signs of trauma. They saw him next at the Quezon . he stopped working at the factory and hunted for another job. he was approached by persons unknown to him. together with the CI. blindfolded and brought to an undisclosed place. She asked accused De Ming to wait for her and her daughter inside his car. the driver handed the phone to him. He joined them inside a yellow car.” He was then dragged out of his car and brought to the other car. She declared that the officers of the People’s Journal publication could attest to her profession. sought to establish that on July 23. the driver picked up something from the place. 1998 at around 4:30 and 5:00 P. After a brief conversation. New Manila.M. When Ong inquired about the money in payment of the shabu. his two (2) co-workers would meet accused Ong as instructed. Brown” plastic bag. accused Ong received a call from Ong Sin that he could not personally meet him. Poñe as team leader. the CI received a call from the drug dealer changing the meeting time between 2:00 and 3:00 P. Quezon City. The Corolla parked in front of their car and a Chinese-looking male. he was taken to the police station. Their trial proceeded. Eustaquio. Upon the recommendation of a friend. According to SPO1 Gonzales.M. The officers brought the two (2) accused to their office where the corresponding booking sheets and arrest report were prepared. He maintained innocence to the crime charged.50 grams and manifested “positive results for methyl amphetamine hydrochloride”[3] or what is commonly known as shabu. to cure a patient. he was able to work in a pancit canton factory in Quezon City. the driver reached for his cellular phone and called up someone.M. SPO1 Gonzales signaled his back-up team by turning on the hazard lights of the car. the mother of his girlfriend. New Manila. Forensic Chemist. who are Chinese nationals. They blindfolded and brought him to a place. accused Ong was introduced by his friend Kian Ling to Ong Sin for a possible job as technician in a bihon factory owned by Ong Sin.M.00 peso bill on top of each bundle. The plastic bag containing the white crystalline substance was referred to the PNP Crime Laboratory for examination. (Underscoring and emphasis supplied. Sgd. assisted by counsel de parte. The prosecution may call at the trial witnesses other than those named in the complaint or information. Their Certificate of Arraignment[6] states that they were informed of the accusations against them.) The arraignment of appellants violates the above rule.[5] The case is with us on automatic review. in open court. is it not a fact that you had the difficulty of investigating the two accused because of communication problem from your informant? A: We did not encounter such problem when we investigated them sir.[9] After arraignment and in the course of the trial. a businessman and a part time interpreter. They claim that their guilt was not proven beyond reasonable doubt. 1998 Order of Judge Diosdado M. 1998 of Judge Peralta. having been informed of the nature of the accusation filed against him/her/them.City Jail. Appellants insist on their innocence. provides: SECTION 1.”[7] From the records. furnishing him/her/them a copy of the complaint or information with the list of witnesses. Q: A: Now that Chinese interpreter that is also an accused? Yes sir. the lower court had to secure the services of a certain Richard Ng Lee as Chinese interpreter. Mary Ruth Milo-Ferrer Branch Clerk of Court Sgd. sir. and asking him whether he pleads guilty or not guilty. however. Ching de Ming ACCUSED CHING DE MING @ ROBERT TIU Neither does the August 4. the services of a Chinese interpreter were used in investigating appellants. Thus. is hereby designated by the Court as interpreter in this case considering that there is no official interpreter of the Court who is knowledgeable in the Chinese language or any Chinese dialect whatsoever. The arraignment shall be made in open court by the judge or clerk by furnishing the accused with a copy of the complaint or information. viz:[8] Q: Now. Peralta of RTC-Br. 1998 the trial court convicted appellants as charged and imposed on them the penalty of death. It merely states: This 4th day of Aug. It does not. how made. Gonzales revealed in his testimony. Quezon City. Appellants are Chinese nationals. Arraignment and plea. The appointment of Mr. the following accused William Ong and Ching De Ming AKA Robert Tiu was/were called and. 1998. as amended. We also asked question and we have another Chinese who was arrested who can speak Tagalog and we used that Chinese man to translate for us and for them if the questions are difficult to understand. 95. both accused entered a plea of not guilty. reading the same in the language or dialect known to him.(a) The accused must be arraigned before the court where the complaint or information was filed or assigned for trial. William Ong ACCUSED WILLIAM ONG Sgd. pleaded Not Guilty to the crime as charged. Section 1 (a) of the Revised Rules of Criminal Procedure. Richard Ng Lee is without the objection of counsel of the accused and the public prosecutor and considering that the court is convinced that he indeed possesses . indicate whether the Information was read in the language or dialect known to them. It likewise ordered each of them to pay a fine of P1 million pesos. viz: Considering that the counsel of the two (2) accused has still a lot of questions to ask on cross-examination x x x x From hereon. it is clear that appellants only knew the Chinese language. Richard Ng Lee. TO WHICH I CERTIFY. We agree. the said accused in answer to the question of the Court. disclose compliance with the rule on arraignment. SPO1 Rodolfo S. I Rule 116. the undersigns (sic) states: That. On November 18.. and in the presence of Trial Prosecutor Ruben Catubay. Mr. This appears in the Order of August 28. It merely stated in part that “[w]hen both accused William Ong y Li and Ching De Ming @ Robert Tiu were arraigned. however. what happen? A: Q: A: Q: A: Out CI make a couple of call and he contacted William Ong thru a broken tagalog conversation. Your question then was what happened. TRINIDAD to the COURT Already answered. Appellants’ conviction is based on the lone testimony of SPO1 Gonzales.) What leaps from the records of the case is the inability of appellants to fully or sufficiently comprehend any other language than Chinese and any of its dialect.the qualifications of an interpreter of a Chinese language or any other Chinese dialect known and spoken by the two (2) accused. We again emphasize that the requirement that the information should be read in a language or dialect known to the accused is mandatory. When you say “closed”.00 pesos? ATTY. ma’am.[11] II More important than the invalid arraignment of the appellants. COURT: I think what you were asking is what happened he said it was the CI who talked. there was a telephone conversation but he has no personal knowledge.000. the alleged pusher. TRINIDAD (counsel of accused) to the COURT We object to the line of questioning. COURT: In other words what he say is that.[12] Not all elements of the sale were established by the testimony of SPO1 Gonzales. the appellants were arraigned on an Information written in the English language.00 pesos. Q: Where did you come to know about this information that the amount is already 600. ATTY. It is beyond contention that a contract of sale is perfected upon a meeting of the minds of the parties on the object and its price. Failure to observe the rules necessarily nullifies the arraignment. It must be strictly complied with as it is intended to protect the constitutional right of the accused to be informed of the nature and cause of the accusation against him. do you know what happen? A: The CI informed us that the price of that shabu which we’re supposed to buy from them amounts to 600.00 pesos? . we find that the prosecution evidence failed to prove that appellants willfully and unlawfully sold or offered to sell shabu. Your Honor.000. The constitutional protection is part of due process. PROSECUTOR to SPO1 GONZALES Q: So after that. viz: PROSECUTOR to SPO1 GONZALES Q: After you have prepared the boodle money and you had made the proper marking which you presented before this Honorable Court.[10] (Emphasis supplied. what do you mean by that? They agreed to the sale of the shabu. Your Honor that would be hearsay. When your CI contacted with William Ong in broken tagalog? I have a conversation with William Ong in broken tagalog the deal of one kilo gram of shabu was initially closed. PROSECUTOR to SPO1 GONZALES Q: After the CI informed you that the price of the shabu is 600. Despite this inability.000. He was the designated poseur-buyer in the team formed for the buy-bust operation. But a careful reading of his testimony will reveal that he was not privy to the sale transaction that transpired between the CI and appellant William Ong. New Manila.00 pesos and venue is at 6th Street. COURT Put on record that the counsel manifested that his answer is again hearsay and that a double hearsay evidence.000. corner Gilmore Avenue. albeit only through the telephone. COURT to SPO1 GONZALES Q: After the informant told you that there was an agreement to sell 600. they just proceeded with the exchange of money and shabu. New Manila.[13] xxxx PROSECUTOR to SPO1 GONZALES Q: And when you were informed that there was a resetting of this deal? COURT to SPO1 GONZALES Q: How did you come to know that there was a resetting because he has no participation in the conversation and it was the CI according to him and the alleged poseur-buyer. Quezon City between 4:00 and 5:00 o’clock in the morning of July 24. and that would be a double hearsay. It is therefore understandable that in his account of his meeting with appellant William Ong. immediately grouped and briefed the team for the said operation. 1998.A: We prepared this boodle money and the 6. between 4 o’clock to 5 o’clock in the morning of July 24. suspect WILLIAM ONG was finally contacted on or about 9:30 in the evening of July 23. PO2 Elmer N. with the pusher. xxxx That on or about 3:00 o’clock in the morning of July 24. ATTY. 1998 through “Kaliwaan or Abutan” (Cash upon Delivery). A: The CI told our Chief Deputy. WILLIAM ONG made a call to our CI informing him (CI) to reset the time of the drug deal/sale of one (1) kilogram of SHABU and it was scheduled again between 2:00 to 3:00 o’clock in the afternoon of same date and same place. a drug deal/sale was initially closed in the agreed amount of six hundred thousand pesos (P600. viz: . Q: So when the CI informed you that they will meet at 6th Street.000. what happened after that? A: The CI told us that the transaction is 600. Rivel fortifies these facts. Sarampote and PO1 Noli Jingo G. The CI was likewise the one who closed the deal with appellant Ong as to the quantity of shabu to be purchased and its price. 1998 and through a broken Tagalog conversation. New Manila.000 by our Chief SOD. ma’am. PROSECUTOR to SPO1 GONZALES Q: And what did the CI do? A: The CI informed us that the time will be at about 2 to 3 o’clock in the afternoon of that same day and the place.00) and the agreed venue is at the corner of 6th Street and Gilmore Avenue.000. He also set the venue and time of the meeting when the sale would take place. That said information was relayed to our Deputy Chief. TRINIDAD to the COURT That would be hearsay. viz: xxxx That after couple of calls made by our CI. what transpired next? A: On or about 3 o’clock in the morning William Ong made a call to our CI informing him that the sale of the delivery of shabu was reset to another time. SPO1 Gonzales made no reference to any further discussion of the price and the quantity of the shabu.[14] It is abundantly clear that it was the CI who made the initial contact. Your Honor. The Joint Affidavit of Arrest[15] executed by SPO1 Gonzales.00 pesos and that you have already prepared the boodle money as you have stated. Quezon City. who upon learning said report. When they met. Quezon City. 1998. what happened next? A: Chinese looking male person alighted from the car and he went to William Ong and handed to William Ong something that was gift wrapped.[18] xxxx Q: do? A: Q: When that thing was handed to William Ong which identified in Court and which was marked. what did William Ong William Ong took it from Ching De Ming.[17] xxxx Q: And while inside the car.PROSECUTOR to SPO1 GONZALES Q: And when you were there stationed at the venue at 6th Street. Quezon City. When a green Toyota corolla was parked in front of the car. How did he do that? A: (put on record that the witness when answering the question he stood up and then used his right hand in waving as if he is calling for somebody) Q: A: Q: When William Ong waved his right hand to his companion what happened? William Ong walked towards to me and suddenly a green Toyota appeared and parked in front of our car.[16] xxxx Q: And when he approached you what did you do if any? A: Our CI introduced me to William Ong as an interested buyer of one kilo gram of shabu and afterwards I asked William Ong in broken tagalog to get inside the car. if there was He excused himself and alighted from our car and told me to wait for his companion. what happened? A: I and the CI parked our car at 6th Street corner Gilmore Avenue and then we saw William Ong emerged from Gilmore Avenue and approached me and our CI. ma’am. Q: A: Q: A: Q: A: Q: any? A: Q: A: Q: When you showed the boodle money to William Ong what did he do if there was any? He looked at it. ma’am. And what did you do after expecting the boodle money or the bag where the boodle money was placed. When this Exhibit was given to by William Ong what did you do in return? A: I opened that something which was gift wrapped and I saw one sealed plastic bag containing white crystalline substance suspected to be a shabu. what happened next? A: While inside the car William Ong asked me about the payment of the stuff and I got the paper bag and slightly opened. What stuff are you referring to? The shabu.[19] . So that I get the plastic bag and show to William Ong the boodle money. New Manila. And when he looked at it what happened next? I told him that I should look at the stuff before I give the money. ma’am. ma’am. And where you able to wait for that male companion he is referring to? He walked a distance and waved at his companion as if somebody will come to him. . the idea to commit a crime originates from the offender. granted certiorari in order to pass upon the propriety of disclosure of the informer’s identity. One is the need to hide their identity and preserve their invaluable service to the police. For. without anybody inducing or prodding him to commit the offense.[22] It is commonly employed by police officers as an effective way of apprehending law offenders in the act of committing a crime. the principal issue on certiorari is whether the United States District Court committed reversible error when it allowed the Government not to disclose the identity of an undercover employee who had played a material part in bringing about the possession of certain drugs by the accused.[23] In a buy-bust operation. encourages them to perform that obligation.[35] Another is the necessity to protect them from being objects or targets of revenge by the criminals they implicate once they become known. The ruling of the U. through Mr. and the delivery of the illegal drug must be the subject of strict scrutiny by courts to insure that law-abiding citizens are not unlawfully induced to commit an offense. have to be balanced with the right of an accused to a fair trial. not the “poseur-buyer” but merely the deliveryman.[33] To impart probative value to these hearsay statements and convict the appellant solely on this basis would be to render nugatory his constitutional right to confront the witness against him. had been present with the accused at the occurrence of the alleged crime. Justice Burton. SPO1 Gonzales’ testimony is hearsay and possesses no probative value unless it can be shown that the same falls within the exception to the hearsay rule. the prosecution must present a complete picture detailing the transaction. A buy-bust operation is a form of entrapment.[36] on informer’s privilege is instructive. Mr. IV The Court is sharply aware of the compelling considerations why confidential informants are usually not presented by the prosecution. which “must start from the initial contact between the poseur-buyer and the pusher. We ruled that in such operations. the offer to purchase.[27] It is the duty of courts to preserve the purity of their own temple from the prostitution of the criminal law through lawless enforcement.[29] In People v. it is incumbent upon the courts to make sure that the details of the operation are clearly and adequately laid out through relevant. This presumption should not by itself prevail over the presumption of innocence and the constitutionally protected rights of the individual.S. the acceptance of the offer and the consideration for the offer.[30] we stressed the “objective” test in buy-bust operations. U. the promise or payment of the consideration until the consummation of the sale by the delivery of the illegal drug subject of the sale. however. the payment of the 'buy-bust' money.[20] Since only the CI had personal knowledge of the offer to purchase shabu. On this score. in effect. Supreme Court in Roviaro v. the prosecution evidence about the buy-bust operation is incomplete.[31] We emphasized that the manner by which the initial contact was made. His testimony was given instead by SPO1 Gonzales who had no personal knowledge of the same. its claim that there was a valid entrapment of the appellants must fail.”[32] In the case at bar. the offer to purchase the drug. we hold that SPO1 Gonzales is. the courts could not merely rely on but must apply with studied restraint the presumption of regularity in the performance of official duty by law enforcement agents. by preserving their anonymity. wherein the police or its agent lures the accused into committing the offense in order to prosecute him.S.[37] The Court. in this case the informant.[38] The purpose of the privilege is the furtherance and protection of the public interest in effective law enforcement. In said case. His testimony therefore on material points of the sale of shabu is hearsay and standing alone cannot be the basis of the conviction of the appellants. and to examine him for his truthfulness.[28] Courts should not allow themselves to be used as instruments of abuse and injustice lest innocent persons are made to suffer the unusually severe penalties for drug offenses. and might be a material witness to whether the accused knowingly transported the drugs as charged.xxxx Q: A: Q: A: When you saw this Exhibit C-2 crystalline substance which was opened according to you. The privilege recognizes the obligation of citizens to communicate their knowledge of the commission of crimes to law-enforcement officials and. Justice Burton explained that what is usually referred to as the informer’s privilege is in reality the Government’s privilege to withhold from disclosure the identity of persons who furnish information of violations of law to officers charged with enforcement of that law. material and competent evidence. When you gave the boodle money to him. what did he do if any these person who secured the money? He took the money inside the bag.[25] Instigation is deemed contrary to public policy and considered an absolutory cause.[34] As the prosecution failed to prove all the material details of the buybust operation.[24] Its opposite is instigation or inducement. which in recent years has been accepted as a valid means of arresting violators of the Dangerous Drugs Law. What did you do? The companion of William Ong demanded to me the money and I gave to him the boodle money. The confidential informant who had sole knowledge of how the alleged illegal sale of shabu started and how it was perfected was not presented as a witness. All these considerations.[26] To determine whether there was a valid entrapment or whether proper procedures were undertaken in effecting the buy-bust operation. Doria.[21] III We further hold that the prosecution failed to establish its claim of entrapment. when SPO1 Gonzales was asked during the trial as to their identities. and (4) other relevant factors. PO1 Noli Jingo G. Where the disclosure of an informer’s identity. PO2 Elmer Sarampote. testified that the qualitative examination she conducted manifested “positive results for methyl amphetamine hydrochloride” with net weight of 980. In fact. the only participants in the operation were enumerated as SPO1 Gonzales as the poseur-buyer. The prosecution has to prove all the material elements of the alleged sale of shabu and the resulting buy-bust operation.[43] In the case at bar. PNP Crime Laboratory. which arises from the fundamental requirements of fairness was emphasized. V Moreover. The problem has to be resolved on a case to case basis and calls for balancing the state interest in protecting people from crimes against the individual’s right to prepare his defense. or the contents of his communication. Police Inspector Medel M.It was held that the scope of the privilege is limited by its underlying purpose. (3) the possible significance of the informer’s testimony.[48] Clearly. In the Joint Affidavit of Arrest. how and when did he[52] get hold of the specimen examined by Police Inspector Eustaquio? Who entrusted the substance to him and requested him to submit it for examination? For how long was he in possession of the evidence before he turned it over to the PNP Crime Laboratory? Who else had access to the specimen from the time it was allegedly taken . the trial court may require disclosure and dismiss the action if the Government withholds the information. It cannot be diminished except by a value of higher significance. what other steps did you take if any? A: We brought them to our office and we requested the crime laboratory Camp Crame to test the suspected shabu that we recovered from both of them. where the disclosure of the contents of the communication will not tend to reveal the identity of an informer. once the identity of the informer has been disclosed to those who would have cause to resent the communication. Eustaquio. Quezon City. There is no crime of illegal sale of regulated drug when there is a nagging doubt on whether the substance confiscated was the same specimen examined and established to be regulated drug. the rest of the records of the case failed to show the role of SPO4 Castro in the buy-bust operation. he was only able to name another member of the team: Q: A: Q: When you say “team.[39] Likewise. the contents are not privileged.[42] In sum. Thus. It is the Memorandum-Request for Laboratory Examination[49] which indicates that a certain SPO4 Castro submitted the specimen for examination.50 grams. is relevant and helpful to the defense of an accused. the records show that the substance allegedly taken from them was submitted to the PNP Crime Laboratory for examination upon request of the Chief of the SOD Narcotics Group.[47] On cross-examination. (2) the possible defenses.[41] In these situations. sir. the privilege is no longer applicable.[44] Police Inspector Grace M.” SPO1 Gonzales testified on direct examination that: Q: When you arrested them according to you. The liberty and the life of a person enjoy high importance in our scale of values. Can you name the member of the team? A: Our team led by Inspector Medel Poñe.[50] Other members of the team who acted as perimeter security were not identified. Poñe as the team leader with PO2 Elmer N. or is essential to a fair determination of a cause.[40] A further limitation on the applicability of the privilege. After the arrest of the appellants. Where the testimony of the informer is indispensable. Rivel as back-up support. the defense only got this statement from SPO1 Gonzales regarding the evidence allegedly confiscated: Q: A: And you immediately brought him to your office at Camp Aguinaldo? After we gathered the evidences we turned them over to our office. The Joint Affidavit of Arrest[46] merely states that the evidence confiscated was submitted to the “PNP Crime Laboratory Group for qualitative examination. However. it should be disclosed. The issue is whether the substance examined was the same as that allegedly confiscated from appellants. the privilege must give way.[51] These are questions which cannot be met with a lockjaw.[45] This is not in dispute. Since SPO4 Castro appears not to be a part of the buy-bust team. ma’am. ma’am.” who compose the team? I and more or less eight (8) person. the mishandling and transfer of custody of the alleged confiscated methyl amphetamine hydrochloride or shabu further shattered the case of the prosecution. the crime charged against the appellants is capital in character and can result in the imposition of the death penalty. there was no reference to the person who submitted it to the PNP Crime Laboratory for examination. They have foisted the defense of instigation which is in sharp contrast to the claim of entrapment by the prosecution. if any. Rivel. there is no fixed rule with respect to disclosure of the identity of an informer. I myself. SPO3 Ronaldo Sayson. Forensic Chemist. The balance must be adjusted by giving due weight to the following factors. among others: (1) the crime charged. Sarampote and PO1 Noli Jingo G. and I can not remember the others. The Director of Prisons is DIRECTED to implement this decision immediately and to inform this Court within five (5) days from receipt of this decision of the date the appellants are actually released from confinement. Carpio-Morales. are ACQUITTED of the crime of violation of Section 15.J. Vitug. NATIONAL LABOR RELATIONS COMMISSION and DIAR’S ASSISTANCE LABOR UNION. No.. Costs de officio.. Carpio. Our minds rest uneasy on the lone testimony of SPO1 Gonzales. appellant De Ming claimed that when he was arrested on July 23. vs. 1998. April 30. and Corona.. concur. Sandoval-Gutierrez. WHEREFORE. Azcuna.: . petitioners. the prosecution cannot maintain that it was able to prove the guilt of the appellants beyond reasonable doubt. on official leave.. The prosecution tells a different story. DECISION PANGANIBAN. 146923.R. No. and are ordered immediately released from custody unless held for some other lawful cause. 2003] BANK OF THE PHILIPPINE ISLANDS. On his part. New Manila. Avelina Cardoz. COURT OF APPEALS. Davide. JJ. as amended. Article I of R.. he was in the area waiting for his girlfriend and her mother who just went inside a townhouse at 8th Street. Austria-Martinez. in relation to Section 2. the uncorroborated story of SPO1 Gonzales that their team entrapped the appellants in a buy-bust operation on July 24. on leave. Sr. Ynares-Santiago. the Decision of the court a quo is REVERSED and SET ASIDE. His girlfriend’s mother.from appellants when arrested? These questions should be answered satisfactorily to determine whether the integrity of the evidence was compromised in any way. respondents. and Tinga. confirmed his explanation. Jr. Appellants WILLIAM ONG y LI and CHING DE MING @ ROBERT TIU. Callejo. Quisumbing. Otherwise.. Republic of the Philippines THIRD DIVISION [G. JJ. C. the denials and proffered explanations of appellants assume significance in light of the insufficiency of evidence of the prosecution. J. 1998 when he was scheduled to meet with a certain Ong Sin for a possible job as technician in a bihon factory. Appellant Ong testified that he was arrested on July 23. Panganiban.A. J. 6425. 1998. Quezon City. SO ORDERED. otherwise known as The Dangerous Drugs Act of 1972. Article III. VI Finally. When a strict and literal application of the rules on non-forum shopping and verification will result in a patent denial of substantial justice, they may be liberally construed. This guideline is especially true when the petitioner has satisfactorily explained the lapse and fulfilled the requirements in its motion for reconsideration. The Case Before the Court is a Petition for Review[1] under Rule 45 of the Rules of Court, challenging the January 26, 2001 Resolution[2] of the Court of Appeals[3] (CA) in CA-GR SP No. 59858. The Resolution reads as follows: “Up for consideration is petitioner’s motion for reconsideration of this Court’s resolution of dismissal which was promulgated on August 25, 2000. Taking note of the comment by the Office of the Solicitor General for the public respondent on said motion, the same is hereby denied. The resolution of dismissal stands.”[4] Earlier, in its August 25, 2000 Resolution,[5] the CA[6] “resolved to DISMISS the above-entitled petition on the ground that the verification was signed only by petitioner’s vice-president, sans any board resolution or power of attorney authorizing anybody to sign the same and the certificate on non-forum shopping.”[7] The Facts On January 30, 1990, 49 workers filed a Complaint[8] against Bank of the Philippine Islands (BPI) and Diar’s Assistance, Inc. (Diar). Docketed as NLRC Case No. 00-01-00580-90, the Complaint was for the “Regularization of Work Status and Preliminary Injunction with Prayer for Restraining Order.” Complainants claimed that they “were working in the respondent BPI performing clerical, messengerial and general utility work as they [had] been assigned in the bank by their agency x x x Diar’s Assistance, Inc.”[9] In a Manifestation and Motion[10] filed on February 23, 1990 during the pendency of the case, the 49 workers prayed for the inclusion of 121 more as complainants after the latter had signified their intention to join the union. Thereafter, the Complaint was amended and the name of the complainant changed to that of the organization, Diar’s Employees Labor Union (BPI Unibank Chapter).[11] The union prayed that the employment status of their members be regularized and that BPI be ordered to absorb them as regular employees. In an Order[12] dated July 18, 1991, Labor Arbiter Pablo C. Espiritu Jr. dismissed the Complaint. The dismissal was affirmed by the NLRC[13] and by this Court.[14] On January 31, 1994, Diar’s Employees Labor Union, through Normando Beguelme (its president) and Jose Laron (a member), filed a new Complaint[15] for the declaration of its members as regular employees of BPI. The Complaint was docketed as NLRC NCR Case No. 00-01-00829-94. After Labor Arbiter Potenciano S. Canizares Jr. dismissed the case for lack of merit,[16] the union appealed to the NLRC. BPI and Diar opposed the appeal and interposed forum shopping as one of their defenses. The NLRC (First Division) set aside the labor arbiter’s Decision and declared complainants as regular employees of BPI.[17] On the issue of forum shopping, the NLRC ruled thus: “A check with the record of this case did not show that the complainants in the first case are the same complainants in this third case. Although the causes of action in the first case and this third case are the same – for the regularization of the members of complainant union – there is no identity of the parties involved. The second case is for injunction and the same is, therefore, not similar to this case.”[18] Diar and BPI moved for a reconsideration. In its March 28, 2000 Order,[19] the NLRC denied both Motions: BPI’s, for being filed beyond the reglementary period; and Diar’s, for lack of merit. Thereafter, BPI filed with the appellate court a Petition for Certiorari[20] under Rule 65, assailing the NLRC Decision. As earlier stated, the CA dismissed the recourse on the ground that the verification has been signed only by petitioner’s vice president, without express authority from any board resolution or power of attorney. Presently before the CA is a similar Petition (CA-GR SP No. 59093) filed by Diar, BPI’s co-respondent.[21] Hence this appeal.[22] Issues Petitioner submits the following issues for the resolution of this Court: “1. Whether or not BPI has a clearly meritorious case so as to warrant the review and the declaration as null and void by this Honorable Court of the resolution of the Court of Appeals dismissing BPI’s petition for certiorari on a mere technicality and notwithstanding substantial compliance thereon by BPI in its motion for reconsideration. “2. Whether or not this Honorable Court’s Resolution in G.R. No. 129067 which disposed of NLRC NCR Case No. 0001-00580-90 (FIRST REGULARIZATION CASE) constitutes a bar by former judgment to NLRC-NCR Case No. 00-0100829-94 (SECOND REGULARIZATION CASE) and whether or not the filing of the SECOND REGULARIZATION CASE violates the prohibition on forum-shopping.”[23] In simpler terms, the issues are as follows (1) whether BPI’s Petition before the CA should have been given due course; and (2) whether the second regularization case is barred by res judicata. The Court’s Ruling The Petition has merit. First Issue: Dismissal of the Appeal on Technicality Petitioner pleads for a liberal construction of the rules on verification and forum shopping. On the other hand, respondents insist on a strict application of these rules. The rules on verification and forum shopping are laid out in Sections 4 and 5 of Rule 7 of the Rules of Court, which we quote: “SEC. 4. Verification. -- Except when otherwise specifically required by law or rule, pleadings need not be under oath, verified or accompanied by affidavit. “A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct of his personal knowledge or based on authentic records. “A pleading required to be verified which contains a verification based on ‘information and belief’ or upon ‘knowledge, information, and belief,’ or lacks a proper verification, shall be treated as an unsigned pleading. (As amended, A.M. No. 002-10, May 1, 2000.) “SEC. 5. Certification against forum shopping. -- The plaintiff or principal party shall certify under oath in the complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he shall report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory pleading has been filed. “Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other initiatory pleading but shall be cause for the dismissal of the case without prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false certification or non-compliance with any of the undertakings therein shall constitute indirect contempt of court, without prejudice to the corresponding administrative and criminal actions. If the acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the same shall be ground for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause for administrative sanctions.” It cannot be denied that the BPI Petition before the CA was dismissed, because the verification and the certificate of nonforum shopping had been signed by the vice president of the bank without any board resolution or power of attorney empowering him to do so. On the other hand, petitioner contends that it did authorize the vice president to act as its representative, as shown in its Motion for Reconsideration. However, respondent union argues that his action was ratified by the Executive Committee of BPI only on September 6, 2000. Thus, the “belated authority” was given 11 days after the 60-day reglementary period for filing a Petition for Certiorari. After carefully considering the arguments of both parties, we hold that a liberal construction of the rules on verification and forum shopping are in order. “Verification is simply intended to secure an assurance that the allegations in the pleading are true and correct and not the product of the imagination or a matter of speculation, and that the pleading is filed in good faith.”[24] Meanwhile, the purpose of the aforesaid certification is to prohibit and penalize the evils of forum shopping.[25] We see no circumvention of these objectives by the vice president’s signing the verification and certification without express authorization from any existing board resolution. As explained in BPI’s Motion for Reconsideration, he was actually authorized to sign the verification and the certification,[26] as shown by the written confirmation attached to the Motion. Furthermore, he is presumed to know the requirements for validly signing those documents. “Rules of procedure are used to help secure and not override substantial justice. Even the Rules of Court mandates a liberal construction in order to promote their objective of securing a just, speedy and inexpensive disposition of every action and proceeding. Since rules of procedure are mere tools designed to facilitate the attainment of justice, their strict and rigid application which would result in technicalities that tend to frustrate rather than promote substantial justice must always be avoided. Thus, the dismissal of an appeal on purely, technical ground is frowned upon especially if it will result to unfairness.”[27] We shall not rule on the merits but, in the interest of fair play and the orderly administration of justice, we find that the reinstatement of the Petition and its consolidation with Diar’s CA appeal is warranted. BPI is an indispensable party to the controversy, considering that its inclusion is necessary for the effective and complete resolution of the case. The fact that respondent union commenced the case against BPI and Diar in a single Complaint is an indication of the indispensability of both parties to the action. The Rules state that “[p]arties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants.”[28] In BA Finance Corporation v. CA,[29] the Court explained: “x x x. An indispensable party is one whose interest will be affected by the court's action in the litigation, and without whom no final determination of the case can be had. The party's interest in the subject matter of the suit and in the relief sought are so inextricably intertwined with the other parties' that his legal presence as a party to the proceeding is an absolute necessity. In his absence there cannot be a resolution of the dispute of the parties before the court which is effective, complete, or equitable. “Conversely, a party is not indispensable to the suit if his interest in the controversy or subject matter is distinct and divisible from the interest of the other parties and will not necessarily be prejudiced by a judgment which does complete justice to the parties in court. He is not indispensable if his presence would merely permit complete relief between him and those already parties to the action or will simply avoid multiple litigation. “Without the presence of indispensable parties to a suit or proceeding, judgment of a court cannot attain real finality.”[30] In all stages of an action -- including those involved in motions for reconsideration, petitions for certiorari and appeals -- the rule on joinder of indispensable parties must be extended, as long as such extension is practicable and the reason for it, as explained above, subsists. The ultimate issue brought up for review in the instant case is: who is the employer of the members of respondent labor union -- BPI, Diar or both? Moreover, a review of the facts of the case reveals that (1) there is a service contract between BPI and Diar; (2) Diar pays the salaries of the members of respondent union; and (3) the members of respondent union perform their tasks in the premises of BPI. These facts reveal close factual and legal relationships among respondent union, BPI and Diar -- relationships that are so inextricably intertwined that the issues raised in the Complaint cannot be finally determined without considering the rights of all three parties. Thus, it is essential that when the case is brought up for review to determine the real employer of the members of respondent labor union, all these parties must be heard. Second Issue: Res Judicata Unquestionably, any ruling on the issue of res judicata would affect the final determination on the merits of the Complaint. This determination will, in turn, affect Diar, which is not impleaded as a party in the present appeal. Hence, it would not be proper for this Court to resolve the issue of res judicata without Diar as a party before it, in view of the pendency of CA-GR SP No. 59093[31] -- a similar petition for the review of the same NLRC Decision, the subject of the case at bar. A consolidation is thus warranted, based on the foregoing circumstances: BPI and Diar are indispensable parties, who have filed separate but similar petitions to review the same NLRC Decision. WHEREFORE, the Petition is hereby GRANTED, and the assailed Resolutions REVERSED and SET ASIDE. The case is REMANDED to the Court of Appeals, which is DIRECTED to consolidate BPI’s case (CA-GR SP No. 59858) with Diar’s (CAGR SP No. 59093). No costs. SO ORDERED. Puno, (Chairman), Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur. : In the case of the Liquidation of the Mercantile Bank of China. The commissioner set off these balances against the credits which the bank had against the aforesaid depositors and the recommendation thus made was approved by the court. Pacific Commercial Co. 1. We hold . AMERICAN APOTHECARIES CO. 1938 In re Liquidation of Mercantile Bank of China.R. L-43689 March 31. Passing upon the claims. Ban Ling & Co Ban Kiat. The first two corporations likewise appealed from the other portions of the decision holding that the credits of the aforesaid depositors should be set off against their indebtedness for the amount of the drafts drawn upon them and sent to the bank for collection. the Mercantile Bank of China delivered the merchandise and the bills of lading and other documents without collecting the amount of the drafts. claimants-appellees. and Carnation Company filed claims asking that the Bank Commissioner pay them the amount of the various drafts which they forwarded the said bank for collection from various persons and entitled. The said drafts represented the values of the merchandise which the creditors had remitted to the drawees. et al. In the case entitled. To this part of the decision is addressed the first assignment of error of the appellants. in other words. Ross. Liquidation of the Mercantile Bank of China. We then said: 3. finally. INC. consisting of the balance in their favor in their current account and saving deposits in the Mercantile bank of China. Felipe Lim Reyes for entity Co Ban Ling and Co Ban Kiat. The commissioner set off the claims of the appellant against what the bank had against him. The court approved the recommendation of the commissioner to the effect that the balances in favor of the claimants-depositors. Tan Tiong Tick vs. be set off against their indebtedness to the bank for the amount of the drafts which were drawn upon the. In connection with these claims. Revilla for appellants.. Alvendia for appellees Chinese Grocers Asso.. Go Poco Grocery Co. FISHER FLOURING MILLS CO. coming from their current account and savings deposits. and were forwarded to the Mercantile Bank of China with instructions that the latter collect their amounts and send the same to them. No. and Carnation Company appealed from that part of the decision of the court which declares the claims filed by the said depositors as preferred credits.. Fisher Flouring Mills Co.Republic of the Philippines SUPREME COURT Manila EN BANC G. or.. E. were at the same time creditors of the Mercantile Bank of China because they had in their favor balances in their current account and savings deposits with said bank. the commissioner appointed by the court approved them and recommended their payment. against the claims of the herein appellants. instituted in the Court of First Instance of Manila. named Tan Tiong Tick. Pacific Commercial Co. et al. Lawrence and Selph for appellees Pacific Coast Biscuit Co. vs. American Apothecaries Co.. Cheng Bang Yek (Chung Lin). and CARNATION COMPANY. and in general recommended that the credits be considered preferred. and not to deliver either the merchandise or the bills of lading and other documents accompanying the same until the said drafts have been paid. Inc. (G. IMPERIAL. Victoriano Tan Layco and Sy Guan Juat & Co. it did not turn over to the claimants the amount thereof.R. it happened that some of the drawees who had accepted the drafts. Eusebio Orense and Carmelino G. or the payment of their balances. Oversteeping its powers. The appellees contend that the set off does not lie in this case because otherwise it would prejudice them and the other creditors in the liquidations.. 43682). we held that the credits against the bank for current account and savings deposits should be set off against those which the bank may have against the depositors. No. recently decided. they also appealed because the court did not order the payment to the appellants of the amounts to be deducted from the dividends of the aforesaid depositors in payment of the drafts drawn upon them and forwarded to the bank for collection.. by the herein appellants and forwarded to the aforesaid bank for collection. J. PACIFIC COMMERCIAL COMPANY.. claimantsappellants. Fisher Flouring Mills Company Inc. P. ET AL. Marcelo Nubla for appellees Ang Cheng Lian et al. The court approved this set off over the objection of the appellant. and. and with the exception of certain amount which it paid on account.. We hold that the appellants' contention is not well founded.. The first and the second to the last of the said articles are as follows: "ART. checks and other papers deposited in a bank for collection remain the property of the depositor." (7 C. 207 Ala..016. 133 U.. "As a general rule. six per cent per annum.353. We hold that the appellants' contention is meritorious.. and fixed deposits provided it retains in its treasury a certain percentage of the amount said deposits. 303. Contrary to the recommendation of the commissioner that the credits of the depositors-claimants Tan Tiong Tick. 27.112. Tan Tiong Tick. and Sy Guan Juat & Co. 561. That the depositary. Bank vs. Tatum vs. $1. vs. as amended by Act No. plus interest. the creditors of the as a result of their current account and savings deposits.. ed.101. Richmond First Nat. Armstrong. Philadelphia vs. 43682).) As to the interest. Go Poco Grocery and Co Ban Lin & Co Ban Kiat are the drawees who accepted for payment the drawn by the Pacific Commercial Co. Co. sec. The appellants excepted to this portion of the decision and assign it as the fourth error committed. Morgan. Johnston. "3. Latimer. 267 U. National Shawmut Bank..47 and $525. in turn. in United States currency. that is. and that they be turned over to the appellants. Bank. and such instructions bind those to whom they are addressed or who know of them. Smith 19 Law. 599. 2... 605. we held that the current account and savings deposits are not preferred credit under the existing and applicable law. 1." (7 Am. United States vs.. it is obvious that any amount which may be collected on account of said drafts and their interest should be turned over to the appellants in satisfaction of their credits. National Bank vs.S. Bank. Bank vs.. Louis. 256.S..J. Carpenter vs. 566. 309. in American money as the principal is of this currency.) "In collecting drafts and other instruments deposited with specific instructions to collect and remit the proceed to the depositor. Bedford bank vs. commission. savings.. 45 Idaho 746. 162. their claims against the bank. 455. Co Ban Ling & Co Ban Kiat and Sy Guan Juat & Co be considered as ordinary credits. Bank of Guntersville vs. 785. with the consent of the depository disposes of the articles on deposit either for himself or for his business. "ART. Bank vs. Co. 584. be deducted from the dividends which the said depositors may earn. even though it is authorized to apply the proceeds on a debt of the owner. and the claimant himself asks that he be allowed interest up to the time when the bank ceased its operations. Park Nat. 193 Ala. is likewise the drawee who accepted for payment the draft drawn by Fisher Flouring Mills Co.S. and are converted into simple commercial loans. it is necessary — "1. 76 Ind." (7 C. 181 Ill. No. pp. and the debts are mutual — that is.. the rate should be the legal one. Chung Lin (Cheng Bang Yek).. vs.. 3519. Acoam. Whenever. That the bank had the authority of the claimant to make use of the money deposited on current and savings account is deducible from the fact that the bank has been paying interest on both deposits.J. Desha Bank & T.. ButterworthJudson Corp. 120. vs. 114. 485. $2. In the case of the Liquidation of the Mercantile Bank of China . Niblack vs. 629.. These drawees refused to pay the amounts of the drafts drawn and accepted by them because they are. provided there is no express agreement to the contrary and the deposit is not specifically applicable to some other particular purposes. according to section 125 of the Corporation Law and 9 of Act No. to the payment of the debt due it by the depositor. etc. at least. 187 Fed. Crown Point First Nat. Chung Lin (Cheng Bang Yek).. Crayter. Ward vs. "It may be stated as a general rule that when a depositor is indebted to a bank. Dearborn Nat. 165 Ind.. Inc. Stapf. Quilling. Bank.. 148 U. 245.85.. Boone County Nat. 199 Ala. Tan Tiong Tick vs. In order that a deposit may be considered commercial.R. 387. 597. Co. Holloway vs. and the rules and provisions applicable to the commercial loans. Bank. 65. provides that the Bank Commissioner shall reduce the assets of the bank into cash and this cannot be done without first liquidating the accounts of the debtors of said bank.83. St.. 102 Fed.. be a merchant. Ft.75. between the same parties and in the same right — the bank may apply the depositor. or such portion thereof as may be necessary. (G. plus their corresponding interest due. inasmuch as the Mercantile Bank of China merely acted as their representative or agent and the title to said drafts did not pass to it. On this point we then said: The Code of Commerce contains express provisions regulating deposits of the nature under consideration. said bank is authorized to make use of the current account. and the bank performs the service of collection as his agent. and they are articles 303 to 310. Wyman vs. First Nat Bank. 207. Jur.that the court's ruling is not error. That the things deposited be commercial objects. because the bank disposed of the funds deposited by the claimants for its ordinary transaction and for the banking business in which was engaged.. the court declared them preferred in connection with the other credits approved. but no other parties. Commercial Nat. sec. or be made by reason or a consequence of commercial transactions. Moreover. 3. the so-called current account and savings deposits have lost the character of deposits properly so-called. p. 517. the bank acts as agent throughout the undertaking. 598.. 40 Am. Commercial Bank & T." In accordance with article 309. $2. 50. and in making liquidation the debtors are entitled to set off. the rights and obligations of the depository and of the depositor shall ceased. or contract which took the place of the deposit shall observed. 118 Ark. Eckels. First Nat. by way of compensation. The appellants being the owners of the amounts of the drafts. American Apothecaries Co. 3154. New Orleans Coffee Co. par. p.) The situation referred to by the appellees is inevitable because section 1639 of the Revised Administrative Code. "2.. This omission is the basis of the second and third assignments of error. The court did not in its decision that the aforesaid sums of money. 261.. 98 Fed. 67 Fed. 169 Ill.. Richardson vs. Said section read: . Rep.. R. 125 Ind.. 279. Go Poco Grocery. That the deposit constitute in itself a commercial transaction. the respective amount of which are $6. or for transactions instructed to him by the former. and should be paid from the time the drawees were in default until the principal has been totally paid. recently decided. "3. or administered. 48. was by law authorized to dispose of the deposits. Every such commercial banking corporation shall at all times have on hand in lawful money of the Philippine Islands or of the United States. 1909. That nothing in this section shall be deemed in any manner to affect pending litigation in bankruptcy proceedings. and which is in his possession for delivery to a definite person in the name and for the account of the remitter or for the settlement of claims which are to be met at the insolvent's domicile. also know as the Insolvency Law. Property and effects deposited with the bankrupt. "The following shall be included in this section: "1. provided that such investment or subrogation has been registered in the registro mercantil in accordance with the provision of the sections of the Code of Commerce mentioned in the next preceding paragraph. 9. if any. 125. drawn or indorsed to the remitted direct. the ownership of which has not been conveyed to him by a legal and irrevocable title. legacy. Such commercial banking corporation shall also at all times maintain reserve equal in amount to at least five per centum of its total savings deposits. Every bank organized under this Act shall at all times have on hand. or donation whether remaining in the form in which it was received or subrogated or invested in other property. considering that there happens to be other creditors. Said section provide: "SEC. — No new bankruptcy proceedings shall be instituted until a new bankruptcy law shall come into force in the Islands. however. shall be considered to be the property of other persons and shall be place at the disposal of its lawful owners an order of the court made at the hearing mentioned in section forty-three or at any ordinary hearing. an amount equal to at least eighteen per centum of the aggregate amount of its deposits in current accounts which are payable on demand and of its fixed deposits coming due within thirty days. Section V of Title I of Book IV of the Code of Commerce contains provisions relative to the right of creditors in case of bankruptcy and their respective gradation. in the same manner as is prescribed in this section for commercial banking corporations in general which reserve against savings deposits may consist of Philippine Government or United States Government bonds. 1956. the creditos. and the term "lawful money of the United States" shall include gold and silver certificate of the United States and bank notes issued by the Federal Reserve Banks. which took effect on may 20. Merchandise. an amount equal to at least twenty per centum of the aggregate amount of its deposits. conclude that the law applicable to the appellant's claims is the Code of Commerce and that his current and savings accounts have been converted into simple commercial loans. . without the necessity of the claimant's consent. 2. for purchase. "The percentage of reserve to deposits in the case of the Philippine National Bank and the Bank of the Philippine Islands is hereby fixed at eighteen per centum of demands deposits and fixed deposits payable within thirty days and five per centum of savings deposits. "5. "SEC. if the assignee or any creditor whose right in the estate of the insolvent has been established shall petition in writing for such hearing and the court in its discretion shall so order. on commission. or held in usufruct by him."SEC. retaining such rights in said property as belong to the insolvent. Dowry property inestimado and such property estimado which may remain in the possession of the husband where the receipt thereof is a matter of record in a public instrument registered under the provisions of sections twenty-one and twenty-seven of the Code of Commerce in force. The said reserve may be maintained in the form of lawful money of the Philippine Island or of the United States. to determine the preference of the appellants credits. Bills of exchange or promissory notes without indorsement or other expression transferring ownership remitted to the insolvent for collection and all others acquired by him for the account of another person. effects. . and any other kind of property found among the property of the insolvent. The next point to decide is the applicable law. sale. rented. We. No new proceedings to be instituted. and subrogating him whenever they shall have complied with all obligations concerning said property. leased. . subject to the limitation indicated. "Therefore the bank. Paraphernal property which the wife may have acquired by inheritance. but its section 52 provides that all the provisions of the law shall not apply to corporations engaged principally in the banking business. All existing laws and orders relating to bankruptcy and proceedings therein are hereby repealed: Provided. "2. . 524. "6. forwarding. in lawful money of the Philippine Island or of the United States. and among them should be understood included the Mercantile Bank of China. otherwise than on current account. therefore. Money remitted to the insolvent. "4. The term "lawful money of the Philippine Islands" shall include the Treasury certificate authorized by Act Numbered Three thousand and fifty-eight. but these provisions have been repealed by section 524 of the Code of Civil Procedure reading as follows: "SEC. Merchandise in the possession of the bankrupt. containing provisions regarding preference of credits. The Philippine Legislature subsequently enacted Act No. or delivery. or in bond issued or guaranteed by the Government of the Philippine Island or of the United States. . the legislature could not reasonably refer to any legislation upon the subject. or domestic servant immediately preceding the commencement of proceeding in insolvency. as amended by Act Numbered Thirty-eight hundred and twelve. "All other creditors shall be paid pro rata. provides: "SEC. "SEC. . or withheld by the insolvent if still existing in his possession or the amount of the value thereof. after payment of the costs of the proceedings."7. 1641. or of his wife. as amended by said Act. and expenses incurred in the administration of the insolvent's estate for the common interest of the creditors. "(d) Legal expenses. taxes and assessments due to any municipality or municipalities of the Philippines Islands. The following are the preferred claims which shall be paid in the order named: "(a) Necessary funeral expenses of the debtor. 3962. to be allowed by the court. in due time. 1929. or otherwise. in providing that the Bank Commissioner shall pay the debts of the company by virtue of an order of the court in the order of their legal priority. except those whose claims are mentioned in the next following section. and bills of exchange and promissory notes derived therefrom in his possession. known as the Employers' Liability Act. 49. . "(b) Debts due for personal services rendered the insolvent by employees. was to enforce the provisions of sections 48. shall not be paid to the person so proving the same until satisfactory evidence shall be produced of the payment of such debt by such person so liable. . which took effect on February 20. The provisions of this Act shall not apply to corporations engaged principally in the banking business. the Bank Commissioner shall pay the debt of the institution. taxes and assessments due to any province or provinces of the Philippines Islands. "In all cases arising under this paragraph assignees may retain the merchandise so purchased or claim it for the creditors by paying the price thereof to the vendor. as the court may direct." From this section 1641 we deduce that the intention of the Philippines Legislature. converted. "(g) Debts. 52. unless the interpretation above stated is accepted." (As amended by Act No. laborers. 49 and 50 of the Insolvency Law in the sense that they are made applicable to cases of insolvency or bankruptcy and liquidation of banks. 50. Amounts due the insolvent for sales of merchandise on commission. SEC. taxes. for there being no legal establishing any priority in the order of payment of credits. or to any other corporation as to which there is any special provision of law for its liquidation in case of insolvency. "(c) Compensation due the laborers or their dependents under the provisions of Act Numbered Thirty-four hundred and twenty-eight. when properly authorized and approved by the court. "(e) Debt. 3519. all of which shall be a legal presumption when the amount involved in any such sale shall not have been credited by on the books of both the owner of the merchandise and of the insolvent. when approved by the court. commissions and fees of the Bank Commissioner. and merchandise the bills of lading or shipping receipts of which have been sent him after the same has been loaded by order of the purchaser and for his account and risk. Merchandise bought on credit by the insolvent so long as the actual delivery thereof has not been made to him at his store or at any other place stipulated for such delivery. But the Philippines Legislature subsequently enacted Act No. guarantor. or children who are under their parental authority and have no property of their own. after the property or preference whatever: Provided. provided it is proven that the obligation to the insolvent is derived therefrom and that said bill of exchange and promissory notes were in the possession of the insolvent for account of the owner of the merchandise to be cashed and remitted. surety.) "ART. Distribution of assets. That any debt proved by any person liable as bail. No other deduction can be made from the phrase 'in the order of their legal priority' employed by the law." It appears that even after the enactment of the Insolvency Law was no law in this jurisdiction governing the order or preference of credits in cases of insolvency and liquidation of a bank. whose debts are duly proved and allowed shall be entitled to share in the property and estate pro rata. and other laws providing for payment of indemnity for damages in cases of labor accidents. "9. and under the provisions of Act Numbered Eighteen hundred and seventy-four. including reasonable expenses. and assessments due the Insular Government. to the said owner. under decree of the court in the order of their legal priority. All creditors. know as the Workmen's Compensation Act. "(f) Debts. and the share to which otherwise held for the benefit of the party entitled thereto. "8. amending various sections of the Revised Administrative Code. — In the case of the liquidation of a bank or banking institution. and section 1641 of this latter Code. for the debtor. Goods or chattels wrongfully taken. even when the same are not made payable to the owner of the merchandise sold. Villa-Real. The last assigned error is a sequel to the preceding ones. Avanceña. consisting of current account and savings deposits are ordinary and should be paid by the Bank Commissioner pro rata with the other of the same class. 47-48. are not preferred credits. 49 and 50 of the Insolvency Law. Benito Gonzales and Marcos G. which amounts are those set out in subdivision 2 of this decision. THE CITY FISCAL OF MANILA. FLAMINIANO. there be deducted the credits or claims of the appellants. So ordered. 1982. rec. petitioners.Examining now the claims for the appellant. JJ. consisting of his current and savings accounts. ASST. Chung Lin (Cheng Bang Yek)..). a temporary restraining order was duly issued ordering the respondents. 1982. For the same reason we hold that the credits of the aforesaid depositor are ordinary and not preferred. we conclude that the appellant's claims.R. Diaz and Horrilleno. namely.£ªwph!1 This is a petition for prohibition and injunction with a prayer for the immediate issuance of restraining order and/or writ of preliminary injunction filed by petitioners on March 26. LOTA and CLEMENT DAVID. CITY FISCAL FELIZARDO N. agents. Actg. we refrain from elaborating thereon.J. should be set off against the credits of the appellants.J.. plus interest thereon at the rate fixed by this decision. HON. JR. and it being unsupported by any argument. MAKASIAR. and that they be delivered to the latter. Manila Lumbers Merchants Association. The Lawphil Project . ANTONIO I. whose names have just been mentioned. it appears that none of them falls under any of the cases specified by sections 48.. Go Poco Grocery. On January 24. respondents. concur. L-60033 April 4. JOSE B. Chiam. 1983. with the costs of this instance to the named depositors-appellees and the appellees who have appeared and filed their briefs. Chinese Grocers Association. (2) that from the dividends to be paid to said depositors.:ñé+. 1984 TEOFISTO GUINGONA. No. consisting of their current account and savings deposits in the Mercantile Bank of China. by virtue of a court resolution issued by this Court on the same date. and TERESITA SANTOS. Y.. MARTIN. 8131938 of the Office of the City Fiscal of Manila (pp. the portions of the decision which are the subject matter of this appeal are modified and it held and decreed: (1) that the credits of Tan Tiong Tick. wherefore. and (3) that the credits of the said depositors. C. vs. C. Co Ban Ling & Co Ban Kiat and Sy Guan Juat & Co. representatives and/or person or persons acting upon their (respondents') orders or in their place or stead to refrain from proceeding with the preliminary investigation in Case No. consisting of the amounts of the drafts upon the former. . Abad Santos. In view of all the foregoing. 1983.Arellano Law Foundation Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. On March 31. their officers. private respondent Clement David filed a motion to lift restraining order which was denied in the resolution of this Court dated May 18. 81-31938 in the Office of the City Fiscal of Manila. that the liabilities of NSLA to David were civil in nature.546. 1981 N LA was placed under receivership by the Central Bank.£îhqw⣠"That he had no hand whatsoever in the transactions between David and NSLA since he (Guingona Jr. Guingona. Jr.) had resigned as NSLA president in March 1978. 364 and related regulations regarding foreign exchange transactions principally.14 and US$75. 81-31938 misappropriated the balance of the investments. 1980 (au jointly with Denise Kuhne)..000. he (Guingona.94 on savings account deposits (jointly with his sister. Dionisio. 82-1695 in the Court of First Instance to contest its (NSLA's) closure. the liabilities of NSLA to David because of the latter's insistence that he placed his investments with NSLA because of his faith in Guingona. as well as the testimony of private respondent's principal witness and the evidence through said witness. 1981..000. as follows:têñ. namely Homero Gonzales.) bound himself to pay David the sums of P668.. that in a Promissory Note dated June 17. that he assumed a portion o. that all transactions with David were recorded except the sum of US$15.£îhqw⣠"That Martin became President of NSLA in March 1978 (after the resignation of Guingona. on the ground of lack of jurisdiction in that the allegations of the charged. 1979 to March. 364 and related Central Bank regulations on foreign exchange transactions. that because NSLA was urgently in need of funds and at David's insistence. private respondent David filed I. Annex' C') stated the following:têñ. or prior to those transactions. that a draft of US$30.S.accounts with interest above the legal rate. In I. 81-31938. 1981 David received a report from the Central Bank that only P305. with estafa and violation of Central Bank Circular No. that on March 21. Jr. then NSLA President. that David's check for US$50.500. Jr. Paz.20 on nine deposits. so that David filed claims therewith for his investments and those of his sister. 1981 (Petition.. showed that petitioners' obligation is civil in nature. No. US$10. 1980. which case was assigned to respondent Lota for preliminary investigation (Petition. thereby reducing the amounts misappropriated to P959. that he (Guingona. at the same time violating Central Bank Circular No.000.) and served as such until October 30. Martin executed a promissory note in David's favor and caused the transfer to him of a nine and on behalf (9 1/2) carat diamond ring with a net value of P510. David invested with the Nation Savings and Loan Association.000. US$15. paid only P200.00 which was a personal loan of Santos." . Victor Gomez.01 and US$37. No. Jr.) paid P200.307. Juan Merino.) secured payment of those amounts with second mortgages over two (2) parcels of land under a deed of Second Real Estate Mortgage (Petition. hence. and. Perfecto Manalac.S.00 was cleared through Guingona. to effect the release of the mortgage over one (1) of the two parcels of land conveyed to David under second mortgages. filed a joint counter-affidavit (Petition. Jr. Jr. 81-31938. and one John Doe) with estafa and violation of Central Bank Circular No." Petitioner. petitioner Guingona Jr. that after NSLA was placed under receivership.As can be gleaned from the above. Jaime V. then NSLA Executive Vice-President of NSLA and petitioner Santos.00 under a receipt dated June 8. his investments were treated as special. allegedly committed as follows (Petition.1982.00.00 was placed in the name of one Paz Roces because of a pending transaction with her.£îhqw⣠On December 23.S.00. Annex "E") in which it was provided that the mortgage over one (1) parcel shall be cancelled upon payment of one-half of the obligation to David. 364 and related Central Bank regulations on foreign exchange transactions.00 on time deposit.00 in stated installments. the instant petition seeks to prohibit public respondents from proceeding with the preliminary investigation of I.531.92 of those investments were entered in the records of NSLA.1981.00 under a receipt and guarantee of payment and US$50. No.'s dollar account because NSLA did not have one. while Santos was General Manager up to November 1980. Annex "D") he (Guingona. that after demands. Annex' B') in which they stated the following.00 and tendered another P300. that.00 which David refused to accept. that on July 22.. P13. therefore. that he (Guingona.821. 8). then NSLA General Manager. (hereinafter called NSLA) the sum of P1.000." Petitioners.000. Q-33865 in the Court of First Instance of Rizal at Quezon City. David charged petitioners (together with one Robert Marshall and the following directors of the Nation Savings and Loan Association. We hereby adopt the antecedent facts narrated by the Solicitor General in its Comment dated June 28.000. Inc.000. that majority of the stockholders of NSLA had filed Special Proceedings No. For purposes of brevity.000.têñ. in his counter-affidavit (Petition. No. Annex "A"):têñ. Jr. p. an recorded in separate confidential documents only a portion of which were to be reported because he did not want the Australian government to tax his total earnings (nor) to know his total investments.£îhqw⣠"From March 20. Jr.000. that the Philippine Deposit Insurance Corporation had already reimbursed David within the legal limits. Flavio Macasaet. petitioner Martin.) filed Civil Case No. Jr. Paulino B.00.000. the respondents in I.S. in which petitioners were charged by private respondent Clement David. that David was induced into making the aforestated investments by Robert Marshall an Australian national who was allegedly a close associate of petitioner Guingona Jr.078.145. Denise Kuhne). Martin and Santos. In the case of Central Bank of the Philippines vs. made investments in the aforesaid bank in the amount of US$75. 1980 Civil Code Gullas vs. Phil. 443). pp. are not preferred credits (Art.01 (1/2 of P1. together with one Robert Marshall and the other directors of the Nation Savings and Loan Association. 1981 affidavit. petitioners Guingona and Martin. and (b) David's principal witness allegedly testified that the duplicate originals of the aforesaid instruments of indebtedness were all on file with NSLA. 81-31938. are considered simple loans and. Article 1980 of the New Civil Code provides that:têñ. and Martin assumed them. will show that from March 20.94 on savings account deposits covered by passbook nos. American Apothecaries Co. vs.. Pacific Commercial Co. This promissory note was based on the statement of account as of June 30.614. or current are to be treated as loans and are to be covered by the law on loans (Art..336.145. Thus. 1981 whereby he personally acknowledged an indebtedness of P668. invested with the Nation Savings and Loan Association the sum of P1. 80. National Bank. rec.). Santos. Fletcher American National Bank vs. 1981 prepared by the private respondent (p. All kinds of bank deposits. 17. as such. As correctly pointed out by the Solicitor General..00 (1/2 of US$75. 1981. They are really 'loans because they earn interest. 8). 6-632 and 29-742.119 [1975]. private respondent David. In re Liquidation of Mercantile Batik of China Tan Tiong Tick vs.000. Antonio I. 8-9). The aforesaid promissory notes were executed as a result of deposits made by Clement David and Denise Kuhne with the Nation Savings and Loan Association. and savings deposits with the aforesaid bank.). petitioners filed the instant petition because: (a) the production of the Promisory Notes. Fiscal Lota denied the motion to dismiss (Petition. Denise Kuhne. But. savings. It must be pointed out that when private respondent David invested his money on nine.02) and US$37.). Morfe (63 SCRA 114. whether fixed.At the inception of the preliminary investigation before respondent Lota.500. p. after the presentation of David's principal witness.e.159. public respondents have no jurisdiction over the charge of estafa. and petitioner Guingona executed another promissory note antedated to June 17.00) in favor of private respondent (p. the contract that was perfected was a contract of simple loan or mutuum and not a contract of deposit. together with his sister. contrary to David's claim that some of his investments were not record (Petition. Jr.00 (p. p. Pacific Coast Biscuit Co. American Apothecaries Co.65 Phil.. 364 and related regulations regarding foreign exchange transactions) subject matter of I. are loans to a bank because it can use the same.20. 1981 a joint promissory note in favor of private respondent acknowledging an indebtedness of Pl.613. i. Gopoco Grocery vs. petitioners Guingona and Martin agreed to divide the said indebtedness. 1981.336. petitioners moved to dismiss the charges against them for lack of jurisdiction because David's claims allegedly comprised a purely civil obligation which was itself novated. Moreover.). 62 Phil.14 (pp. and current deposits of-money in banks and similar institutions shall be governed by the provisions concerning simple loan.307. savings. Thereafter. The amount of indebtedness assumed appears to be bigger than the original claim because of the added interest and the inclusion of other deposits of private respondent's sister in the amount of P116. The petitioner here in making time deposits that earn interests will respondent Overseas Bank of Manila was in reality a creditor of the respondent Bank and not a depositor.].).078. the sole issue for resolution is whether public respondents acted without jurisdiction when they investigated the charges (estafa and violation of CB Circular No. 375. 1981. and current deposits of money in banks and similar institutions are hat true deposits. Certificates of Time Deposits and Savings Account allegedly showed that the transactions between David and NSLA were simple loans. rec.02 and US$75. Furthermore. assumed the obligation of the bank to private respondent David by executing on June 17. before this Court indisputably show that he has indeed invested his money on time and savings deposits with the Nation Savings and Loan Association.£îhqw⣠Article 1980. Ang Chong UM 66 PWL 385. Chinese Grocers Association 65 Phil.614. Banker's Acceptance. 15-16. 153-157. 81. Fixed. vs. or on July 17. £îhqw⣠Bank deposits are in the nature of irregular deposits.00 (p.000. Petitioners alleged that they did not exhaust available administrative remedies because to do so would be futile (Petition. complaint filed in the Office of the City Fiscal of Manila by private respondent David against petitioners Teopisto Guingona.000.S. savings. Central Bank of the Philippines (96 SCRA 102 [1980]) that:têñ. It appears further that private respondent David.531.." This Court also declared in the recent case of Serrano vs. together with his sister.£îhqw⣠It should be noted that fixed. upon the request of private respondent David. There is merit in the contention of the petitioners that their liability is civil in nature and therefore. A casual perusal of the December 23. or a total of P1. 65 PhiL 429. 519). civil obligations on the part of NSLA which were novated when Guingona. 66 Phil 414. We said:têñ. Current and saving deposits. rec.546. 1980 Civil Code. Martin and Teresita G. roc. rec. Failure of the . the records reveal that when the aforesaid bank was placed under receivership on March 21.20 on time deposits covered by Bankers Acceptances and Certificates of Time Deposits and the sum of P13. The respondent Bank was in turn a debtor of petitioner. rec. 1979 to March. Jr. the various pleadings and documents filed by private respondent David. Pacific Coast Biscuit CO. 25. No. 9) [pp. one of the parties delivers to another. "In commodatum the bailor retains the ownership of the thing loaned while in simple loan. the borrower can dispose of the thing borrowed (Article 248. "Art. prevent the rise of criminal liability as long as it occurs prior to the filing of the criminal information in court.£îhqw⣠The novation theory may perhaps apply prior to the filling of the criminal information in court by the state prosecutors because up to that time the original trust relation may be converted by the parties into an ordinary creditor-debtor situation. Gaz. it may however. as distinguished from the civil. Again. this Court reiterated the ruling in People vs.£îhqw⣠As pointed out in People vs.£îhqw⣠In order that a person can be convicted under the above-quoted provision. par. Hence. goods or personal property borrowed Being the owner. 2898. and place the complainant in estoppel to insist on the original transaction or "cast doubt on the true nature" thereof. 69 [1968]) We held that:têñ. Serrano ( 25 SCRA 64. thereby placing the complainant in estoppel to insist on the original trust. thereby resulting in the novation of the original contractual obligation arising from deposit into a contract of loan and converting the original trust relation between the bank and private respondent David into an ordinary debtor-creditor relation between the petitioners and private respondent. Nery. Montanes.£îhqw⣠"Art.têñ. But even granting that the failure of the bank to pay the time and savings deposits of private respondent David would constitute a violation of paragraph 1(b) of Article 315 of the Revised Penal Code. declaring that:têñ. such as to pay interests on deposits and to pay withdrawals. novation prior to the filing of the criminal information — as in the case at bar — may convert the relation between the parties into an ordinary creditor-debtor relation. i. Malik.respondent Bank to honor the time deposit is failure to pay its obligation as a debtor and not a breach of trust arising from a depositary's failure to return the subject matter of the deposit (Emphasis supplied). WE have already laid down the rule that:têñ." It can be readily noted from the above-quoted provisions that in simple loan (mutuum). the offended party may no longer divest the prosecution of its power to exact the criminal liability.and return it. because when the aforesaid bank was placed under receivership by the Central Bank. Moreover. The nature of simple loan is defined in Articles 1933 and 1953 of the Civil Code. 124 SCRA 578. while it is true that novation does not extinguish criminal liability. 1953. upon the condition that the same amount of the same kind and quality shall he paid in which case the contract is simply called a loan or mutuum. — By the contract of loan. it has. in Gonzales vs.jurisdiction. the failure of the Bank to return the amount deposited will not constitute estafa through misappropriation punishable under Article 315. nevertheless any incipient criminal liability was deemed avoided. the relationship between the private respondent and the Nation Savings and Loan Association is that of creditor and debtor. the sums of money that petitioners received were loans. — A person who receives a loan of money or any other fungible thing acquires the ownership thereof. 1933. Civil Code) and his act will not be considered misappropriation thereof' (Yam vs. And.e. it must be proven that he has the obligation to deliver or return the some money. Thus. . no obligation to return or deliver the same money that was deposited. "Simple loan may be gratuitous or with a stipulation to pay interest.. the bills or coins. Nery ( 10 SCRA 244 [1964] ). either something not consumable so that the latter may use the same for a certain time. Gervacio. l(b) of the Revised Penal Code. petitioners Guingona and Martin assumed the obligation of the bank to private respondent David. the ownership of the amount deposited was transmitted to the Bank upon the perfection of the contract and it can make use of the amount deposited for its banking operations. Velasco. 76. the failure of the bank or petitioners Guingona and Martin to pay the deposits of private respondent would not constitute a breach of trust but would merely be a failure to pay the obligation as a debtor. in the latest case of Ong vs. only the latter can renounce it (People vs. 42 Phil. the related civil complaints and the supporting sworn statements. Emphasis supplied). 34 [1979]. consequently. and is bound to pay to the creditor an equal amount of the same kind and quality. however. 8 Phil. But after the justice authorities have taken cognizance of the crime and instituted action in court. 580-581 [1983] ). as contrasted to commodatum the borrower acquires ownership of the money. Court of Appeals (L-58476. This is so because as clearly as stated in criminal complaints. While the Bank has the obligation to return the amount deposited. vs. ownership passes to the borrower. The crime being an offense against the state. 620). 54 Off. U. but it will only give rise to civil liability over which the public respondents have no.S. 94 SCRA 30. People vs. which they received from private respondents. "Commodatum is essentially gratuitous. Consequently. in which case the contract is called a commodatum. or money or other consumable thing. goods or personal property that he received Petitioners had no such obligation to return the same money. in Lopez vs. Pangasinan. intended to annul void proceedings. 93 SCRA 462. 385. and Hernandez vs. Albano. the general rule is that "ordinarily. vs. 2. 621-622 [1966]). in petitioners' reply filed on May 7.£îhqw⣠The writs of certiorari and prohibition. for the orderly administration of justice.00 without authority from the Central Bank. Abeto vs. Considering that this might adversely affect his case. 1982 to private respondent's comment and in the July 27.00 were really converted into Philippine currency before they were accepted and deposited into Nation Savings and Loan Association. to avoid multiplicity of actions. the prosecution in a criminal offense cannot be the subject of prohibition and injunction. to prevent the use of the strong arm of the law in an oppressive and vindictive manner. would work great injustice to petitioners and would render meaningless the proper administration of justice. Likewise. the same had to be cleared first and converted into Philippine currency. We held that:têñ. Petitioners' contention is worthy of behelf for the following reasons: 1. it is clear that novation occurred long before the filing of the criminal complaint with the Office of the City Fiscal. this court has recognized the resort to the extraordinary writs of prohibition and injunction in extreme cases. In conclusion. dollars were converted first into Philippine pesos before they were accepted and deposited in Nation Savings and Loan Association. in the absence of a clear and convincing evidence to the contrary (see paragraphs p and q. 1981 with the Office of the City Fiscal. 1982 reply to public respondents' comment and reiterated in petitioners' memorandum filed on October 30. because the statute relied upon is unconstitutional or was held invalid" ( Primicias vs. are in the ultimate analysis. 47 Phil. Rules of Court). 27 Phil. criminal prosecution may not be blocked by court prohibition or injunction. et al. The City Judge. 5. 1982. public respondents should be restrained from further proceeding with the criminal case for to allow the case to continue. Rule 131. Consequently. 90 Phil. Trinidad. as when money loaned is made to appear as a deposit. Petitioners herein were likewise charged with violation of Section 3 of Central Bank Circular No.000.S. considering that the liability of the petitioners is purely civil in nature and that there is no clear showing that they engaged in foreign exchange transactions. as aforestated. "5. Accordingly.It may be observed in this regard that novation is not one of the means recognized by the Penal Code whereby criminal liability can be extinguished. however. that the US dollars intended by respondent David for deposit were all converted into Philippine currency before acceptance and deposit into Nation Savings and Loan Association.000. citing Ramos vs. whether or not it was such that its breach would not give rise to penal responsibility. "4. the role of novation may only be to either prevent the rise of criminal habihty or to cast doubt on the true nature of the original basic transaction. We hold that the public respondents acted without jurisdiction when they investigated the charges against the petitioners. U. Torres. 96 [1967]). While as a rule. who in turn deposited it to his dollar account with the Security Bank and Trust Company. It appears from the records that when respondent David was about to make a deposit of bank draft issued in his name in the amount of US$50. 1981 assuming the obligation of the bank to private respondent David. They contend however. thereby adding more support to the conclusion that the US$75. 364 and other related regulations regarding foreign exchange transactions by accepting foreign currency deposit in the amount of US$75. as extraordinary legal remedies. 3. Petitioner Guingona merely accommodated the request of the Nation Savings and loan Association in order to clear the bank draft through his dollar account because the bank did not have a dollar account. "3. thus:têñ. Villareal. and that the transaction was regular and fair. to afford adequate protection to constitutional rights. respondent David should have promptly denied petitioners' allegation. Hence. petitioner Guingona authorized Nation Savings and Loan Association to withdraw the same in order to be utilized by the bank for its operations.000. the bank draft was endorsed by respondent David to petitioner Guingona. Thus. People. 19 SCRA 95.£îhqw⣠"1. any incipient criminal liability would be avoided but there will still be a civil liability on the part of petitioners Guingona and Martin to pay the assumed obligation. "2. In the case at bar. to prevent the unlawful and oppressive exercise of legal authority and to provide for a fair and orderly administration of justice. 481). Respondent David has not denied the aforesaid contention of herein petitioners despite the fact that it was raised. Immediately after the bank draft was cleared. ( 18 SCRA 616.00 with the Nation Savings and Loan Association. in Yu Kong Eng vs. 581. 469-470 [1979]. We took cognizance of a petition for certiorari and prohibition although the accused in the case could have . Consequently. or other similar disguise is resorted to (cf. in proper cases. It is safe to assume that the U. Municipality of Urdaneta. are allowed in the following instances:têñ. 25 SCRA 557 [1968]. while the criminal complaint for estafa was filed on December 23.£îhqw⣠On the issue of whether a writ of injunction can restrain the proceedings in Criminal Case No. Sec. there is no dispute that petitioners Guingona and Martin executed a promissory note on June 17. hence.S." Exceptions. 3140. because the bank is presumed to have followed the ordinary course of the business which is to accept deposits in Philippine currency only. even if the petitioners could have appealed to the Ministry of Justice. Nepomuceno. SERRANO. our action in the premises being based on the public welfare policy the advancement of public policy.. 627. he instructed respondent Maersk to send money orders to his family. it failed to present competent evidence of payment such that this Office is constrained to approve this claim as warranted. The case was transferred to the NLRC where Labor Arbiter Arthur Amansec ruled. Whenever he returned to the Philippines. COURT OF APPEALS. In Dimayuga vs. British and Danish ships. It appears that petitioner's family failed to receive the money orders petitioner sent through respondent Maersk. Meantime. deployed petitioner Serrano as a seaman to Liberian. Respondent Maersk assured him that they would look into the matter. petitioner filed a complaint for collection of the total amount of the unsent money orders and illegal salary deductions against the respondent Maersk in the Philippine Overseas Employment Agency (POEA).P. Moller replied to petitioner that they keep accounting documents only for a certain number of years.1äwphï1. 1999 dismissing outrightly the petition for certiorari filed by petitioner for having been filed out of time.[3] Upon learning this in 1978.[1] As petitioner was on board a ship most of the time. Regarding the Danish SSS deductions of forty-four dollars ($44. MOLLER. if convicted. 1993. Regarding to (sic) complainant's claim for payment of and/or refund of seven (7) money orders for the period covering 1977 to 1978. they could have appealed. Petitioner agreed and from 1977 to 1978. 139420.00) for a period of three (3) months in 1991. respondent Maersk would hire him again to board another one of their vessels for about a year.[5] In April 1994. The following facts spurred the present controversy: From 1974 to 1991. the same cannot be said to be illegal. Likewise. The ebb and flow of his claim will now rest as he is finally awarded what has long been due him.P. WHEREFORE. August 15. A. 43 Phil. INC. while the respondents claim payment of that claim. vs. In fact. the local agent of respondent foreign corporation A. it appearing that the same were for payments of complainants' medical insurance and expenses.600. Moller declined petitioner's demand for payment. petitioner demanded that respondent Maersk pay him the amounts the latter deducted from his salary. petitioner wrote to respondent Maersk demanding immediate payment to him of the total amount of the money orders deducted from his salary from 1977 to 1978.050. Fajardo. And in Arevalo vs.P. Inc.P.ñët Republic of the Philippines FIRST DIVISION [G.P. DECISION PUNO. 304. and A.: Were it not for petitioner's relentless efforts. it was claimed that it had no outstanding money orders. his claim for portions of his salary as a seaman would now be sunk into oblivion. deducted various amounts from his salary for Danish Social Security System (SSS). thus data on his money claims from 1977 to 1978 were no longer available. respondent A. these deductions are compulsory deductions pursuant to Department Order No. J. petitioner. No. THE TEMPORARY RESTRAINING ORDER PREVIOUSLY ISSUED IS MADE PERMANENT.appealed in due time from the order complained of.[4] On November 11. petitioner would go to the office of respondent Maersk to follow up his money claims but he would be told to return after several weeks as respondent Maersk needed time to verify its records and to bring up the matter with its principal employer. COSTS AGAINST THE PRIVATE RESPONDENT. 1990 of the Danish Maritime Authority.00 Sterling Pounds from petitioner's salary. a non-deduction could have been unlawful and could have meant official sanctions against the respondents. Moller. THE PETITION IS HEREBY GRANTED. respondent A. 63 Phil. . respondent Maersk offered to send portions of petitioner’s salary to his family in the Philippines. NATIONAL LABOR RELATIONS COMMISSION.R. MAERSKFILIPINAS CREWING. Respondent Maersk deducted the amounts of these money orders totaling HK$4. This is a petition for review on certiorari to nullify the resolutions of the Court of Appeals dated June 18. respondents. the same cannot be said to be unlawful. The amounts would be sent by money order. ship club. the petition for certiorari challenging the trial court's action admitting an amended information was sustained despite the availability of appeal at the proper time. Being government imposed deductions. then assigned him again to board one of their vessels. 1999 and July 15. viz: “Anent the deductions from his salary of "Welfare/Ship Club" contributions. SO ORDERED.00 and £1. We gave due course to their petition for the orderly administration of justice and to avoid possible oppression by the strong arm of the law. and SSS Medicare. respondent Maersk-Filipinas Crewing. in October 1993.[2] Respondent Maersk. 898 dated December 27. We also admitted a petition to restrain the prosecution of certain chiropractors although. 2001] ROBERTO R. Moller. welfare contributions. Finally. it is also alleged. Inc. viz: “RESPONDENT COURT OF APPEALS ERRED IN DISMISSING THE PETITION ON MERE TECHNICALITIES RATHER THAN ON THE MERITS OF THE CASE.600 and 1.600 and 1.' In the instant petition. complainant has slept on his rights and allowed himself to be overtaken by prescription. If the motion is denied. for being meritorious. is hereby APPROVED. he received a copy of the impugned decision of the National Labor Relations Commission. the petition shall be filed in and cognizable only by the Court of Appeals. Thus. he had already used up six (6) days of the reglementary 60-day period so that he had only fifty-four (54) days from notice of the denial of his motion for reconsideration within which to file his petition. Accordingly.The petition shall be filed not later than sixty (60) days from notice of the judgment. petitioner takes issue only on the dismissal of his claim for the unsent money orders. No extension of time to file the petition shall be granted except for the most compelling reason and in no case to exceed fifteen (15) days.00 (Affidavit-complaint) has indeed prescribed.('s) cross-claim against respondent. Clearly. 'If petitioner had filed a motion for new trial or reconsideration in due time after notice of said judgment. he received a copy of the Resolution of the NLRC denying his motion for reconsideration. within which to file his petition. as amended. was further amended effective September 1. Primarily we find that the complainant's claim that the money orders he sent to his brother Arturo Serrano in the years 1977 to 1978 were not received by the latter and his claim against respondent to pay him the alleged amounts of HK$4. in the Regional Trial Court exercising jurisdiction over the territorial area as defined by the Supreme Court. he filed his motion for reconsideration. order or resolution sought to be assailed in the Supreme Court or. 4. but which shall not be less than five (5) days in any event. petitioner filed a motion for reconsideration of the NLRC decision. or in the Sandiganbayan if it is in aid of its jurisdiction. viz: “. viz: “The Appeal is impressed with merit. and unless otherwise provided by law or these Rules.The petition may be filed not later than sixty (60) days from notice of judgment. the aggrieved party may file the petition within the remaining period. 1999. the petitioner himself states that on February 26.050 (Position Paper) or US$2. Pursuant to Section 4 of the Rule. In his petition before this Court. Petitioner sought recourse in the Court of Appeals. Applying the law then applicable. order or resolution. the sixty (60) day period shall be counted from notice of the denial of said motion. We shall first deal with the issue on the period for filing a petition for review from a decision of the NLRC to the Court of Appeals. complainant's cause of action accrued in 1977 and 1978 but he filed a complaint only on April 20. 1994. The appellate court dismissed his petition for having been filed out of time. if it relates to the acts or omissions of a lower court or of a corporation. Under Article 251 (sic) of the Labor Code as amended and we quote: 'Article 291. But he filed it only on June 7.”[7] (emphasis supplied) Be that as it may. . 1999. Inc. Money claims. When and where petition filed. board. 1999. 1999. judgment is hereby made ordering the respondent and/or TICO Insurance Co. reckoned from notice of such denial.xxx xxx xxx WHEREFORE. 1999. to refund to complainant his untransmitted money order payment of HK$4. . the Court of Appeals correctly dismissed the petition for certiorari for having been filed out of time. It was denied for lack of merit. Petitioner's motion for reconsideration of the appellate court's resolution having been denied. such a petition should be filed within sixty days. 2000 to read as follows: “Sec.” On March 4. . the period herein fixed shall be interrupted. whether such motion is required or not. he appealed to this Court with the lone assignment of error.050 Sterling Pounds. it is late by eight (8) days. Other claims for lack of merit. The NLRC reversed and set side Labor Arbiter Amansec's decision and dismissed the case on the ground of prescription. officer or person. are ordered DISMISSED. .” The Labor Arbiter's dismissal of petitioner’s complaint for illegal salary deductions was not appealed and has thus become final.' In the instant case. 1999. and on March 4. On April 6. It may also be filed in the Court of Appeals whether or not the same is in aid of its appellate jurisdiction.. computed as follows: 'SEC. If it involves acts or omissions of a quasi-judicial agency. he had only until May 30.-. as amended effective September 1.050.. 4. order or resolution. otherwise they shall be forever barred. Hence. 1998. Respondent TICO Insurance Co. Section 4.”[6] Respondent Maersk appealed to the NLRC the Labor Arbiter's grant of the claim for the amount of unsent money orders. In case a motion for reconsideration or new trial was timely filed. All money claims arising from employer-employee relations accruing during the effectivity of this Code shall be filed within three years from the time the cause of action accrued. Rule 65. Where and when petition to be filed. do not come within the legal conception of a retroactive law. we ruled that the action had not prescribed. viz: . The latter was held liable for its negligence in the decision rendered on April 6. Finally. . even after termination of the criminal case against him. 291 of the Labor Code. 1974.[8] petitioner filed a petition for certiorari in the Court of Appeals on January 24. The retroactive application of procedural laws is not violative of any right of a person who may feel that he is adversely affected (Gregorio vs. Statutes regulating (sic) to the procedure of the courts will be construed as applicable to actions pending and undetermined at the time of their passage. However. board. He repeatedly requested for reinstatement thereafter.The petition shall be filed in the Supreme Court or. no vested right may attach to nor arise from procedural laws. but only operate in furtherance of the remedy or confirmation of rights already existing. v. Procedural laws are retroactive in that sense and to that extent. Sagales. The respondent driver was absolved of any contributory negligence. Rule 22. officer or person. The counting of the sixty-day reglementary period was reckoned from the date petitioner received the impugned decision. 00-2-03-SC wherein the sixty-day period to file a petition for certiorari is reckoned from receipt of the resolution denying the motion for reconsideration should be deemed applicable. This resulted to the death of eighteen (18) passengers and caused serious injury to fifty-six (56) other passengers.” (emphasis supplied) Although the above amendment took effect on September 1. as thus computed. All money claims arising from employer-employee relations accruing during the effectivity of this Code shall be filed within three years from the time the cause of action accrued. the next working day. 1980 a formal complaint with the Ministry of Labor and Employment for illegal dismissal against Baliwag Transit praying for reinstatement with back wages and emergency cost of living allowance. he claims that it has not prescribed. On May 10. unless otherwise provided by law or these rules. Soon after the PNR decision was rendered. this Court has applied it retroactively. 208). petitioner Baliwag Transit replied that he could not be reinstated as his driver's license had already been revoked and his driving was "extremely dangerous to the riding public. The complaint was dismissed by the regional director on the ground of prescription under Art. on May 2. Mina. 26 SCRA 512). he had 60 days or until June 7. No. 1977. we ruled that the petition in the Court of Appeals was deemed timely filed. or the general rule against retroactive operation of statutes (Castro vs. et al. the petition shall be filed in and cognizable only by the Court of Appeals. The appellate court dismissed it on February 15. 1980. NLRC. interrupted by the filing of a motion for reconsideration. CIR. petitioner Serrano received the resolution of the NLRC denying his motion for reconsideration on April 6. Applying the amendment to the case. Tinio vs. the time shall not run until the next working day. 26 SCRA 229. viz: “. Rule 65 of the Rules was amended effective September 1. 2000.” (emphasis supplied) The pivotal question is when petitioner's cause of action accrued for this will determine the reckoning date of the three-year prescriptive period. otherwise they shall be forever barred.. The petitioner therein sought recourse in this Court. On appeal to this Court. We agree. 2000. 1999. Ople. viz: “Article 291." This prompted respondent driver to file on July 29. or in the Sandiganbayan if it is in aid of its appellate jurisdiction. 1980. The applicable law is Article 291 of the Labor Code. the driver was also prosecuted for multiple homicide and multiple serious physical injuries. viz: “We hold that the amendment under A. While the case was pending in this Court. in the Regional Trial Court exercising jurisdiction over the territorial area as defined by the Supreme Court. He was advised to wait until his criminal case was terminated. then resumed from the date of receipt of the resolution denying the motion for reconsideration. Thus. Moller wrote to him that its accounting records showed it had no outstanding money orders and that his case was considered outdated. Remedial statutes or statutes relating to remedies or modes of procedure. Thenceforth.” Petitioner thus timely filed his petition with the Court of Appeals on June 9. which do not create new or take away vested rights. This was reversed by then Labor and Employment Minister Ople. a bus of the petitioner Baliwag Transit bus company driven by the respondent driver figured in an accident with a train of the Philippine National Railways (PNR) on August 10. Money claims. if it relates to the acts or omissions of a lower court or of a corporation. The bus company instituted a complaint against the PNR. (Billones vs. Section 4. 94 Phil. a Sunday or a legal holiday in the place where the court sits. Inc. Court of Appeals. The issue is whether or not the claim of the petitioner has prescribed. 1999. but to no avail. 2000. falls on a Saturday. If it involves the acts or omissions of a quasi-judicial agency. But as June 7 fell on a Saturday. In Systems Factors Corporation and Modesto Dean v. The reason is that as a general rule. 2000 for having been filed ten days beyond the prescriptive period. he demanded reinstatement in a letter signed by his counsel. We now proceed to decide the case on the merits. Section 1 provides in relevant part. Petitioner contends that his cause of action accrued only in 1993 when respondent A.[10] In that case. Petitioner's cause of action accrued in November 1993 upon respondent Maersk's definite denial of his money claims following this Court's ruling in the similar case of Baliwag Transit .M. he had until June 9. to file his petition. . If the last day of the period. the three (3) year prescriptive period should be counted from 1993 and not 1978 and since his complaint was filed in 1994. No extension of time to file the petition shall be granted except for compelling reason and in no case exceeding fifteen (15) days. It may also be filed in the Court of Appeals whether or not the same is in aid of its appellate jurisdiction. 1999 to file a petition for certiorari with the Court of Appeals. the driver renewed his license and sought reinstatement with Baliwag Transit. 14 SCRA 674)”[9] In the case at bar.P. but the case was provisionally dismissed in March 1980 for failure of the prosecution witness to appear at the scheduled hearing. The bus itself also sustained extensive damage. J. Having filed his action five (5) months thereafter or in April 1994. 1980. ROBERT SY doing business under the name and style Jobert Printing Services. (Chairman).P. QUALITY LABELS. 1996 dismissing herein petitioner Philippine Bank of Communications petition for certiorari impugning an order granting the motion for the issuance of a writ of execution pending appeal issued by the Regional Trial Court of the National Capital Judicial Region (Branch 101. as he was not considered automatically dismissed on that date. The private respondent insists it is May 10. (T)he antecedent question that has to be settled is the date when the cause of action accrued and from which the period shall commence to run. 1999 are REVERSED and SET ASIDE." The earlier requests by him having been warded off with indefinite promises.00 and £1.R. Subsequently.P. respondent Maersk warded off these demands by saying that it would look into the matter until years passed by. 1980..700. (2) an obligation on the part of the named defendant to respect or not to violate such right. The problem in the case at bar is with the third element as the first two are deemed established. As the private respondent was the petitioner's principal witness in its complaint for damages against the Philippine National Railways. concur Republic of the Philippines THIRD DIVISION [G. as Judge. Petitioner repeatedly demanded payment from respondent Maersk but similar to the actuations of Baliwag Transit in the above cited case. Davide. and the private respondent not yet having decided to assert his right. Quezon City). . private respondent Falcon Garments Corporation (Falcon) opened Current Account No. and Ynares-Santiago. The . The parties disagree on this date. and (3) an act or omission on the part of such defendant violative of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff. 1999 and July 15. CESAR M. No.050. for it was then that the petitioner denied his demand for reinstatement and so committed that act or omission "constituting a breach of the obligation of the defendant to the plaintiff. SANTIAGO. It is settled jurisprudence that a cause of action has three elements. In October 1993. MAGIN TABUSO. 1992. J. There was no apparent disagreement then between (respondent driver) Hughes and his employer..P. Then and only then was the claim categorically denied by respondent A. The issues had not yet been joined. when his demand for reinstatement was rejected by the petitioner.“. 126158. HON. The decision of the Labor Arbiter ordering respondent Maersk and/or A. we may assume that Baliwag Transit and Hughes were on the best of terms when the case was being tried. and not even by positive act of the petitioner but as a result of the suspension of his driver's license because of the accident. to wit. September 23. when the collission occurred. 1993. 1997] PHILIPPINE BANK OF COMMUNICATIONS. On February 9. Falcon filed a complaint with the Regional Trial Court of Quezon City against PBCom which was docketed as Civil Case No. the petition is GRANTED and the impugned resolutions of the Court of Appeals dated June 18. presided over by Judge Percival Mandap-Lopez. Following the Baliwag Transit ruling. entitled Falcon Garments Corporation. Q-95-22625. on November 27. GUMBAC. INC. et al. DECISION MELO.00) with interest at 17% per annum and penalty at 12% per annum in case of default. 1993. in Civil Case No.600. 1980. 25-00640-7 at BMA Quezon City Branch of petitioner Philippine Bank of Communications (PBCom). .. 1980. petitioner’s cause of action accrued only upon respondent A. MAKILITO MAHINAY. We hold that the private respondent's right of action could not have accrued from the mere fact of the occurrence of the mishap on August 10. The contention of the petitioner is that it should be August 10. so to speak.”[11] (emphasis supplied) The facts in the case at bar are similar to the Baliwag case. vs. JJ. 1995..000. SO ORDERED. We agree with private respondent that May 10. his cause of action could not be said to have then already accrued. v. Pardo. (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created. Serrano finally demanded in writing payment of the unsent money orders. Hence. Respondents. At best. WHEREFORE.00 Sterling Pounds or their peso equivalent at the time of actual payment is reinstated. Moller in its letter dated November 22. This happened only when the private respondent finally demanded reinstatement on May 2. Moller's definite denial of his claim in November 1993. FALCON GARMENTS CORPORATION. The antecedent facts of the case as gathered from the record are as follows: Sometime in 1989.: Assailed and sought to be set aside in the instant petition is the decision of respondent Court of Appeals promulgated on September 13. EUGENIO POA. Q-95-22625 and raffled to Branch 78. we hold that it was filed within the three-year (3) prescriptive period provided in Article 291 of the Labor Code. private respondent Falcon obtained a loan from petitioner in the principal sum of Four Million Seven Hundred Thousand Pesos (P4. EFREN CACHERO. Jr. is the date when his cause of action accrued. and his demand was categorically rejected by the petitioner on May 10. THE COURT OF APPEALS. 1974. there existed no justification at that time for the private respondent to demand reinstatement and no opportunity warrant (sic) either for the petitioner to reject that demand. C. he was deemed suspended from his work. TORIO and EFREN C. Philippine Bank of Communications. 1974. RTC of Quezon City Branch 101. Kapunan. Moller to pay petitioner his untransmitted money order payments in the amount of HK$4.[12] No costs. Petitioner. PEDRO T. Falcon failed to pay its loan on due date and went in default in December. P 500.00 as attorneys fees. p.01 The privelege respondents in this case ILLEGALLY and UNLAWFULLY implemented a writ of execution pending appeal on 13 September 1996 using an expired writ. However.78 which were made from 1990 to 1992. it was no longer practicable to bank with petitioner. (Rollo. upon a plaintiffs bond of P5. while private respondent Falcon filed a Motion for Execution Pending Appeal dated February 7.092. damages.729. 25-006407 the sum of P12. presided over Judge Pedro T. On January 2. 1996. the Court of Appeals eventually upheld the validity of the writ of execution pending appeal and forthwith dissolved the writ of preliminary injunction.00 with interest also at 12% per annum. SP No. premises considered. herein petitioner has not receive copy of said decision which is not yet final. b. of 13 September 1996.00 plus interest at the rate of 12% per annum to commence from the date of filing of the complaint.000.78.m. as well as the other damages stated in the decision of Branch 78 dated January 2. plus interest at the rate of 12% per annum to commence from the date of the filing of the complaint until the said amount is fully restored and operate the said account in accordance with the instructions of plaintiff. and prayed that the money judgement be not restored to its current account but instead be directly paid to it (Rollo. private respondent Falcon obtained an alias writ of execution which served upon petitioner on the same afternoon. acting through its board of directors. On June 4. plus interest.700.000. On September 13.78 with 12% per annum and plaintiffs obligation to defendant Bank be likewise paid by plaintiff in the amount of P4. a writ of preliminary injunction was issued by the Court of Appeals restraining its implementation. defendant is ordered to restore immediately to plaintiffs Current Account No. the trial court rendered a decision against PBCom the dispositive portion of which reads: WHEREFORE. Judge Santiago granted the same and authorized the issuance of a writ of execution pending appeal. Private respondent Falcon filed an Ex-Parte Manifestation and Motion dated May 7. 1996. On the same day. 40636). and an Order of the Court of Appeal subject of this petition which was promulgated only at 10 a. plus the stipulated interest and penalty.000.) The writ was issued on May 14. damages. 1996.) Petitioner further avers that: 3. On the very same day of the filing of the motion. 1996. 1996. 1996. with prayer for a temporary restraining order. p. and attorneys fees.000.complaint prayed for the restoration to Falcons current account of alleged unauthorized withdrawals totalling P12.000. claiming that with its strained relations with PBCom. 1996. before Branch 78 could resolve said motion.092.000. On September 16. Plaintiff FALCON is ordered to pay defendant its loan at P 4. 8. Judge Lopez inhibited himself and the case was re-raffled to Branch 101. All other claims and counterclaims are dismissed for lack of merit. p.729. the Court hereby grants its motion for execution pending appeal hereby ordering defendant Bank to immediately pay the plaintiff the sum of P12. PBCom denied liability and interposed a compulsory counterclaim in the sum of P4.R. p. and c.700. 41. The dispositive portion of said order provides: WHEREFORE. RULE 39 OF RULES OF COURT. 1996. finding merit and justification in plaintiffs motion. 1996. and attorneys fees.00 as litigation expenses. the present petition was filed.00 as exemplary damages. 132).34) Petitioner PBCom seasonably filed a notice of appeal.000. And to pay plaintiffs the following sums: a. (Rollo. P 500. P 200. the writ was served upon PBCom which sought the intercession of the Court of Appeals (CA-G. On that day. and on May 16. In its answer. 729.00 conditioned to answer for whatever damages which defendants may suffer by virtue of this Order. (Rollo.000. .092. Santiago.00.700. preliminary writ of injunction and mandatory injunction alleging that: THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN AFFIRMING THE ORDER OF JUDGE PEDRO SANTIAGO GRANTING THE ISSUANCE OF A WRIT OF EXECUTION PENDING APPEAL CONSIDERING THAT GOOD REASONS DO NOT EXIST FOR THE ISSUANCE OF A WRIT OF EXECUTION PENDING APPEAL UNDER SECTION 2. 2. Sabrador. Court of Appeals. Attached to the Reply to the Opposition filed by plaintiffs. and 5. of Laogan Silva Baeza & Llantino Law Offices.3. Court of Appeals. 89 Phil. which among other things. 72 SCRA 98 [1976]. supra). Daniel Y. order the execution to issue.1996 which the Court noted on January 17. The prevailing doctrine an principle then which continues to be the same as provided in Paragraph 2. In the absence of such good reasons. When Judge Santiago resolved the first ex parte manifestation and motion. 1993 granting the alias writ of execution pending appeal prior to the courts receipt of its official copy of said decision dissolving the injunction and even before the finality of the same. 1996. (b) to require Judge Pedro T. 196 SCRA 847 [1991]. one group of heirs has not yet received the inheritance due them when the others have already received theirs. Soriano. Judge Santiago submitted his explanation on December 11. City of Manila vs. Mojica. With the filing of the memoranda of the parties. Santos vs. 92-93. 26 SCRA 607 [1969]. Lucero. The pith of the matter before us is the existence of good reasons which would justify execution pending appeal. 4. the petition is now ripe for resolution. upon good reasons to be stated in a special order.. Court of Appeals. even before the expiration of the time to appeal. vs. or are about to do so (Borja vs. 40636. 125 SCRA 337 [1983]). noticed petitioner urgent manifestation and motion dated September 17.) Upon the above representation of petitioner duly verified by its counsel. (Rollo. Laogan. Quezon City. 2. Lao vs. Rule 39 of the Rules of Court. Good reasons consist of compelling circumstances justifying the immediate execution lest judgment becomes illusory. we issued a temporary restraining order at the same time requiring private respondents to comment. SP No. 1996 Order. As annex A. reading in relevant part as follows This Court has given serious thoughts on the restrictive application of Section 2. in is discretion. to issue the writ of certiorari and failure to do so would constitute grave abuse of discretion on its part. brandished the questioned writ and decision enabling private respondents to coerced. When the defeated party is in imminent danger of insolvency (Hacienda Navarro vs. Mencias. PVTA vs. De Leon vs. The supposed good reasons relied upon by Judge Santiago to justify the discretionary execution pending appeal are spelled out in the May 7.R. 239 (1951). it is incumbent upon the reviewing court. 1997. Section 2. the original . praying that (a) counsel for private respondent be required to explain why they claimed in their ex parte motio for issuance of an alias writ of execution pending appeal before respondent RTC that the Court of Appeals had already dissolved the injunction one hour before the promulgation of the Court of Appeals decision in CA-G. National Marketing Corp. are two public documents. On November 11. the court may. 184 SCRA 318 [1990]). 536 [1938]. When the appeal is dilatory and the losing party intends to encumber and/or dispose of the property subject of the case during the pendency of the appeal in order to defraud or deprive the plaintiff of proprietary rights an defeat the ends of justice (Home Insurance Company vs. the Court issued a resolution. If a record on appeal is filed thereafter the motion and the special order shall be included therein. Rule 39 of the former Rules of Court which provided Sec.02 PBCom and counsel became aware of the questioned Decision of the Court of Appeals when PBCom Ayala Branch. Makati City. 65 Phil. forced and intimidated the personnel of the said petitioners branch resulting in the unlawful taking of about P1. It is in this regard that we find that the Court of Appeals committed grave abuse of discretion in sustaining the trial court. Capulong.03 Private respondents have foisted to petitioner and counsel that they (private respondents) will again go to PBComs other branches to get in full balance of the money judgement which is still on appeal. the applicable provision was Section 2. the following being merely representative of the same: 1.7 million 3. considering the tactics of the adverse party who may apparently have no case except to delay. to explain why he issued the order dated September 13. such as the Court of Appeals. 1996. Inc. pp. 4 SCRA 867 [1962]). Execution pending appeal On motion of the prevailing party with to notice to the adverse party. 21 SCRA 1021 [1967]. or the prevailing party may after the lapse of time become unable to enjoy it. 122 SCRA 631 [1983]. De los Reyes vs. Deterioration of commodities subject to litigation (Federation of United Namarco Distributors. 3. called up and told them that private respondents with about 30 people. Atty. A long line of jurisprudence indicates what constitute good reasons as contemplated by the Rules. When in an intestate proceeding which has been pending for almost 29 years. of Rule 39 of the 1997 Rules of Civil Procedure is that discretionary execution is permissible only when good reasons exist for immediately executing the judgment before finality or pending appeal or even before the expiration of the time to appeal. The advanced age of the prevailing party (Borja vs. Santiago of RTC Branch 101. Encarnacion. Falcon Garment Corporation et al. J-1. as an overall effect of the unauthorized withdrawal or transfer of account of your corporation. in Civil Case No.) The above stated order quotes the following transcribed testimony of Magin Tabuso. E. 40-41. (Rollo pp. it is not remote that plaintiffs survival hangs on the balance. 22 against Falcon Garment Corporation and/or its officers by Solidbank on February 14. J-3. witness for private respondents.000. the filing of collection cases against it. And as Annex B. . Q What particular threat are you talking about? A Usually these workers are dependent from our production and so they started to feel restless and insecure sometimes and they feel demoralized. With the seizure of plaintiffs instruments in the operation of its business. sir. the threat of criminal prosecution against its officers. the imminent threat to its industrial peace. J-2. what particular action were undertaken by these creditors against your company? A Our credit lines from the banks and from the other creditors were closed. 3 of its motion combined with the facts established by the complaint of Solidbank against Falcon and the police blotter. and J-4 also for the complaint. sir. sir. The checks issued by Falcon to Solidbank. The police blotter even enumerates these machines and office equipments. viewed from the above quoted opposition of defendant. sir. can you tell what is its effect insofar as the operation of your corporation is concerned? ANSWER: It has great effect on the corporation as a whole.00 by deducting the same from the principal account. There was a growing threat in the industrial peace of our company. are written with demands which carry the threat of criminal action for violation of Batas Pambansa Blg. F. It is observed the complaint filed by Solidbank against Falcon supports the material allegations of plaintiffs in the hearing as reproduced above and as also quoted by defendant in its opposition. the original copy of a police blotter of the Center Police District Command. referred to as Complaint). 2. seized the machineries.000.. Police Station No. that plaintiffs ownership over the funds sought to be reinstated to Current Account No. and I of the complaint. we were not able to pay them as a result of those unauthorized withdrawals. 96-76567. Baler St.. it paralyzes the whole operations. All the circumstances enumerated by plaintiffs under par. Q How many employees are holding your staff? A We have about 200 workers. This Court. The complaint shows that Falcon is now being sued for non-payment of its loan with Solidbank. Q Your claims of alleged illegal transfer of withdrawals. Quezon City (hereafter referred to as police blotter). constitute a sufficient evidence of good reason in support of plaintiffs subject motion. Q Inasmuch as you said that these creditors were not paid. Q There are list of your creditors in paragraph 5. thus ATTY. 25-00640-7. forming part as Annexes D. Q What else? A And we were not able to serve orders of valued customers because were not able to meet the production due to financial difficulties. G.00 plus and one of the prominent creditors of PBCom and also Solid Bank.700. The threats of impending criminal and civil cases alleged by plaintiffs are now proven and established to be real. because as our credit today we have an amount of P12. is not in dispute. Q Do you have complete list of those creditors which you mentioned you have not paid as a result of the unauthorized withdrawal or transfer of your account? A Yes. MAHINAY: (on direct examination) QUESTION: Now. Annexes J. to the mind of this Court. There is truth therefore to plaintiffs claim that its only hope for survival and arresting threats of civil and criminal cases. at times which led us to attack. office and factory equipments of Falcon. is the immediate execution of the judgment.carbon copies of the summons and complaint in the case entitled Solid Bank Corporation v.000. also takes into consideration.3 of your complaint. does this affect also the industrial peace of your company? A Yes. are they the same creditors you are talking about? A Yes. H. a case for collection of sum of money and replevin (hereafter. 1996. bounced for being drawn against insufficient funds. Further and significantly taking into consideration plaintiffs readiness to pay defendants counterclaim of P4. e. 1996 order of execution issued by Judge Santiago deliberately modified and failed to conform to the dispositive portion of the January 2. Only an appellate court can appreciate the dilatory intent of an appeal as an additional good reason in upholding an order for execution pending appeal which may have been issued by the trial court for other good reasons. we cannot help observing that the May 7. paragraph (a). and to operate the said account in accordance with the instructions of plaintiffs. to rule that the appeal is patently dilatory and rely on the same as its bases for finding good reason to grant the motion. 39-40. the May 7. Court of Appeals (157 SCRA 370 [1988]) that -Execution pending appeal in accordance with Section 2. acting through its board of directors.092. of Rule 39 is. 1997).729. which is the decision Judge Santiagos order intended to execute. pp. it is not within competence of the trial court. of course. but this Court is of a different persuasion and view. and even assuming that there was a serious threat to Falcons continued corporate existence. the exception. execution of a judgment should not be had until and unless it has become final and executory -.) The January 2. Rule 39 of the 1997 Rules of Court. what may prevent the depositor from withdrawing the entire amount? However.in which case. In fact. Besides. when the period of appeal has not expired. Annex 2-Comment. in the courts discretion. Other than said Solidbank case. one will notice a whale of distinction between the two aforementioned orders. Falcons survival as a body corporate can not be threatened by anticipated litigation. plus interest and other damages. or in case where the motion for execution pending appeal is filed with the appellate court in accordance with Section 2.(Rollo. Hence. only one case was actually filed against Falcon and this is the complaint for collection filed by Solidbank. The other case are impending. to enforce the writ ordering petitioner bank to restore the current account of private respondent. The survival of a juridical personality is clearly outweighed by the long standing general policy of enforcing only final and executory judgments. (p. 130-132. Court of Appeals (G. 377. execution shall issue as a matter of right. No. such as for instance. 126556. 1996 order directed petitioner to immediately pay the sum of P12.i. rollo.78. Santiago (161 SCRA 570 [1988]).). impending insolvency of the adverse party or the appeal being patently dilatory. we reiterated our pronouncement in Roxas vs. plus interest at the rate of 12% per annum to commence from the date of the filing of the complaint until the said amount is fully restored. it was noted in Aquino vs. But even as to the latter reason. that it is not for the trial judge to determine the merit of a decision he rendered as this is the role of the appellate court. R. the order dated May 7. Even assuming that it was indeed in financial distress and on the verge of facing civil or even criminal suits. In contrast. release of any amount from said account may be done only upon proper resolution of private respondent Falcons board of directors. Additionally. other that the sheriff of the trial court concerned. after more careful and deliberate consideration. It is significant to stress that private respondent Falcon is a juridical entity and not a natural person.. and that this variance was upon express motion to Falcon (See: prayer of Falcons Ex parte Manifestation & Motion. it would have been absolutely unnecessary to deputize anybody.) The trial court concluded that the foregoing statements presented during the hearing of the motion for execution pending appeal constitute good reasons for the discretionary execution. the existence of good reasons is what confers discretionary power on a Court x x to issue a writ of execution must constitute superior circumstances demanding urgency which will outweigh the injury or damages should the losing party secure a reversal of the judgment. for. the period for appeal has lapsed without an appeal having been taken. On the other hand. or appeal having been taken. so it is said. a simple and orderly banking procedure may just have taken place. 25-00640-7 the sum of P12. What is worse. The reasons relied upon are not compelling and thus can not constitute good reasons.78. the immediate execution of a judgment in its favor pending appeal cannot be justified as Falcons situation may not be likened to a case of a natural person who may be ill or may be of advanced age. For one thing.092. This notwithstanding. The Court of Appeals agreed. once credited. after all. Even the danger of extinction of the corporation will not per se justify a discretionary execution unless there are showings of other good reasons. July 28.729. In the recent case of David vs. On the other hand. 1996 decision ordered petitioner to restore immediately to plaintiffs Current Account No. . in resolving a motion for execution pending appeal. 1996 decision rendered by Judge Percival MandapLopez. Normally. upon restoring the said amount. save only if there be good reasons therefor. the appeal has been resolved and the records of the case have been returned to the court of origin -. As provided in Section 2 Rule 39 of the x x Rules x x. 1996 directed the immediate payment to Falcon of the corresponding money judgment which may thus be used or misused with or without proper instructions of Falcons board of directors. if petitioner PBCom were ordered to credit the money judgment to Falcons current account with its BMA Quezon City Branch and to operate said account in accordance with the instructions of the board of directors of Falcon. execution of the judgment should not be allowed. the right to appeal has been renounced or waived. If Falcons current account were merely credited in accord with the judgment. At first glance the order to restore private respondents current account in the aforementioned amount and the order to immediately pay the same amount directly to private respondent may seem to be same. pp. The material existence of a juridical person is not on the same plain as that of human life. the harassment complained of by the petitioner bank would not have happened had respondent trial court issued a writ which faithfully conformed to the judgment sought to be enforced. we hold that it is not tantamount nor even similar to an impending death of a natural person. Nevertheless. 1996. the instant petition is GRANTED. Inc. No special pronouncement is made as to costs.J.. (Chairman). Dept. 40636 is hereby ANNULLED and SET ASIDE. Villoria vs. 1996 in CA-G. 1996 in Civil Case No.R. Piccio. Barbaric acts such as those complained of have no place in a civilized society. Gamboas Inc. Court of Appeals. Accordingly. Court of Appeals. 95 Phil. as well as public respondent sheriffs not to resort to such forms of harassment by using the strong arms of the law to the prejudice of any party. the trial court is hereby ORDERED to determine the exact amount taken by private respondent by virtue of the writ or writs of execution issued pursuant to the annulled order dated May 7. it also appears that petitioner PBCom does not intend to pursue the administrative aspect of these alleged irregularities. 802 [1954]). It must conform particularly to that ordained or decreed in the dispositive portion of the decision (GSIS vs. JJ. C. Falcon has ignored and has remained silent in regard to PBComs charge of harassment and irregular resort to armed policeman and civilians with acetylene torches in the enforcement of the writ of execution pending appeal. An order of execution which varies the tenor of the judgment or exceeds the terms thereof is a nullity (Foremost Farms. Q-9522625 is likewise ANNULLED and SET ASIDE. 218 SCRA 233 [1993]). stationed at Quezon City. WHEREFORE. 251 SCRA 123 [1995]. has sworn to uphold the rule of law. its prayer in the petition being completely silent on these points. Francisco and Panganiban. 72 SCRA 131 [1976]. thus lending credence to PBComs complaint. The decision of the Court of Appeals dated September 13. However. It is even more abhorrent when such acts are with the participation or at the very least the acceptance of a member of the bar who.. Romero. SP No. vs. which amount private respondent is hereby ORDERED to return to petitioner Philippine Bank of Communications. concur.It is well-settled general principle that a writ of execution must conform substantially to every essential particular of he judgment promulgated. The order of the Regional Trial Court of the National Capital Judicial Region. under his oath. Narvasa. dated May 7. vs. Branch 101. . we find necessary to exhort both private respondent and its counsel. of Labor and Employment. SO ORDERED. Execution which is not in harmony with the judgment is bereft of validity. premises considered. private respondent wrote petitioner’s counsel on April 20.500. 1984 and withdrawn on October 23.. On December 18. In turn. private respondent’s son wrote to Reyes stating that the check had been assigned "for encashment" to Ramon A.. He also said that upon learning of the dishonor of the check. February 29. Napiza for sum of money. who is private respondent’s son. which (sic) I have been and is (sic) still exerting utmost and maximum efforts to collect from Mr.R. If at all. please take notice that said check was deposited on September 3. Private respondent acceded. CV No. de Guzman and Agnes C..[12] In reply. Jr... the withdrawal slip shows that the amount was payable to Ramon A.[6] On November 20. Ariel Reyes.. de Guzman and/or Agnes C. payable to "cash" in the amount of Two Thousand Five Hundred Dollars ($2. . 1986. de Guzman and was duly initialed by the branch assistant manager. Scsdaad xxx.xxx. Benjamin D. vs.541.. Teresita Lindo. de Guzman after it shall have been cleared upon instruction of Chan. Reyes reminded private respondent of his son’s promise and warned that should he fail to return that amount within seven (7) days. one Ruben Gayon.00 or the prevailing peso equivalent plus legal interest from date of demand to date of full payment. instructed one of its employees.500. Napiza IV.. 1987. I did not receive its proceeds as may be gleaned from the withdrawal slip under the captioned signature of recipient. private respondent deposited in Foreign Currency Deposit Unit (FCDU) Savings Account No. 1985 demanding the return of the $2. Using the blank withdrawal slip given by private respondent to Chan. NAPIZA. the reason why the transaction is not reflected in the passbook of the account. a sum equivalent to 20% of the total amount due as attorney's fees.xxx. 112392.[10] Private respondent’s son undertook to return the amount of $2. No. the manager of petitioner’s Buendia Avenue Extension Branch. Sdaad On September 3.500. and litigation and/or costs of suit. on October 23. 028-187. praying for the return of the amount of $2. DECISION YNARES-SANTIAGO. it may not be amiss to mention here that I merely signed an authority to withdraw said deposit subject to its clearing. 1984. was able to withdraw the amount of $2. my obligation on the transaction is moral in nature.[11] This was followed by a letter of the bank’s lawyer dated April 8. the matter would be referred to the bank’s lawyers for appropriate action to protect the bank’s interest. Also.Republic of the Philippines FIRST DIVISION [G. Mr. Besides. respondents. or a total period of fifty (50) days had elapsed at the time of withdrawal. petitioner. 2000] BANK OF THE PHILIPPINE ISLANDS. J. with the understanding that as soon as the check is cleared.[2] which dismissed the complaint filed by petitioner Bank of the Philippine Islands against private respondent Benjamin C.. Continental Bank Manager’s Check No. petitioner received communication from the Wells Fargo Bank International of New York that the said check deposited by private respondent was a counterfeit check[7] because it was "not of the type or style of checks issued by Continental Bank International. 00014757[4] dated August 17.00) and duly endorsed by private respondent on its dorsal side. COURT OF APPEALS and BENJAMIN C.00 to petitioner bank. 1985[13] stating that he deposited the check "for clearing purposes" only to accommodate Chan. 028187[3] which he maintained in petitioner bank’s Buendia Avenue Extension Branch. He added: "Further. 1984. both of them would go to the bank to withdraw the amount of the check upon private respondent’s presentation to the bank of his passbook. Notably. 1984. to inform his father that the check bounced.[9] Reyes himself sent a telegram to private respondent regarding the dishonor of the check..[5] It appears that the check belonged to a certain Henry Chan who went to the office of private respondent and requested him to deposit the check in his dollar account by way of accommodation and for the purpose of clearing the same.67 from FCDU Savings Account No.500. his father immediately tried to contact Chan but the latter was out of town. 1984.R. 1984. 37392 affirming in toto that of the Regional Trial Court of Makati. and agreed to deliver to Chan a signed blank withdrawal slip."[8] Consequently. petitioner filed a complaint against private respondent. Branch 139.: This is a petition for review on certiorari of the Decision[1] of the Court of Appeals in CA-G. Henry Chan who is directly liable under the circumstances.00." On August 12. Furthermore..00 per appearance in court. The lower court held that petitioner could not hold private respondent liable based on the check’s face value alone." The lower court further held that "it was incumbent upon the petitioner to credit the value of the check in question to the account of the private respondent only upon receipt of the notice of final payment and should not have authorized the withdrawal from the latter’s account of the value or proceeds of the check. – Every indorser who indorses without qualification.541. On November 4. exemplary damages of P50. The appellate court held that petitioner committed "clear gross negligence" in allowing Ruben Gayon. the trial court.00 and attorney’s fees of 30% of whatever amount that would be awarded to him plus an honorarium of P500. Private respondent added that he had "given the Plaintiff fifty one (51) days with which to clear the bank draft in question.00 plus P300.. (b).[14] where this Court stated that a personal check is not legal tender or money." Having admitted that it committed a "mistake" in not waiting for the clearance of the check before authorizing the withdrawal of its value or proceeds.00 honorarium per appearance..00.. private respondent alone was liable "for the value of the credit given on account of the draft or check deposited. 3. The check still had to be cleared and its proceeds can only be withdrawn upon presentation of a passbook in accordance with the bank’s rules and regulations..000. should be liable for the amount stated therein in accordance with the following provision of the Negotiable Instruments Law (Act No.WHETHER OR NOT RESPONDENT NAPIZA IS LIABLE UNDER HIS WARRANTIES AS A GENERAL INDORSER.. 2.WHETHER OR NOT PETITIONER WAS GROSSLY NEGLIGENT IN ALLOWING THE WITHDRAWAL.... IAC.500.. v. Petitioner filed a comment on the motion for leave of court to admit the third party complaint. the Court of Appeals affirmed the lower court’s decision. before the check was cleared and in crediting the amount indicated therein in private respondent’s account. the trial court issued orders on August 25... wherein it asserted that per paragraph 2 of the Rules and Regulations governing BPI savings accounts. admitting that he indeed signed a "blank" withdrawal slip with the understanding that the amount deposited would be withdrawn only after the check in question has been cleared.. without his knowledge. the motion to admit third party complaint should be granted.. and (c) of the next preceding section." in fact." Charging petitioner with "apparent ignorance of routine bank procedures. and . 1987 directing private respondent to actively participate in locating Chan. dismissed the third party complaint without prejudice. it had allegedly admitted having paid the amount in the check "by mistake" x x x "if not altogether due to collusion and/or bad faith on the part of (its) employees. and held that the check deposited in this case must be cleared before its value could be properly transferred to private respondent's account. Meanwhile. 1991. After all.500..Private respondent filed his answer... It stressed that the mere deposit of a check in private respondent’s account did not mean that the check was already private respondent’s property.000. He alleged that "thru strategem and/or manipulation. to withdraw the money without presenting private respondent’s passbook and. Thus. private respondent prayed that third party defendant Chan be made to refund to him the amount withdrawn and to pay attorney’s fees of P5.00. He likewise alleged that he instructed the party to whom he issued the signed blank withdrawal slip to return it to him after the bank draft’s clearance so that he could lend that party his passbook for the purpose of withdrawing the amount of $2. having affixed his signature at the dorsal side of the check. Likewise." by way of counterclaim. To so hold him liable "would render inutile the requirement of ‘clearance’ from the drawee bank before the value of a particular foreign check or draft can be credited to the account of a depositor making such deposit." Petitioner should have disallowed the withdrawal because his passbook was not presented.00 even without private respondent’s passbook. 66.. 1987 and October 28. these requirements are designed to protect the bank from deception or fraud." Chan was able to withdraw the amount of $2." It contended that private respondent was estopped from disclaiming liability because he himself authorized the withdrawal of the amount by signing the withdrawal slip..WHETHER OR NOT A CONTRACT OF AGENCY WAS CREATED BETWEEN RESPONDENT NAPIZA AND RUBEN GAYON. Private respondent also filed a motion for admission of a third party complaint against Chan. Private respondent replied that for the parties to obtain complete relief and to avoid multiplicity of suits. After private respondent failed to comply. the requirement of presentation of a passbook to ascertain the propriety of the accounting reflected would be a meaningless exercise. Petitioner prayed for the denial of the said motion so as not to unduly delay the disposition of the main case asserting that private respondent’s claim could be ventilated in another case.. a decision was rendered dismissing the complaint. petitioner should suffer the resultant loss.67 from his dollar savings account through collusion with one of petitioner’s employees. Without filing a motion for the reconsideration of the Court of Appeals’ Decision. He claimed that petitioner had no one to blame except itself "for being grossly negligent. However. Inc. warrants to all subsequent holders in due course – (a). said party was able to withdraw the amount of $2.000. Petitioner claims that private respondent. raising the following issues: 1.The matters and things mentioned in subdivisions (a). petitioner’s contention that private respondent warranted the check’s genuineness by endorsing it is untenable for it would render useless the clearance requirement. The Court of Appeals cited the case of Roman Catholic Bishop of Malolos. petitioner filed this petition for review on certiorari.. Jr. Liability of general indorser.. private respondent prayed for moral damages of P100.. 1988. Supremax On appeal. on May 18. 2031): "SEC. . notwithstanding such holder at the time of taking the instrument knew * * (her) to be only an accommodation party. then Ruben Gayon. acceptor. transmission and other charges related to such withdrawals shall be for the account of the depositor and shall be paid by him/her upon demand.. and may be withdrawn only in the manner above provided. * * (the instrument) shall be accepted or paid. Such request must indicate the name of the payee/s... as the case may be.. upon presentation of the depositor’s savings passbook and with the withdrawal form supplied by the Bank at the counter. and (b) the depositor’s passbook. either Ramon or Agnes de Guzman should have issued another authority to Gayon for such withdrawal. the accommodation party being the surety. or to any subsequent indorser who may be compelled to pay it. and the necessary proceedings on dishonor be duly taken. Private respondent admits that he signed a blank withdrawal slip ostensibly in violation of Rule No.’ Such an indorser ‘who indorses without qualification. the following rules on withdrawal of deposits appear: "4.. in addition. could not have withdrawn any amount. 6 requiring that the request for withdrawal must name the payee." Section 65.."[20] Such contention would have been valid if not for the fact that the withdrawal slip itself indicates a special instruction that the amount is payable to "Ramon A."[18] We hold.. provides for the following warranties of a person negotiating an instrument by delivery or by qualified indorsement: (a) that the instrument is genuine and in all respects what it purports to be.[21] was not the proper payee of the proceeds of the check.[16] this Court described the liabilities of an indorser as follows: Juris "Appellant’s contention that as mere indorser. to be able to withdraw from the savings account deposit under the Philippine foreign currency deposit system. or indorser.e.[17] However. Maniego. according to its tenor. at the dorsal side of the withdrawal slip is an "authority to withdraw" ... i. In the passbook that petitioner issued to private respondent. who was also employed in petitioner’s Buendia Ave.. or both. the holder or last indorsee of a negotiable instrument has the right ‘to enforce payment of the instrument for the full amount thereof against all parties liable thereon. on the other hand. to their (availability).’ Among the ‘parties liable thereon’ is an indorser of the instrument. the amount to be withdrawn and the place where such withdrawal should be made. drawer or acceptor * * unless he clearly indicated by appropriate words his intention to be bound in some other capacity. Of course. to hold private respondent liable for the amount of the check he deposited by the strict application of the law and without considering the attending circumstances in the case would result in an injustice and in the erosion of the public trust in the banking system. private respondent "presented the opportunity for the withdrawal of the amount in question. that the propriety of the withdrawal should be gauged by compliance with the rules thereon that both petitioner bank and its depositors are duty-bound to observe.. the personality of private respondent’s son and the lapse of more than fifty (50) days from date of deposit of the Continental Bank draft. Withdrawals in the form of notes/bills are allowed subject however. she may not be liable on account of the dishonor of the checks indorsed by her.Withdrawals must be made by the depositor personally but in some exceptional circumstances. ‘a person placing his signature upon an instrument otherwise than as a maker.[15] In People v. Withdrawals may also be made in the form of travellers checks and in pesos.. and neither a deposit nor a withdrawal will be permitted except upon the presentation of the depositor’s savings passbook.. or any subsequent indorser who may be compelled to pay it. two requisites must be presented to petitioner bank by the person withdrawing an amount: (a) a duly filled-up withdrawal slip.That the instrument is at the time of his indorsement.e.’ As such. Extension branch. The interest of justice thus demands looking into the events that led to the encashment of the check. and that if it be dishonored..Deposits shall not be subject to withdrawal by check. (b) that he has a good title to it. he engages that on due presentment. or both. a person ‘who has signed the instrument as maker. Jr. to obtain reimbursement from the party accommodated. 6. the Bank may allow withdrawal by another upon the depositor’s written authority duly authenticated..’ although she has the right. and for the purpose of lending his name to some other person. and that if it be dishonored.. i.(b). amount and the place where the funds are to be paid."[19] Scjuris Under these rules.. petitioner’s personnel should have been duly warned that Gayon. as the case may be. is likewise untenable.. drawer. and (c) that all prior parties had capacity to contract. according to its tenor. and the necessary proceedings on dishonor be duly taken. mail or telegraphic transfer in currency of the account at the request of the depositor in writing on the withdrawal slip or by authenticated cable.. That the withdrawal slip was in fact a blank one with only private respondent’s two signatures affixed on the proper spaces is buttressed by petitioner’s allegation in the instant petition that had private respondent indicated therein the person authorized to receive the money. however.e.. she is under the law ‘liable on the instrument to a holder for value.. in which the amount deposited withdrawn shall be entered only by the Bank. ‘since the relation between them is in effect that of principal and surety. naming his authorized agent). Otherwise." Such being the case. 5. de Guzman." Petitioner relied "on the genuine signature on the withdrawal slip. Under the law. Petitioner contends that "(i)n failing to do so (i. valid and subsisting. he practically authorized any possessor thereof to write any amount and to collect the same. without the same being returned yet. he will pay the amount thereof to the holder. Any stamp. de Guzman &/or Agnes C.’ Maniego may also be deemed an ‘accommodation party’ in the light of the facts.Withdrawals may be made by draft." It is thus clear that ordinarily private respondent may be held liable as an indorser of the check or even as an accommodation party.. he will pay the amount thereof to the holder. And.’ inter alia ‘engages that on due presentment.. it shall be accepted or paid. Petitioner asserts that by signing the withdrawal slip. after paying the holder. without receiving value therefor... Said ruling brings to light the fact that the banking business is affected with public interest. Smith. As this Court once said on this matter: "Negligence is the omission to do something which a reasonable man... Private respondent does not deny having signed such authority. Moreover. provided. the withdrawal slip contains a boxed warning that states: "This receipt must be signed and presented with the corresponding foreign currency savings passbook by the depositor in person. petitioner. yet still relevant. The seventy-eight (78)-year-old. case of Picart v. would do. guided by those considerations which ordinarily regulate the conduct of human affairs. depositor should accomplish the authority at the back. and whether or not the defective items can be returned to the depositor. the collection shall be debited by the Bank against the account.. Under these facts." (Italics and underlining supplied." The requirement of presentation of the passbook when withdrawing an amount cannot be given mere lip service even though the person making the withdrawal is authorized by the depositor to do so. The fact that private respondent’s passbook was not presented during the withdrawal is evidenced by the entries therein showing that the last transaction that he made with the bank was on September 3. however. paid the amounts represented in three (3) checks to Virginia Boncan. If. the Philippine National Bank in New York. the Court approved the Auditor General’s denial of Banco Atlantico’s claim for payment of the value of the checks that was withdrawn by Boncan. the unavoidable conclusion is that the typewritten name of "Ruben C. in depositing the check in his name. However. The existence of negligence in a given case is not determined by reference to the personal judgment of the actor in the situation before him.500."[27] As such. Spain. always having in mind the fiduciary nature of their relationship. The law considers what would be reckless. petitioner shall credit the amount in private respondent’s account or infuse value thereon only after the drawee bank shall have paid the amount of the check or the check has been cleared for deposit." was intercalated and thereafter it was signed by Gayon or whoever was allowed by petitioner to withdraw the amount. Again. whether a manager’s check or ordinary check. checks. or negligent in the man of ordinary intelligence and prudence and determines liability by that. The bank did so without previously clearing the checks with the drawee bank. money orders... 1984."[29] . The law here in effect adopts the standard supposed to be supplied by the imaginary conduct of the discreet pater-familias of the Roman law. or the doing of something which a prudent and reasonable man would do. this is in accordance with ordinary banking practices and with this Court’s pronouncement that "the collecting bank or last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior endorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuineness of the endorsements. then he is guilty of negligence. failed to exercise the diligence of a good father of a family. will be accepted as subject to collection only and credited to the account only upon receipt of the notice of final payment. a bank is under obligation to treat the accounts of its depositors "with meticulous care. a commercial bank in Madrid. Thus: "2. the finance officer of the Philippine Embassy in Madrid. This is in consonance with the rule that a negotiable instrument. provides the test by which to determine the existence of negligence in a particular case which may be stated as follows: Did the defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the same situation? If not. amendments or changes in its record.00. cannot be collected or if the Bank is required to return such proceeds.All deposits will be received as current funds and will be repaid in the same manner.. petitioner’s personnel negligently handled private respondent’s account to petitioner’s detriment." Accordingly. in a way. This is clear from Rule No. etc. By the nature of its functions. Under the above rule. Gayon. the proceeds of the deposited checks."[24] The rule finds more meaning in this case where the check involved is drawn on a foreign bank and therefore collection is more difficult than when the drawee bank is a local one even though the check in question is a manager’s check.[25] Misjuris In Banco Atlantico v. for the protection of the bank’s interest and as a reminder to the depositor. private respondent was. Collection charges by the Bank’s foreign correspondent in effecting such collection shall be for the account of the depositor. The Court held that the encashment of the checks without prior clearance is "contrary to normal or ordinary banking practice specially so where the drawee bank is a foreign bank and the amounts involved were large. the withdrawal shall be entered in the depositor’s passbook. Auditor General. In total disregard of its own rules.. the provisional entry therefor made by the Bank in the savings passbook and its records shall be deemed automatically cancelled regardless of the time that has elapsed. in dealing with its depositors.naming Gayon the person who can withdraw the amount indicated in the check. merely designating petitioner as the collecting bank. under its own rules. for any reason. 6 set out by petitioner so that. For withdrawals thru a representative.) Jurissc As correctly held by the Court of Appeals. on account of the "special treatment" that Boncan received from the personnel of Banco Atlantico’s foreign department.[28] In the case at bar. by depositing the check with petitioner. in allowing the withdrawal of private respondent’s deposit. blameworthy. is not legal tender. and the Bank is hereby authorized to execute immediately the necessary corrections. If the account has sufficient balance. private respondent did not become the outright owner of the amount stated therein. after receiving the deposit. Jr. etc. money orders. there could not have been a principal-agent relationship between private respondent and Gayon so as to render the former liable for the amount withdrawn. the date he deposited the controversial check in the amount of $2. drafts. petitioner likewise overlooked another rule that is printed in the passbook. considering petitioner’s clear admission that the withdrawal slip was a blank one except for private respondent’s signature.[26] Banco Atlantico. as well as on the savings passbook at the first opportunity to reflect such cancellation.[22] In allowing the withdrawal.[23] As such. that deposits of drafts. a bank should exercise its functions not only with the diligence of a good father of a family but it should do so with the highest degree of care. such as a check. private respondent had a balance of only $750."[37] The proximate cause of the withdrawal and eventual loss of the amount of $2. and without which the result would not have occurred. banks that were deposited with petitioner. otherwise it could take a long time before a depositor could make a withdrawal.00 although they had not yet received notice from the clearing bank in the United States on whether or not the check was funded.: This case emanated from a complaint filed by private respondent Emme Herrero for damages against petitioner Citytrust Banking Corporation. policy and precedent. which. is "that cause. Agoncillo for private respondent. collaborating counsel for private respondent. and Pardo. Newmiso Davide. made regular deposits. CV No.500.[36] is untenable. petitioner’s branch manager. THE INTERMEDIATE APPELLATE COURT and EMME HERRERO. that amount was credited in his ledger as a deposit resulting in the corresponding total balance of $3. 1984. 1994 CITYTRUST BANKING CORPORATION. David B. J. it should suffer the resulting damage. in natural and continuous sequence.R. Said practice amounts to a disregard of the clearance requirement of the banking system. Wells Fargo Bank International handled the clearing of checks drawn against U. VITUG. 1984 the word "hold" was written beside the balance of $109.500.00. but petitioner’s Buendia Ave. Agcaoili and Associates for petitioner. Kapunan. Puno.00 on petitioner’s part was its personnel’s negligence in allowing such withdrawal in disregard of its own rules and the clearing requirement in the banking system. While it is true that private respondent’s having signed a blank withdrawal slip set in motion the events that resulted in the withdrawal and encashment of the counterfeit check. the petition for review on certiorari is DENIED. 1984.00. November 20. vs.640.541.250.00 were indicated therein as withdrawn thereby leaving a balance of $2.00..[30] Upon private respondent’s deposit of $2. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. 1984.92. In her complaint.500.500.R. 37392 is AFFIRMED.92.[31] On September 10.Petitioner violated its own rules by allowing the withdrawal of an amount that is definitely over and above the aggregate amount of private respondent’s dollar deposits that had yet to be cleared.00 and the value of the check deposited in the amount of $2.[34] According to Reyes. common sense. petitioner assumed the risk of incurring a loss on account of a forged or counterfeit foreign check and hence.. Basco. In so doing. petitioner.[32] On November 19. 1984. Reyes’ contention that after the lapse of the 35-day period the amount of a deposited check could be withdrawn even in the absence of a clearance thereon. the negligence of petitioner’s personnel was the proximate cause of the loss that petitioner sustained.[35] Jjlex From these facts on record.S. Jr. C. was informed unofficially of the fact that the check deposited was a counterfeit.00.59 was reflected in the ledger and on October 23.. 84281 May 27. the amount of $600. respondents. No. Extension Branch received a copy of the communication thereon from Wells Fargo Bank International in New York the following day.00 and the additional charges of $10. the amount of $2. The bank’s ledger on private respondent’s account shows that before he deposited $2. private respondent averred that she. JJ. concur. 1984. WHEREFORE. an interest of $11.J. .[33] That must have been the time when Reyes. which is determined by a mixed consideration of logic. it is at once apparent that petitioner’s personnel allowed the withdrawal of an amount bigger than the original deposit of $750. Humberto B.67 was entered as withdrawn with a balance of $109. unbroken by any efficient intervening cause. SO ORDERED. Proximate cause. (Chairman).00 on September 3. On September 30. produces the injury. a businesswoman. The Decision of the Court of Appeals in CA-G. 262. "B").00 007400 — 4.500. the teller should not have accepted plaintiff's deposit without correcting the account number on the deposit slip which.000. is the following printed provision: In making a deposit . There could be no mistaking in her name. the complete name of plaintiff depositor appears in bold letters on the deposit slip (Exh.299. yet. In the case before Us. as pointed out by defendant. it contained only seven (7) digits instead of eight (8)." The last check No. temperate and moderate damages of P5.281. viz: Check No.e. 29000823.starting September of 1979. Amount 007383 — P1. This is controlling in determining in whose account the deposit is made or should be posted.204. Second. For then she could have readily .00 007387 — 2. was erroneous because. private respondent has also the duty to use her account in accordance with the rules of petitioner bank to which she has contractually acceded. which found the appeal meritorious. and attorney's fees of P4. The bank is engaged in business impressed with public interest. "B").000.. Herrero." In fact. lending out money and collecting interests. however. This.00 007384 — 1. "Emma E. which. it contends. Petitioner bank concedes that it is its obligation to honor checks issued by private respondent which are sufficiently funded. even if it be true that there was error on the part of the plaintiff in omitting a "zero" in her account number. judgment is hereby rendered in favor of the defendant and against the plaintiff. she deposited with petitioner the amount of Thirty One Thousand Five Hundred Pesos (P31. The appellate court ruled: WHEREFORE. it is a fact that her name. plaintiff is hereby adjudged to pay the defendant reasonable attorney's fee in the amount of FIVE THOUSAND PESOS (P5. Laguna. Laguna. is clearly written on said deposit slip (Exh. It should not be a matter of the bank alone receiving deposits. As it happened. asserted that it was due to private respondent's fault that her checks were dishonored. dismissed the complaint for lack of merit. The counterclaim of defendant is dismissed for lack of merit. DISMISSING the complaint for lack of merit.00. contained in its "brochures" governing current account deposits. Herrero". and that the deposit was made in her name. obviously. This is so because it is not likely to commit an error in one's name than merely relying on numbers which are difficult to remember. with petitioner Citytrust Banking Corporation at its Burgos branch in Calamba.00) plus cost of suit. was personally redeemed by private respondent in cash before it could be redeposited. Private respondent went to the Court of Appeals.507. 007400. could have been avoided at the first instance had the teller of defendant bank performed her duties efficiently and well. it rendered judgment.716. Among such rules. Petitioner Citytrust Banking Corporation is now before us in this petition for review on certiorari. but. For. in cash.00 When presented for encashment upon maturity. Hence. We view the use of numbers as simply for the convenience of the bank but was never intended to disregard the real name of its depositors. It averred that instead of stating her correct account number. Exactly the same issue was addressed by the appellate court. thus: WHEREFORE. plaintiff's deposit had to be consigned to the suspense accounts pending verification. i.000. . reversing the trial court's decision. on 15 July 1988. in order to amply cover six (6) postdated checks she issued. On 15 May 1980. It is also its obligation to see to it that all funds invested with it are properly accounted for and duly posted in its ledgers. and it is its duty to protect in return its many clients and depositors who transact business with it.00 007387 — 4. indeed. kindly insure accuracy in filing said deposit slip forms as we hold ourselves free of any liability for loss due to an incorrect account number indicated in the deposit slip although the name of the depositor is correctly written. The Regional Trial Court (Branch XXXIV) of Calamba.00 007492 — 6. on 27 February 1984. defendant's teller should not have fed her deposit slip to the computer knowing that her account number written thereon was wrong as it contained only seven (7) digits. after its deliberations. made the following findings and conclusions: 1 We cannot uphold the position of defendant. Petitioner. according to defendant. she inaccurately wrote 2900823. "Emme E.00).00. with costs against him. . especially a number with eight (8) digits as the account numbers of defendant's depositors. in its answer. all the checks were dishonored due to "insufficient funds.000. We are not persuaded that defendant bank was not free from blame for the fiasco.00. the judgment appealed from is REVERSED and a new one entered thereby ordering defendant to pay plaintiff nominal damages of P2. In the first place. in her deposit slip. That is. Intermediate Appellate Court. the forbearance should be commensurated with prompt. "O" and "P"). including the assurance that their deposits will be duly credited them as soon as they are made. "L". or should be. Herrero" was erroneous and would be rejected by the computer. They add that failure on the part of the defendant to do so is negligence for which they are liable. can cause the depositor not a little embarrassment if not also financial loss and perhaps even civil and criminal litigation. After all. part of the training and standard operating procedure of the bank's employees. The two awards are incompatible and cannot be granted concurrently. may be vindicated or recognized. Bank clients are supposed to rely on the services extended by the bank.. if any. Decision). which has been violated or invaded by the defendant. No costs in this instance. 2. Court of Appeals. 183 SCRA 360. in cautioning depository banks on their fiduciary responsibility. we similarly said.detected that the account number in the name of "Emma E. Nominal damages are given in order that a right of the plaintiff. confident that the bank will deliver it as and to whomever he directs. The point is that as a business affected with public interest and because of the nature of its functions. 2224. We have already ruled in Mundin v. on the other hand. 1985. The bank must record every single transaction accurately. along with nominal damages. . but were nevertheless properly credited her deposit (pp. temperate or moderate damages. AC-G. who are supposed to be always "on-the-go". and we accordingly agree with the Court of Appeals in granting to her nominal damages but not in similarly awarding temperate or moderate damages. particularly businessmen. reiterated in Bank of Philippine Islands vs. it behooved upon defendant bank to see to it and without recklessness — that the depositor was accurately credited therefor. ways and means are available whereby deposits with erroneous account numbers are properly credited depositor's correct account numbers. For. Manila Banking Corp. We agree with plaintiff that — . That is the responsibility of the bank and its employees. we also find need for vindicating the wrong done on private respondent. vs. Plaintiff's account is a "current account" which should immediately be posted. whether such account consists only of a few hundred pesos or of millions. and withdrawing therefrom. that — In every case. In all other respects. New Civil Code). be proved with reasonable certainty (Art. CV No. may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot. like plaintiff. and not for the purpose of indemnifying the plaintiff for any loss suffered by him (Art. the depositors are not concerned with banking procedure. On the other hand. Temperate or moderate damages. 2221. 131 SCRA 271). Far East Bank & Trust Co. We agree with petitioner. from the nature of the case. Inc. however. and as promptly as possible. Nov. In the instant case. any delay in crediting their account can be embarrassing to them as in the case of plaintiff. such as the dishonor of a check without good reason. the bank is under obligation to treat the accounts of its depositors with meticulous care. efficient and satisfactory service. At least. 206 SCRA 408. 4-5.R. quoting the court a quo in an almost identical set of facts. the depositor expects the bank to treat his account with utmost fidelity. New Civil Code. always having in mind the fiduciary nature of their relationship. prom. Depositors are only concerned with the facility of depositing their money. Intermediate Appellate Court. We subscribe to the above disquisitions of the appellate court. that it is wrong to award. earning interest thereon. "N". To post a deposit in somebody else's name despite the name of the depositor clearly written on the deposit slip is indeed sheer negligence which could have easily been avoided if defendant bank exercised due diligence and circumspection in the acceptance and posting of plaintiff's deposit. which are more than nominal but less than compensatory damages. A blunder on the part of the bank. 03639. As proof thereof plaintiff alludes to five particular incidents where plaintiff admittedly wrongly indicated her account number in her deposit slips (Exhs. the appealed decision is MODIFIED by deleting the award of temperate or moderate damages. that — Having accepted a deposit in the course of its business transactions. In Simex International (Manila). the appellate court's decision is AFFIRMED. down to the last centavo. This has to be done if the account is to reflect at any given time the amount of money the depositor can dispose of as he sees fit. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION . . WHEREFORE. vs. "J". even in computerized systems of accounts. it does not earn interest. she placed the old personal account number of Arthur Canlas on the deposit slip for the new joint checking account of the spouses so that the initial deposit of P2. Canlas' parents. Leonen. No. and 5. Canlas representing moral damages. Arthur and Vivienne Canlas. 1977. 210-442-41 in the same branch. (p. Costs.250 for the joint checking account was miscredited to Arthur's personal account (p. 1984. the "new accounts" teller of the bank pulled out from the bank's files the old and existing signature card of respondent Arthur Canlas for Current Account No. By mistake. The award of P50. On May 5. one of the checks was dishonored by the bank for insufficient funds and a penalty of P20 was deducted from the account in both instances. opened a joint current account No. et al.000. 1992 BANK OF THE PHILIPPINE ISLANDS.: In a decision dated September 3.00 for plaintiff Arthur Canlas and P150. THE INTERMEDIATE APPELLATE COURT and the SPOUSES ARTHUR CANLAS and VIVIENE CANLAS. 210-442-41 for use as I D and reference. Rollo). As the surviving corporation under the merger agreement and under Section 80 (5) of the Corporation Code of the Philippines. However.89 in April 1977 and another check for P1.000 the P465. When the respondent spouses opened their joint current account. On December 15.00 as actual damages. 1978. 113. 69162 February 21. Rollo).000. actions or proceedings by and against CBTC. petitioner. the judgment appealed from is hereby modified as follows: 1. Emmanuel B. The motion was denied. 69178 entitled.000. Ramirez & Associates for petitioner.R.000.R. P 10. 36. J. During the pendency of the case. This petition for review of that decision was filed by the Bank. Commercial Bank and Trust Company of the Philippines. P 150.00 on June 1. CV No. the private respondents filed a complaint for damages against CBTC in the Court of First Instance of Pampanga (p. Canlas.250. 1981. when respondent Vivienne Canlas issued a check for Pl. The respondent spouses. the dispositive portion of which reads: WHEREFORE." reduced to P105. Plaintiff-Appellees vs. BPI took over the prosecution and defense of any pending claims.000 damage-award of the trial court to the private respondents for an error of a bank teller which resulted in the dishonor of two small checks which the private respondents had issued against their joint current account. respondents.00 as attorney's fees. 210-520-73 on April 25. L. 9. 2. but the bank could not contact them because they actually reside in Porac. P 150.000. Pampanga. The dispositive portion of its decision reads: WHEREFORE.000. . P 5.00 in actual damages is herewith deleted. the Intermediate Appellate Court deleted the actual damages and reduced the other awards. 3. 1977. In view of the overdrawings.00 as exemplary damages. the bank filed a motion to dismiss the complaint for improper venue.639. The spouses subsequently deposited other amounts in their joint account.00 for plaintiff Vivienne S.. the Intermediate Appellate Court (now Court of Appeals) in AC-G. Rollo).160. the Regional Trial Court of Pampanga rendered a decision against BPI. DefendantAppellant. Arthur Canlas had an existing separate personal checking account No. 4. Canilao for private respondents. 1977 in the Quezon City branch of the Commercial Bank and Trust Company of the Philippines (CBTC) with an initial deposit of P2. The city address and telephone number which they gave to the bank belonged to Mrs. On February 27.G. GRIÑO-AQUINO. the Bank of the Philippine Islands (BPI) and CBTC were merged. "Arthur A. the bank tried to call up the spouses at the telephone number which they had given in their application form. judgment is hereby rendered sentencing defendant to pay the plaintiff the following: 1. On appeal. vs. Prior thereto. ." like the incorrect account number that the bank teller wrote on the initial deposit slip for the newly-opened joint current account of the Canlas spouses. Court of Appeals.2. (p. vs. it caused serious anxiety. In all other respects. 167 SCRA 209). it must bear the blame for not discovering the mistake of its teller despite the established procedure requiring the papers and bank books to pass through a battery of bank personnel whose duty it is to check and countercheck them for possible errors. 367). The venue of the case had been properly laid at Pampanga in the light of private respondents' earlier declaration that Quezon City is their true residence. 78. the bank is under obligation to treat the accounts of its depositors with meticulous care. as correctly observed by respondent Appellate Court. the depositor expects the bank to treat his account with the utmost fidelity. Inc. Court of Appeals (183 SCRA 360. While the bank's negligence may not have been attended with malice and bad faith. who casually declared that "the approving officer does not have to see the account numbers and all those things. Costs against the defendants appellant. On the question of venue raised by petitioner. The point is that as a business affected with public interest and because of the nature of its functions.00. The bank is not expected to be infallible but.00 is awarded to plaintiffs-appellees Arthur Canlas and Vivienne S.00 and attorney's fees to P5. it was a "petty thing. the officials and employees tasked to do that did not perform their duties with due care. Said court further stressed that it cannot absolve the petitioner from liability for damages to the private respondents. The award of reasonable attorney's fees is proper for the private respondents were compelled to litigate to protect their interest (Art. A blunder on the part of the bank. there was ample proof that the residence of the plaintiffs is B. not P50. This has to be done if the account is to reflect at any given time the amount of money the depositor can dispose of as he sees fit. nevertheless. Unfortunately. Rollo). . Canlas' parents was placed by the private respondents in their application for a joint checking account. . Exemplary damages is likewise reduced to the sum of P50. In every case. vs. Rollo). at the suggestion of the new accounts teller. can cause the depositor not a little embarrassment if not also financial loss and perhaps even civil and criminal litigation. in this instance. 117. down to the last centavo. that sparked this half-a-million-peso damage suit against the bank. Rollo. Rule 4 of the Rules of Court). Those are very petty things for the approving manager to look into" (p. vs.000. The appellate court based its award of moral and exemplary damages. 3. because of the embarrassment that even an honest mistake can cause its depositors (p. The bank must record every single transaction accurately.00 each. 38. 2. and attorney's fees on its finding that the mistake committed by the new accounts teller of the petitioner constituted "serious" negligence (p. the absence of malice and bad faith renders the award of exemplary damages improper (Globe Mackay Cable and Radio Corp. and as promptly as possible. 176 SCRA 778). 2208. 40. embarrassment and humiliation to the private respondents for which they are entitled to recover reasonable moral damages (American Express International. The petitioner was guilty of gross negligence in the handling of private respondents' bank account. The appealed decision is MODIFIED by deleting the award of exemplary damages to the private respondents. much less held liable for damages on account of the inadvertence of its bank employee for Article 1173 of the Civil Code only requires it to exercise the diligence of a good father of family. or where the plaintiff or any of the plaintiffs resides. Record on Appeal). the decision of the Intermediate Appellate Court. the petition for review is granted. 31. Antonio Enciso. as may be gathered from the testimony of the bank's lone witness. 3. Canlas. IAC. However. The city address of Mrs. such as the dishonor of a check without good reason. Rollo). Apparently. Private respondents are entitled to the moral and exemplary damages and attorney's fees adjudged by the respondent appellate court. WHEREFORE. confident that the bank will deliver it as and to whomever he directs. presumably to facilitate mailing of the bank statements and communicating with the private respondents in case any problems should arise involving the account. Civil Code). this Court stressed the fiduciary nature of the relationship between a bank and its depositors and the extent of diligence expected of it in handling the accounts entrusted to its care. whether such account consists only of a few hundred pesos or of millions.000. In Simex International (Manila). Pampanga (p. at the election of the plaintiff (Section 2[b]. No waiver of their provincial residence for purposes of determining the venue of an action against the bank may be inferred from the so-called "misrepresentation" of their true residence. always having in mind the fiduciary nature of their relationship. Sacan. Porac.) Petitioner filed this petition for review alleging that the appellate court erred in holding that: 1.000.000. There is no merit in petitioner's argument that it should not be considered negligent. In this case. even on the assumption of an honest mistake on its part. now Court of . Inc. Moral damages of P50. it is evident that personal actions may be instituted in the Court of First Instance (now Regional Trial Court) of the province where the defendant or any of the defendants resides or may be found. concur. To satisfy the judgment. Melchor S. Ramos. Dela Cruz. Upon expiration of the one year period for the judgment debtor to exercise his right of redemption. Mabasa. Daniel Soriano et al. Deray. Venus P. (sic) The motion of the respondents that this case be consolidated with CA-G. Norma M. Manila at which time and date the parties may argue their respective positions. . Rosenilla P. Marilyn S. 44378 OF THE HONORABLE COURT OF APPEALS. Rey C. Buncag. Martinez. Roger A. Geronimo S. Emmanuel Guzman. De Leon. Macatuggal. Bernardo R. JJ. Angel C. Tarun. Marcial B.. Cabalza. Herminia T. 1975 in favor of the plaintiff. The levied properties were sold at public auction wherein petitioner Leonardo T. ANGELITO RANOSA. Ricardo M. Perfecta G. Petra C. Arsenio D. Rolloque. Fe Basilio Sevilleja. Bassig. Dominador A.000. Damaso. De Polonia. Jose G. Court of Appeals Main Building. Gamponia. Jr.J. for Specific Performance and Damages which was decided on June 5. respondents. Daliuag. Artemio T. Maramag. Bordey. Ventura. 1997 at the Moran Hall. Romeo M. Armand A. Rolando C. George F. Zone 2-B-Julo S. Republic of the Philippines THIRD DIVISION [G. Asido. Marciano L. Maximo Marcos. Romeo M. Florentino A. Angelito G. Inan. Bunagan. Eleuterio G. Reyes was the sole and highest bidder. Ermita. De La Cruz. Batalla. Carmelita G.” The antecedents material to the instant petition are: Petitioner Leonardo T. No.00. Zone 3.. Elcid D. Gammad. Rainerio V. Gregorio F. Lacambra.Donato E. EL CID PAGURAYAN. SP No. Cabaruan. is AFFIRMED. Mallillin. DECISION GONZAGA-REYES. on July 29. Ondivilla. Jose D. December 21. 3039. Reyes is the plaintiff in Civil Case No. 1997 and the alias Writ of Demolition dated May 30. Martinez. the Deputy Provincial Sheriff of Cagayan levied on three (3) parcels of land belonging to Daniel. Baliga. Villaverde and Ernesto Yabut. Bulanadi. Deray. Edison C.Appeals. Baloran Victoriano D.Milagros M. ANTONIO SOLOMON. OCCUPANTS AND BUILDERS IN GOOD FAITH” LISTED IN THE “LIST OF MOVANTS-INTERVENORS” ATTACHED AS ANNEX B[1] Zone 2. Eva S. Lagrimas B. Domingo A. De Leon. Warles A. REYES. Alagao. Marcelino C. Bienvenido A. 1999] LEONARDO T. Elena P. Iluminado F. J. Quinto. Ramos. Baguiran. No costs. Alejandra M. Fermin A. Gammad. Castro. Joven C. the deed of absolute sale covering the properties was issued in favor of Reyes. Jimmy M. SO ORDERD. Narvasa. Dominador and Domitila. Angelita S. Dominador B. Randy D. Paleg. which is hereunder quoted in full: “It appearing that the threatened execution of the writ of demolition against the petitioners will cause irreparable injury and will work injustice to them and there being a need to maintain the status quo further while this petition has not been resolved. Greg T. Jr. Pilar M. 42725 is denied. 1997. VILMA RAMOS. Jose D.1 TO THE PETITION IN CA-GR SP NO. Addatu. Lazo. enjoining the respondents from implementing the Resolution dated May 26. 2136 entitled Leonardo Reyes vs. vs. C. Guiyab. Remigio and Chave P. petitioner. Manuel M. Pedro D. Digna O. Jonathan D. Corpuz. Cosilet. Teresita C. Gilbert P. Emmnuel M. Salomon. Galvez. Villamor. Woodro S. Candida A. Mappatao. Orlando E..: Before us is a petition for certiorari under Section 1 of Rule 65 which seeks to annul the Resolution[2] of respondent court (Fourteenth Division) dated July 2. 1997 in Civil Case No. Pagurayan.R. Larry O.. Ventura. Federico S. Jr. Bordey. Domingo. Mallilllin. Valera. Moore. Dammay. AND THE ALLEGED “TENANTS. it appearing that this case can be decided independently of the question of ownership of the land.M. Cerelina A. Ramos. SO ORDERED. Mayoyo. Flores. Salomon. Cruz and Medialdea. Antonio D. Bunagan. 129750. Federico L. Pedro C. Garcia. De Leon. Renosa. This petition is hereby set for hearing at 10:30 A. let a writ of preliminary injunction issue upon the filing by the petitioners of a bond in the sum of P200. Pagadduan. Castaneda. Rolloque. Manding. Quinto.R. Vilma C. COURT OF APPEALS. Caridad T. Diosdado. all surnamed Soriano. Martinez. Espada. Marina Marcos. Garo. The assailed order was issued by respondent court in view of the threatened execution of the writ of demolition against the petitioner and was intended to maintain the status quo while the petition has not been resolved. The rule is that certiorari as a special civil action will not lie unless a motion for reconsideration is filed before the respondent tribunal to allow it an opportunity to correct its imputed errors. with application for a temporary restraining order and a writ of preliminary injunction (which was received by this Court on July 25. 1996 directing the provincial sheriff “to enforce the Writ of Execution and to deliver the Writ of Possession to petitioner Reyes. Leonardo Reyes filed the instant petition for certiorari and prohibition.[5] While there are exceptions to the rule[6].[3] As stated in the above-mentioned Resolution. and to “eject the lessees and those acting in their behalf for the land subject of this unit. Reyes and the judgment debtors (the Sorianos). Before this date. Petition for Review on Certiorari was denied by the Supreme Court and the denial became final on July 27. Moreover. On the date set for hearing.e. 3093. On July 2. SO ORDERED. a writ of execution was issued on November 26. whether private respondents are indeed lessees or builders in good faith. 3093. the Court of Appeals issued the Resolution now assailed in this petition. the respondent court had set the petition for hearing to enable the parties to argue their respective positions. even before the same was sold in the auction sale. The Sorianos and occupants (herein private respondents) refused to vacate the property. none of them are in point. The Sorianos and the private respondents herein. the court set the petition for hearing on July 29. had failed. This case was decided in favor of Reyes.[8] From an examination of the pleadings and their annexes. should be dismissed. Vitug. 1997. 3-E and 3-H (except Lot 3747-G-1) are now titled in the name of petitioner Reyes. Private respondents claim that they should be allowed to intervene and be given the opportunity to be heard as they were not made parties in Civil Case No. earlier-quoted.i. the judgment debtor had filed a case. Civil Case No. SP No. .[4] We find no merit in the instant petition. In this case. we are not convinced that respondent abused its discretion in a manner that is whimsical and arbitrary as to warrant our interference by the extraordinary writ of certiorari. on a petition for certiorari. 44378 questioning the denial by the trial court of their request to be allowed to intervene and to quash the writ of demolition and alias writ of demolition directed against them. and whose reason for wanting to be heard is that they are builders in good faith on the lots in question and that the houses and improvements to be demolished belong to them. JJ. 3-H and 3447-C-1. buildings and improvements thereon. who claim to have been in the land in question and built in good faith their houses. Private respondents filed a petition for certiorari in the Court of Appeals docketed as CA-G. who were not impleaded as parties to the case between Leonardo T. The petitioner had available to him a speedy and adequate remedy. the Court is not impressed that the petition has substantive merit. Panganiban. 3-E. 3-B. 1992 per entry of judgment. 1997) assailing the quoted resolution of the Court of Appeals granting injunctive relief. resisted the execution and the demolition of their houses. The issuance of a preliminary injunction rests entirely within the discretion of the court taking cognizance of the case and is generally not interfered with except in cases of manifest abuse. and Purisima. concur. WHEREFORE. the petition for certiorari was precipitately filed and is premature. as he could have filed a motion for reconsideration. Needless to state.” As a consequence. when he had full opportunity to do so. The Court of Appeals affirmed the decision with modification. the petition is dismissed for lack of merit. We find no cogent reason to disturb respondent court’s finding that the demolition will “cause irreparable injury and will work injustice” to the therein petitioners. and for that reason. petitioner opted to elevate the matter to this Court where he now raises what is essentially a question of fact. Lots 3-A 3-B. commanding that Reyes be placed in possession of the Lots 3-A. questions of fact are not properly to be raised in a petition for certiorari before this Court which is not a trier of facts. Melo (Chairman). First. After attempts by the Sorianos to stop the execution of the judgment declaring the sale in favor of petitioner Reyes valid.[7] Instead of presenting his arguments before the Court of Appeals. R. absent a showing of grave abuse of discretion.It appears that earlier.. to annul the auction sale and certificate of sale in favor of Reyes. The records of the Court of Appeals show that the proceedings in the Court of Appeals were suspended in view of the filing of the instant petition. but he opted to dispense with the same for no good reason. petitioner Reyes moved for the suspension of the proceedings and informed the court that he has filed a petition for certiorari and prohibition in the Supreme Court. That the threatened demolition will cause irreparable injury or damage is a finding that this Court will not disturb. 1997 in order that the parties may argue their respective positions. and a writ of demolition was issued upon motion. Agustin Go. petitioners.S. Civil Service Commission.C. C. complaining about the delay in receiving his check. 1991 AGUSTIN Y. Mangatarem. Floverto Jazmin is an American citizen and retired employee of the United States Federal Government.M. C. In January. GO and THE CONSOLIDATED BANK AND TRUST CORPORATION (Solidbank).Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. He used to encash the checks at the Prudential Bank branch at Clark Air Base. HONORABLE INTERMEDIATE APPELLATE COURT and FLOVERTO JAZMIN. the bank.R. The depositor indicated . Pangasinan. Thereafter. in his capacity as branch manager of the then Solidbank (which later became the Consolidated Bank and Trust Corporation) in Baguio City.40 1 equivalent to the total amount of P 20. he received annuity checks in the amounts of $ 67. De los Reyes & Associates for petitioners. Jazmin failed to receive one of the checks on time thus prompting him to inquire from the post offices at Mangatarem and Dagupan City. FERNAN. Manila. through its manager Go.:p The instant petition for review on certiorari questions the propriety of the respondent appellate court's award of nominal damages and attorney's fees to private respondent whose name was used by a syndicate in encashing two U. both payable to the order of Floverto Jasmin of Maranilla St.565. Pampanga. BG 5206 by depositing two (2) U.00 for retirement through the Mangatarem post office. respondents.S. He had been a visitor in the Philippines since 1972 residing at 34 Maravilla Street. Jazmin wrote the U. J. As pensionado of the U. he received a substitute check which he encashed at the Prudential Bank at Clark Air Base.00 for disability and $ 620. Millora & Maningding Law Offices for private respondent. D. Thus. Bureau of Retirement at Washington. 1975. on March 4. 1975. required the depositor to fill up the information sheet for new accounts to reflect his personal circumstances.69. As the result of his inquiries proved unsatisfactory.00 and $913. Pangasinan and drawn on the First National City Bank. No. 1975. vs. L-68138 May 13. Meanwhile. Mangatarem. treasury checks Nos. on April 22.S. government. 5-449-076 and 5-448-890 in the respective amounts of $1810. treasury checks at petitioner bank. allowed a person named "Floverto Jazmin" to open Savings Account No. The savings account was opened in the ordinary course of business.. S. H-2711659. the defendant CBTC should also be held responsible. that he was married to Milagros Bautista. P20..000 plus attorney's fees of P5. He averred that his peace of mind and mental and emotional tranquility as a respected citizen of the community would not have suffered had Go exercised "a little prudence" in ascertaining the identity of the depositor and. moral shock and social humiliation on account of the defendants' gross negligence. 5-449-076 and 5-448890 payable to the order of Floverto Jasmin in the respective amounts of $1. this Court finds for plaintiff and that he is entitled to the reliefs prayed for in the following manner: Defendant Agustin Y. The latter amount was actually for only $13. while the records do not show the unaltered amount of the other treasury check. treasury checks as there was no time limit for returning them for clearing unlike in ordinary checks wherein a two to three-week limit is allowed. that Go's complaint was "an act of vicious and wanton recklessness and clearly intended for no other purpose than to harass and coerce the plaintiff into paying the peso equivalent of said dollar checks to the CBTC branch office in Baguio City" so that Go would not be "disciplined by his employer.565. 3 Consequently. Eventually. 4 In their answer. On June 29. for the "grossly negligent and reckless act" of its employee. On September 24. the deposited checks were sent to the drawee bank for clearance. at Camp Holmes. 1976. Pangasinan and that the differences in name and address should have put Go on guard.. it was only on August 24.000 as compensatory and moral damages. Benguet. it had sufficient time to ascertain the identity of the depositor. Go reported the matter to the Philippine Constabulary in Baguio City. Mangatarem. to the plaintiff the amount of SIX THOUSAND PESOS .40. The dispositive portion of the decision states: WHEREFORE. and that his initial deposit was P3. Go and the Consolidated Bank and Trust Corporation for moral and exemplary damages in the total amount of P90.000 as attorney's fees and P5. Thereafter. Government checks Nos. the investigators found that the person named "Floverto Jazmin" who made the deposit and withdrawal with Solidbank was an impostor. Mangatarem.40. Pangasinan.S. residence certificate/alien certificate of registration/passport. 1976. 1978 6 the lower court found that Go was negligent in failing to exercise "more care. the bank reported the matter to the Philippine Constabulary. 138134 under remarks or instructions and left blank the spaces under telephone number. He alleged therein that Go allowed the deposit of the dollar checks and the withdrawal of their peso equivalent "without ascertaining the identity of the depositor considering the highly suspicious circumstances under which said deposit was made. They contended that contrary to plaintiff s allegations. the court. it allowed the depositor to withdraw the amount indicated in the checks. Maranilla St. As counterclaim. He likewise denied that he opened an account with Solidbank or that he deposited and encashed therein the said checks. Finding that the plaintiff had sufficiently shown that prejudice had been caused to him in the form of mental anguish. they prayed for the award of P100.000 as exemplary damages. 1976 for investigation regarding the complaint filed by Go against him for estafa by passing altered dollar checks.000 as litigation. Inasmuch as Solidbank did not receive any word from the drawee bank. He was shown xerox copies of U. Branch II at Lingayen a complaint against Agustin Y. caution and vigilance" in accepting the checks for deposit and encashment. the defendants contended that the plaintiff had no cause of action against them because they acted in good faith in seeking the "investigative assistance" of the Philippine Constabulary on the swindling operations against banks by a syndicate which specialized in the theft. that he was a Filipino citizen and a security officer of the US Army with the rank of a sergeant bearing AFUS Car No. Jazmin denied that he was the person whose name appeared on the checks. and that he suffered humiliation and embarrassment as a result of the filing of the complaint against him as well as "great inconvenience" on account of his age (he was a septuagenarian) and the distance between his residence and the constabulary headquarters. bank and trade performance and as to who introduced him to the bank. Emphasizing that the main thrust of the complaint was "the failure of the defendants to take steps to ascertain the identity of the depositor. alteration and encashment of dollar checks. Jazmin was investigated by constabulary officers in Lingayen.S. 1973 requesting all banking institutions to report to the Central Bank all crimes involving their property within 48 hours from knowledge of the crime.810.therein that he was Floverto Jazmin with mailing address at Mangatarem. 2217 and 2219 (10) in conjunction with Article 21 of the Civil Code. He wrote CSA No. Co and the CONSOLIDATED BANK AND TRUST CORPORATION are hereby ordered to pay." the court noted that the depositor was allegedly a security officer while the plaintiff was a retiree-pensioner. La Trinidad. invoking Articles 2176. Jazmin filed with the then Court of First Instance of Pangasinan. P20. 1976 in the Baguio Midland Courier.00 and $913." that by reason of said complaint. Go "immediately and recklessly filed (the) complaint for estafa through alteration of dollar check" against him. incidental expenses and costs. The court also noted that instead of complying with the Central Bank Circular Letter of January 17. they verified the signature of the depositor and their tellers conducted an Identity check. the two dollar cheeks were returned to Solidbank with the notation that the amounts were altered. 1976 or more than a month after the bank had learned of the altered checks that it filed the complaint and therefore. that instead of taking steps to establish the correct identity of the depositor. ruled in favor of the plaintiff. Pangasinan and not to Floverto Jazmin. It held that more care should have been exercised by Go in the encashment of the U.35. jointly and severally.. 2 The depositor's signature specimens were also taken. 1976 or more than a year later. Jazmin received radio messages requiring him to appear before the Philippine Constabulary headquarters in Benguet on September 7. Pangasinan and home address at Maravilla St. It noted that the checks were payable to the order of Floverto Jasmin. 5 In its decision of March 27. Maravilla St. Initially. that he received the same and that the signature on the indorsement was his. It considered as "reckless" the defendants' filing of the complaint with the Philippine Constabulary noting that since the article on a fake dollar check ring appeared on July 18. after three (3) weeks. he was "compelled to present and submit himself" to investigations by the constabulary authorities. Mangatarem.000. Pangasinan and later. On August 3. 000. 27 Phil. Go and the bank interposed the instant petition for review on certiorari arguing primarily that the employer bank may not be held "co-equally liable" to pay nominal damages in the absence of proof that it was negligent in the selection of and supervision over its employee. the appellate court ordered Go and Consolidated Bank and Trust Corporation to pay jointly and severally Floverto Jazmin only NOMINAL DAMAGES in the sum of Three Thousand Pesos (P 3. But the error in the name and address of the payee was very patent and could not have escaped the trained eyes of bank officers and employees. is not a ground for moral damages. which has been violated or invaded by the defendant. L-14333. The defendants appealed to the Court of Appeals. maybe vindicated or recognized and not for the purpose of indemnifying the plaintiff for any loss suffered by him (Article 2221. Espenilla CA-G. The fact that appellee did not suffer from any loss is of no moment for nominal damages are adjudicated in order that a right of the plaintiff.(P6. private respondent is entitled to an award of damages. Consequently. ONE THOUSAND PESOS (P1.000. Accordingly. since appellee has no right to claim for moral damages. September 30. still appellants are liable under the law for nominal damages. it would be unjust to overlook the fact that petitioners' negligence was the root of all the inconvenience and embarrassment experienced by the private respondent albeit they happened after the filing of the complaint with the constabulary authorities. concluded that Go's negligence in the performance of his duties was "the proximate cause why appellant bank was swindled" and that denouncing the crime to the constabulary authorities "merely aggravated the situation. moral shock and social humiliation were suffered by private respondent only after the filing of the petitioners' complaint with the Philippine Constabulary. Piansay.000. 8 The facts of this case reveal that damages in the form of mental anguish.000. under Article 2180 of the Civil Code. 284).00) as moral damages. there being no negligence on the part of Go. Nos. Sandijas.00) as exemplary damages. January 28. then he may not likewise be entitled to exemplary damages (Estopa vs. 9 we hold that under the peculiar circumstances of this case. Hence. 1984. the attorney's fees to be amended (sic) to plaintiff should be increased to P3. 45200-45201-R. it is understandable why petitioners appear to have overlooked the facts antecedent to the filing of the complaint to the constabulary authorities and to have put undue emphasis on the appellate court's statement that "denouncing a crime is not negligence. the herein appellee has established a cause of action. Corollarily. 1975).00) as attorney's fees and costs of litigation and to pay the costs and defendant AGUSTIN Y. It was only then that he had to bear the inconvenience of travelling to Benguet and Lingayen for the investigations as it was only then that he was subjected to embarrassment for being a suspect in the unauthorized alteration of the treasury checks. Had Go exercised the diligence expected of him as a bank officer and employee." It ruled that there was a cause of action against the defendants although Jazmin had nothing to do with the alteration of the checks. but was not able to adduce evidence showing actual damages then nominal damages may be recovered (Sia vs. The appellate court. Centeno. disallowed the award of moral and exemplary damages and granted nominal damages instead. And. Go and the bank filed a motion for the reconsideration of said decision contending that in view of the finding of the appellate court that "denouncing a crime is not negligence under which a claim for moral damages is available.00. Indeed. There is therefore." the award of nominal damages is unjustified as they did not violate or invade Jazmin's rights. however. because he suffered damages due to the negligence of Go. and that he was constrained to file the instant case. They are not intended for indemnification of loss suffered but for the vindication or recognition of a right violated or invaded (Ventanilla vs.R. These are damages recoverable where a legal right is technically violated and must be vindicated against an invasion that has produced no actual present loss of any kind. the bank shall be held liable for its manager's negligence. L-14503. Considering that he had to defend himself in the criminal charges filed against him. The situation would have been different if the treasury checks were tampered with only as to their amounts because the alteration would have been unnoticeable and hard to detect as the herein altered check bearing the amount of $ 913. Go in addition thereto in his sole and personal capacity to pay the plaintiff the amount of THREE THOUSAND PESOS (P3. April 21. he would have noticed the glaring disparity between the payee's name and address on the treasury checks involved and the name and address of the depositor appearing in the bank's records. 1960).40 shows.00) with interest at six (6%) percent per annum until fully paid and One Thousand Pesos (P 1. New Civil Code). all with interest at six (6) percent per annum until fully paid. It explained thus: While it is true that denouncing a crime is not negligence under which a claim for moral damages is available. On January 24. his employer may not be held liable for nominal damages. . SO ORDERED. No. 1961).00) as attorney's fees and costs of litigation.000. or where there has been a breach of contract and no substantial injury or actual damages whatsoever have been or can be shown (Elgara vs. no other conclusion than that the bank through its employees (including the tellers who allegedly conducted an identification check on the depositor) was grossly negligent in handling the business transaction herein involved." Although this Court has consistently held that there should be no penalty on the right to litigate and that error alone in the filing of a case be it before the courts or the proper police authorities. Petitioner Go's negligence in fact led to the swindling of his employer. where the plaintiff as in the case at bar.000. The motion for reconsideration having been denied. said court (then named Intermediate Appellate Court) rendered a decision 7 finding as evident negligence Go's failure to notice the substantial difference in the identity of the depositor and the payee in the check. Hence. It is not necessary that such damages have been foreseen or could have reasonably been foreseen by the defendant. March 16. the bank is responsible for the acts of its employee unless there is proof that it exercised the diligence of a good father of a family to prevent the damage. acting within the scope of their assigned tasks. Branch 171. respondents. the Court of Appeals disposed as follows: . it definitely was the start of his consequent involvement as his name was illegally used in the illicit transaction. Metro Manila. COURT OF APPEALS and LETICIA TUPASI-VALENZUELA joined by husband Francisco Valenzuela. 2913-V-88. Republic of the Philippines SECOND DIVISION [G. in Civil Case No. 1996.[1] In setting aside the trial court's decision. the decision of the respondent appellate court is hereby affirmed.. the burden of proof lies upon the bank and it cannot now disclaim liability in view of its own failure to prove not only that it exercised due diligence to prevent damage but that it was not negligent in the selection and supervision of its employees. 10 As Go's negligence was the root cause of the complained inconvenience. Again. which reversed the judgment of the Regional Trial Court of Valenzuela. the defendant shall be liable for all damages which are the natural and probable consequences of the act or omission complained of. concur. Ed-pm-is DECISION QUISUMBING.R. 2000] PRUDENTIAL BANK. . "(E)mployers shall be liable for the damages caused by their employees . vs. Anent petitioner bank's claim that it is not "co-equally liable" with Go for damages.: This appeal by certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the Decision dated January 31. under the fifth paragraph of Article 2180 of the Civil Code. Feliciano.. knowing that its viability depended on the confidence reposed upon it by the public.R. JJ. . Jr. 11 Hence. Gutierrez. WHEREFORE." Pursuant to this provision. petitioner.While at that stage of events private respondent was still out of the picture. 35532. the bank through its employees should have exercised the caution expected of it. SO ORDERED. J. In crimes and quasi-delicts. Jr. 125536. 1997. and the Resolution dated July 2. CV No. No. humiliation and embarrassment.. of the Court of Appeals in CA G. Bidin and Davide. dismissing the private respondent's complaint for damages. Costs against the petitioners. Go is liable to private respondents for damages. 000. in favor of one Belen Legaspi. and to pay the costs. P50. and requested him for the ledger of her current account. the issue is whether the respondent court erred and gravely abused its discretion in awarding moral and exemplary damages and attorney's fees to be paid by petitioner to private respondent. EXEMPLARY DAMAGES AND ATTORNEY'S FEES. She went to the Valenzuela Branch of Prudential Bank on July 4.60 deposited by private respondent on June 1. 01016-3 in the Valenzuela Branch of petitioner Prudential Bank. She asked why her check was dishonored when there were sufficient funds in her account as reflected in her passbook. WHETHER OR NOT THE RESPONDENT COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION WHERE EVEN IN THE ABSENCE OF EVIDENCE.993. On January 31.00.00 by way of exemplary damages. Legaspi. WHETHER OR NOT THE RESPONDENT COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DEVIATING FROM ESTABLISHED JURISPRUDENCE IN REVERSING THE DISMISSAL JUDGMENT OF THE TRIAL COURT AND INSTEAD AWARDED MORAL DAMAGES."WHEREFORE. Simply stated. Undeterred. now petitioner. EVEN IN THE ABSENCE OF EVIDENCE AS FOUND BY THE TRIAL COURT. 1988.000.60.00 by way of moral damages. On June 1. III. with automatic transfer of funds from the savings account to the current account. 1988.271.[3] Petitioner filed a timely motion for reconsideration but it was denied. It was issued to Legaspi as payment for jewelry which private respondent had purchased.00 penalty for the dishonor of her Prudential Check No.00 for and as attorney's fees. Since this was not the first incident private respondent had experienced with the bank. 983395. Hence. AWARDED ATTORNEY'S FEES.48 in her savings account and P776. WHETHER OR NOT THE RESPONDENT COURT OF APPEALS ACTED IN GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION. this petition. 1988. S-jcj Later. 1988. Private respondent discovered a debit of P300.000. Because of this incident. dismissing the complaint of private respondent. After trial.00 check was redeposited by Lhuillier on June 24.00 BY WAY OF EXEMPLARY DAMAGES. Pasay Branch. he abruptly faced his typewriter and started typing. it was dishonored for being drawn against insufficient funds. 1991. 1996.000. private respondent as of June 21. Reyes told her that there was no need to review the passbook because the bank ledger was the best proof that she did not have sufficient funds. Supreme II. AWARDED P50.00 by way of moral damages. . Sc-jj Thereafter. and to pay the costs. Legaspi's secretary tried to contact private respondent but to no avail. P50. or after a period of 23 days.00 exemplary damages.41. Taking into account that deposit and a series of withdrawals. P50. EVEN IN THE ABSENCE OF EVIDENCE AS FOUND BY THE TRIAL COURT. and properly cleared on June 27. as well as the counterclaim filed by the defendant.00 post-dated June 20. who was in jewelry trade.93 in her current account.00 for and as attorney's fees. the court rendered a decision on August 30. Thus the P11. with petitioner. Jjs-c SO ORDERED. 1988 had a balance of P35. The latter told the former to redeposit the check. WHETHER OR NOT THE RESPONDENT COURT OF APPEALS ACTED IN GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION WHERE. Co-urt IV. private respondent was unmoved by the bank's apologies and she commenced the present suit for damages before the RTC of Valenzuela. 666B (104561 of even date) the amount of P35. respondent appellate court rendered a decision in her favor.000. a businessman also in the jewelry business.000. private respondent was surprised to learn of the dishonor of the check. or total deposits of P36. endorsed the check to one Philip Lhuillier. When Lhuillier deposited the check in his account with the PCIB. the officer in charge of current account.000. Then. to inquire why her check was dishonored. herein private respondent deposited in her savings account Check No. setting aside the trial court's decision and ordering herein petitioner to pay private respondent the sum of P100.000.271. 1988. the appealed decision is hereby REVERSED and SET ASIDE and. 5744 and Current Account No. drawn against the Philippine Commercial International Bank (PCIB). 1988. 983395 in the amount of P11. private respondent issued Prudential Bank Check No. She approached one Albert Angeles Reyes. private respondent appealed to the Court of Appeals. Upon her return from the province. was credited in her savings account only on June 24."[2] The facts of the case on record are as follows: Private respondent Leticia Tupasi-Valenzuela opened Savings Account No.500. the bank tried to mollify private respondent by explaining to Legaspi and Lhuillier that the bank was at fault. P50. raising the following issues: I. WHERE. 1988.500. AWARDED MORAL DAMAGES IN THE AMOUNT OF P100.770. another rendered ordering the appellee bank to pay appellant the sum of P100. Lhuillier's secretary informed the secretary of Legaspi of the dishonor. it was found out that the check in the amount of P35. petitioner questions the award of moral damages. The yardstick should be that it is not palpably and scandalously excessive. always having in mind the fiduciary nature of their relationship.000. Hence we ruled that the offended party in said case was entitled to recover reasonable moral damages. The point is that as a business affected with public interest and because of the nature of its functions. the total deposit of private respondent which was misposted by the bank. (4) the responsibility imposed. we find the award of respondent court of P50. 183 SCRA 360. 367 (1990).000. WHEREFORE.[8] we held that "a bank is under obligation to treat the accounts of its depositors with meticulous care whether such account consists only of a few hundred pesos or of millions of pesos. IAC. Valenzuela. the award of P100.000. While petitioner's negligence in this case may not have been attended with malice and bad faith. and Bank of Philippine Islands vs. Responsibility arising from negligence in the performance of every kind of obligation is demandable. They offered to make restitution and apology to the payee of the check.Petitioner claims that generally the factual findings of the lower courts are final and binding upon this Court. the award of moral damages by the respondent Court of Appeals could not be said to be in error nor in grave abuse of its discretion.00. Even if malice or bad faith was not sufficiently proved in the instant case. all the aforementioned weighed.000. and that the matter had been put to rest. However.. that there was nothing more to it.00 is reasonable.000. . confident that the bank will deliver it as and to whomever he directs. even in the face of lack of evidence to prove such damages.[11] The standards in fixing attorney's fees are: (1) the amount and the character of the services rendered.[5]Jle-xj Admittedly. Inc.[9] The law allows the grant of exemplary damages by way of example for the public good. In our view. Petitioner contends that the appellate court gravely abused its discretion when it awarded damages to the plaintiff. the reduced amount of P20. it was private respondent who declined the offer and allegedly said. thus: Lex-juris "In every case. nevertheless. (6) the skill and the experience called for in the performance of the services. Valenzuela. Petitioner avers it acted in good faith. Court of Appeals. It was an honest mistake on its part. and considering that the amount involved in the controversy is only P36. The mistake resulted to the dishonor of the private respondent's check. whether such account consists only of a few hundred pesos or of millions. x x x" In the recent case of Philippine National Bank vs.000. (8) the results secured. it is the result of lack of due care and caution expected of an employee of a firm engaged in so sensitive and accurately demanding task as banking. The bank must record every single transaction accurately. nevertheless. because the trial court had the opportunity to observe the deportment of witness and the evaluation of evidence presented during the trial. The bank's negligence was the result of lack of due care and caution required of managers and employees of a firm engaged in so sensitive and demanding business as banking. excessive and reduce the same to P30. Legaspi.00 by way of moral damages in favor of private respondent Leticia T. embarrassment and humiliation". petitioner bank had committed a mistake. the fact remains that petitioner has committed a serious mistake. Accordingly.[12] In this case. In our view. there are exceptions to this rule. It dishonored the check issued by the private respondent who turned out to have sufficient funds with petitioner. petitioner contends that private respondent may not "claim" damages because the petitioner's manager and other employee had profusely apologized to private respondent for the error. happened. (3) the nature and importance of the litigation and business in which the services were rendered. considering the reputation and social standing of private respondent Leticia T. as found by both the respondent appellate court and the trial court. 412-413 (1992). as found by the trial court. down to the last centavo. A blunder on the part of bank. 206 SCRA 408. such as the dishonor of a check without good reason. the appellate court also found that "while it may be true that the bank's negligence in dishonoring the properly funded check of appellant might not have been attended with malice and bad faith. et al. It misposted private respondent's check deposit to another account and delayed the posting of the same to the proper account of the private respondent. This has to be done if the account is to reflect at any given time the amount of money the depositor can dispose of as he sees fit. It is further ordered to pay her exemplary damages in the amount of P20.00. the bank is under obligation to treat the account of its depositors with meticulous care. this Court had occasion to stress the fiduciary nature of the relationship between a bank and its depositors and the extent of diligence expected of the former in handling the accounts entrusted to its care. The trial court found "that the misposting of plaintiff’s check deposit to another account and the delayed posting of the same to the account of the plaintiff is a clear proof of lack of supervision on the part of the defendant bank. The level of meticulousness must be maintained at all times by the banking sector."[6] Similarly. the depositor expects the bank to treat his account with the utmost fidelity. however. It claims that private respondent did not suffer any damage upon the dishonor of the check.770. and as promptly as possible. Firstly.[4] Petitioner faults the respondent court from deviating from the basic rule that finding of facts by the trial court is entitled to great weight. as appellee [bank] submits. (5) the amount of money and the value of the property affected by the controversy or involved in the employment. One is where the trial court and the Court of Appeals had arrived at diverse factual findings. it caused serious anxiety. The petitioner is ordered to pay P100.000. according to petitioner. (2) labor.00 for attorney's fees. the Court of Appeals did not err in awarding exemplary damages. 1988. Further. as well as the alleged endorsee.00 is more appropriate. attorney's fees. Lhuillier. time and trouble involved. Juri-smis There is no hard-and-fast rule in the determination of what would be a fair amount of moral damages since each case must be governed by its own peculiar facts. it being a recognized rule that an attorney may properly charge a much larger fee when it is contingent than when it is not.[10] The public relies on the banks' sworn profession of diligence and meticulousness in giving irreproachable service. the assailed DECISION of the Court of Appeals is hereby AFFIRMED. when misposting of private respondent's deposit on June 1. Jj-juris The award of attorney's fees is also proper when exemplary damages are awarded and since private respondent was compelled to engage the services of a lawyer and incurred expenses to protect her interest.41. vs. can cause the depositor not a little embarrassment if not also financial loss and perhaps even civil and criminal litigation. Court of Appeals. (7) the professional character and the social standing of the attorney. Regrettably."[7] In Simex International (Manila).00 and P30. SO ORDERED. Hence. Jksm Costs against petitioner. with MODIFICATION. As a special privilege to the Morans. No. The regular charges on overdraft. the bank allowed them to maintain a zero balance in their current account.090. . On December 14. through Librada Moran. Such arrangement for automatic transfer of funds was called a pre-authorized transfer (PAT) agreement. petitioners. namely one current account (No. Transfers from Saving Account No. They regularly purchased bulk fuel and other related products from Petrophil Corporation on cash on delivery (COD) basis.00 payable to Petrophil Corporation. MORAN. 3.00 and 30. Metro Manila.666. respondents. 1037002387 had an available balance of P43. 4. P35. whom it considered as valued clients.874. The records show that on December 14.100. 105836 March 7. The transfer may be effected on the day following the overdrawing of the current account. You hold CITYTRUST free and harmless for any and all omissions or oversight in executing this automatic transfer of funds.58 and P6. 1994 SPOUSES GEORGE MORAN and LIBRADA P. 3 xxx xxx xxx On December 12. 041960) for P50. again through Librada Moran. 1983. but the check/s would be honored if the savings account has sufficient balance to cover the overdraft. petitioners. (Nos. Gonzales. corner Old Wack-Wack Road. while Savings Account No. 37-00066-7) and two savings accounts.R. In turn. 1983. PNB. to refuse to effect transfer of funds at our sole and absolute option and discretion. 8 and he likewise deposited in their Savings Account No. 1037001372 (covered by the PAT) had an available balance of P26. issued another check (Citytrust No. to personally oversee their daily transactions with the bank. Orders for bulk fuel and other related products were made by telephone and payments were effected by personal checks upon delivery. 1 Petitioners maintained three joint accounts. Mandaluyong. December 13. 1983. 2 The PAT letter-agreement entered into by the parties on March 19.00 was then transferred by him .25. 1982 contained the following provisions: xxx xxx xxx 1. 2.104.39. vs. J. but they gave written authority to Citytrust to automatically transfer funds from their Savings Account No. 9 The amount of P40.00. 4 The next day.900. This is merely an accommodation on our part and we have the right. 1037002387 to their current account could be made only with their prior authorization. Agcaoli & Associates for private respondent. 1983. petitioners. 1037001372 the amounts of P5. 1037002387 and 1037001372) with the Shaw Boulevard branch of Citytrust Banking Corporation. 1037001372 to their Current Account No. He deposited in their Savings Account No.00.268.Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. 7 At about ten o'clock in the morning of the following day. 041962) in the amount of P56. 1983. Petrophil Corporation deposited the two aforementioned checks to its account with the Pandacan branch of the Philippine National Bank (PNB).30 6 and Savings Account No. the collecting bank.00 in favor of the same corporation.: Petitioner spouses George and Librada Moran are the owners of the Wack-Wack Petron gasoline station located at Shaw Boulevard.00. as was his regular practice. Bilog & Associates for petitioners.576. COURT OF APPEALS and CITYTRUST BANKING CORPORATION.754. drew a check (Citytrust No. THE HON. and activity fees will be imposed by the Bank. REGALADO. at all times and for any reason whatsoever. December 15. . Batiller.000. 1037002387 the amounts of P10. reserving our right to terminate this arrangement at any time without written notice to you. 5 The total sum of the two checks was P106. 37-00066-7 had a zero balance. . 37-00066-7 at any time whenever the funds in their current account were insufficient to meet withdrawals from said current account. petitioner George Moran went to the bank. Pandacan branch presented them for clearing with the Philippine Clearing House Corporation in the afternoon of the same day. Current Account No. 1037001372 was transferred to their current account. Considering that the transfers were by then sufficient to cover the two checks. 1984. 10 Sometime on December 15 or 16. to a person named therein or to bearer or order. 26 The present action for damages accordingly hinges on the resolution of the inquiry as to whether or not petitioners had sufficient funds in their accounts when the bank dishonored the checks in question. at approximately ten o'clock in the morning. by a party having money in their hands.000. 1983. As explained by respondent court in its decision. On December 14. which was provided by the bank. 51549. a bank is not liable for its refusal to pay a check on account of insufficient funds. the Court of Appeals rendered judgment in CA-G. hence petitioners filed a complaint for damages on September 8. demanded an explanation from Raul Diaz. On December 15. the relationship between the bank and the depositor is that of a debtor and creditor. Branch 159 at Pasig. . he talked to a certain Villareal.from Saving Account No. Pandacan branch. 1983 George Moran was informed by his wife Librada. CV No. Citytrust filed a counterclaim for damages. with the Regional Trial Court.000. 12 George Moran. Diaz then went to Petrophil to personally present the checks in payment for the two dishonored checks.00 was transferred from Savings Account No. a check is a written order addressed to a bank or persons carrying on the business of banking. 17 On appeal. A check is a bill of exchange drawn on a bank payable on demand. through Diaz. 13 On December 16 or 17. It appears. the banker agrees to pay checks drawn by the depositor provided that said depositor has money in the hands of the bank. or a little over six months after the incident. . 1983. allegedly causing them to suffer loss of earnings. the bank dishonored the checks due to "insufficiency of funds. entitles the drawer to substantial damages without any proof of actual damages.666. 20 Fixed savings and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan.00 as moral damages. 1983. petitioners. At the same time." Said letter was received by Petrophil on January 4. 18 We start some basic and accepted rules. learned that P66. 1984.000. that the latter received from Citytrust. we feel that the same should properly be resolved by us. George Moran learned from one Constancio Magno. This would necessarily require us to inquire into both the savings and current accounts of petitioners in relation to the PAT arrangement. Apparently. notifying them that the two aforementioned checks were "inadvertently dishonored . 1037001372 to the same current account through the preauthorized transfer (PAT) agreement. which was docketed therein as Civil Case No. through George Moran. In view of the factual findings of the two lower courts the correctness of which are challenged by what appear to be plausible. wrote Citytrust claiming that the bank's dishonor of the checks caused them besmirched business and personal reputation. 37-00066-7 expectedly had a zero balance. 16 The bank did not act favorably on their demands. a named sum of money. 1989 was rendered by the trial court dismissing both the complaint and the counterclaim. arguments. Rionisto. a decision dated October 9. head of the centralized clearing unit of Citytrust. requesting them to pay on presentment. 1989 affirming the decision of the trial court. it is asserted by petitioners that such fact should have prevented the dishonor of the checks.666. 25 Before a bank depositor may maintain a suit to recover a specific amount from his bank." 11 The non-delivery of gasoline forced petitioners to temporarily stop business operations. Petrophil cancelled their credit accommodation. . 1984. a bank officer. 14 In a chance meeting around May or June. a letter dated December 16. due to operational error.R. presented the checks for collection. furious and upset.00 from Saving Account No. 21 In other words. 1037002387 to their current account by means of a pro forma withdrawal form (a debit memorandum). when PNB. Failing to get a sufficient explanation. when the deposit is sufficient. the customer service officer. Diaz went to the Moran residence to get the signatures of the petitioners on an application for a manager's check so that the dishonored checks could be redeemed. statutory and doctrinal. petitioners. 24 Conversely. shame and anxiety. 23 Hence. had committed a "grave error". hence they were contemplating the filing of the necessary legal actions unless the bank issued a certification clearing their name and paid them P1. who allegedly told him that Amy Belen Ragodo. it is bound to honor his checks to the extent of the amount of his deposits. that it was not so. In turn. alleging that the case filed against it was unfounded and unjust. credit manager of Petrophil. 15 On July 24. 22 By virtue of the contract of deposit between the banker and its depositor. After trial. Metro Manila.30 while Current Account No. to wit:. 25009 on October 9. however. the branch manager. 19 Thus. that Petrophil refused to deliver their orders on a credit basis because the two checks they had previously issued were dishonored upon presentment for payment. 1037001372 was P26.104. forcing them to pay for their purchases in cash. through counsel. detailed on the witness stand the standard clearing procedure adopted by respondent bank and the Philippine Clearing House Corporation. he must first show that he had on deposit sufficient funds to meet his demand. In addition. 1984. Gerard E. The failure of a bank to pay the check of a merchant or a trader. notwithstanding the fact that a deposit may be made later in the day. 1983. the available balance for Savings Account No. Another P40. 1037002387 to the current account. authorizing the latter to make the necessary transfer. where the bank possesses funds of a depositor. the amount of P66.00 was transferred from Saving Accounts No. In the case at bar. 1983?. In fact. Petitioner had no reason to complain. It cannot. A check. (tsn.30 while Current Account No.104. the bank would not have automatically transferred P66. if the same was at all possible. it was only during business hours in the morning of December 15. that P66. failed to consider the fact that the witness himself admitted that he had no personal knowledge surrounding the dishonor of the two checks in question. 28 Moreover. it endeavors to induce the drawer to make good his account so that the check can be paid. 1983. September 9.Q: Let me again re-phase the question.00 was automatically transferred from Savings Account No. 1983 and December 13. the available balance for Savings Account No. between the time of the issuance of said checks on December 12 and 13 and the time of their presentment on December 14. Under the clearing house rules. Now in accordance with the bank. He must personally keep track of his available balance in the bank and not rely on the bank to notify him of the necessity to fund certain check she previously issued. it protests the check on the following morning and notifies its correspondent bank by the telegraph of the protest. 37-0006-7 had no available balance.666. To prove their point. 1983.00 was transferred from Savings Account No. That theory is incorrect. be held liable to the payee and holder of the check for not protesting it upon the day when it was received. thus preventing their dishonor. was not enough to cover either of the two checks. hence it wanted to prevent the dishonor of their checks. was only P26. and another P40. 9-10). you would receive the checks from (being deposited to) the collecting bank which in this particular example was the Pandacan Branch of PNB which . is supposed to be drawn against a previous deposit of funds for it is ordinarily intended for immediately payment. respondent bank did not succeed in effectuating its good intentions. there was no necessity to put into effect the pre-authorized transfer agreement. In the absence of a contrary showing. Thus. The checks will now be processed at the Citytrust Computer at around 3:00 o'clock in the morning of December 14 (sic)but it will be processed for balance of Citytrust as of December 14 because for one. 1983. 1983 at around ten o'clock in the morning that the necessary funds were deposited. Rule 131 of the Rules of Court provides a disputable presumption in law that the ordinary course of business has been followed. First National Bank 29 that a bank performs its full duty where. when PNB. Most of (sic) these two checks issued by Mrs. When the transfer from both savings accounts to the current account were made. Unfortunately. As earlier stated. and by notifying its correspondent of the dishonor of the check by telegram. as distinguished from an ordinary bill of exchange.00 to said current account. Although not admitting fault. they were done in the hope that the checks may be retrieved. 1983(and) these two (2) checks were made payable to Petrophil Corporation. Pandacan branch presented the checks for collection. 1988. Under similar circumstances. to wit: Q: Now according to you. A: So these checks will now be presented by PNB with the Philippine Clearing House on December 14. Petrophil Corporation presented these two (2) checks for clearing with PNB Pandacan Branch on December 14. which unfortunately was too late to prevent the dishonor of the checks. when petitioners' checks were dishonored due to insufficiency of funds. although he knew the standard clearing procedure. 1037001372. 1037001372 to Current Account No. it is clear that the available balance on December 14. we are supposed to process it on the date it was presented for clearing. Petitioners argue that if indeed the checks were dishonored in the early morning of December 15. for they alone were at fault. 1983 was the actual date when the checks were processed. 1983. It was only on December 15. On December 14. As previously noted. it is presumed that the acts in question were in conformity with the usual conduct of business. it tried its best to make sure that the checks would not bounce.666. Citytrust will send a clearing representative to the Philippine Clearing House at around 2:00 o'clock in the morning of December 15 and then get the checks. what would happen with these checks drawn with (sic) PNB on December 14. as explained in the aforequoted testimony. 37-00066-7. and failing in this. We do not agree. Petitioners argue that public respondent. 1037002387 to the same current by a debit memorandum. the court added that the bank did more that it was required to do by making an effort to induce the drawer to deposit sufficient money to make the check good. although what was stamped on the dorsal side of the two checks in question was "DAIF/12-15-83. they had already deposited sufficient funds to cover said checks. it does not necessarily mean that the same procedure was adopted with regard to the two checks. at the very least. to repeat.000. we have not opened on December 15 at 3:00 o'clock." since December 15. On record. it was held in Whitman vs. petitioners quoted in their petition the following testimony of said witness Rionisto. A drawer must remember his responsibilities every time he issues a check. twenty-four hours to replenish their balance in the bank. They theorize that the checks having already been dishonored. upon the receipt of a check drawn against an account in which there are insufficient funds to pay it in full. by relying heavily on Rionisto's testimony. The transfers were made to preserve its relations with petitioners whom it knew were valued clients. petitioners failed to present countervailing evidence to rebut the presumption that the checks involved underwent the same regular process for clearing of checks followed by the bank since 1983. and then the Philippine Clearing House will process it until midnight of December 14. pp. which was the subject of the PAT agreement. 1037001372. 27 Considering the clearing process adopted. Librada Moran under the accounts of the plaintiffs with Citytrust Banking Corporation were drawn dated December 12. petitioners had. therefore. 1983 was used by the bank in determining whether or not there was sufficient cash deposited to fund the two checks. the available balance of Savings Account No. Petitioners maintain that at the time the checks were dishonored. Section 3(q). the two checks involved were included in the "checks to be funded. and analyzing his testimony in its entirety and not in truncated portions. the bank could also not be faulted for not accepting either of the two checks. Said argument does not persuade. . The report contains. . If ever petitioners on previous occasions were given notices every time a check was presented for clearing and payment and there were no adequate funds in their accounts. so petitioner asseverated. Shaw Boulevard branch. dated December 16. Where a depositor has two accounts with a bank. Q: Are you sure about that? A: Yes. 34 We are agree with respondent Court of Appeals in its assessment and interpretation of the nature of the letter of Citytrust to Petrophil.30. 1307001372 then had a balance of only P26. a bank employee. Such a practice of paying checks in part has never existed. George Moran testified that he would deposit the necessary funds stated in the pink slips. we are supposed to process it on the date it was presented for clearing. the letter is not an admission of liability as it was written merely to maintain the goodwill and continued patronage of plaintiff-appellants. Savings Account No. the bank had all the right to dishonor the checks because there were no sufficient funds to speak of in the first place. but to serve the further purpose of affording evidence for the bank of the payment of such amount when the check is taken up. Q: And naturally you will place there "drawn against insufficient funds. 1983"? A: Yes. As aptly and correctly stated by said court." That report was used by the bank as its basis in dishonoring the two checks in question. Citytrust could not be expected to accept for payment either one of the two checks nor partially honor one check. p. (tsn. at most. A check is intended not only to transfer a right to the amount named in it. and the bank would be without a voucher affording a certain means of showing the payment. September 9. If the demand is by check. 1037002387. the check holder could not be called upon to surrender the check. these were. sir . 33 On the other hand. .in turn will deliver it to the Philippine Clearing House and the Philippine Clearing House will deliver it to your office around 12:00 o'clock of December . received said report in the early morning of December 15. 14) 30 Obviously witness Rionisto was merely confused as to the dates (December 14 and 15) because it did not jibe with his previous testimony. prior to banking hours. Q: And the checks will be processed in accordance with the balance available as of December 14? A: Yes. a drawer must have to his credit enough to cover the demand. . Amy Belen Rogado. 1983. This being the case.00. 1983. ? A: Around 2:00 o'clock of December 15. and is under no duty to make up the deficiency from the savings account. up to only the amount of the drawer's funds. A bank is under no obligation to make part payment on a check. the bank may lawfully refuse payment. which is not covered by a pre-arranged automatic transfer agreement. 32 Pursuing this matter further. We sent a clearing representative. the bank still had no obligation to honor said checks as there was then no authority given to it to make the transfer of funds." These pink slips were then given to George Moran. while the second one was for P56.00. the bank may rightfully refuse to pay the check. and not December 14. the report was merely used by the bank as a basis for determining whether or not it was necessary to notify them of the need to deposit certain amounts in their accounts. (This) cannot be . wherein he categorically stated that "the checks will now be processed as the Citytrust Computer at around 3:00 in the morning of December 14 (sic) but it will be processed for balance of Citytrust as of December 14 because for one. among others. a listing of "checks to be funded. "." 31 Analyzing the procedure he had previously explained. sir. had enough amount deposited to cover both checks (which is not so in this case). . it would logically and ineluctably appear that he actually meant December 15. petitioner argues. The rule is based on commercial convenience. we have not opened on December 15 at 3:00 o'clock. where the check is drawn for an amount larger than what the drawer has on deposit. an open account and a savings account. Upon partial payment. Thus. 1983. In turn. not a single check written on the notices was ever dishonored after he had funded said checks with the bank. As a matter of fact. and any rule that would work such manifest inconvenience should not be recognized.104. Petitioner contends that the bank erred when it did so because on previous occasions.090. mere accommodations on the part of respondent bank. 1988. The first check issued was in the amount of P50. assuming arguendo that Savings Account No. . It was not a requirement or a general banking practice. sir. and draws a check upon the open account for more money than the account contains. December 14. Legally. In the early morning of every business day.576. Under the clearing house rules. the various branches of Citytrust would receive a computer printout called the "rejected transactions" report from the head office. If his credit with the bank is less than the amount on the face of the check." When Citytrust. hence noncompliance therewith could not lay the bank open to blame or rebuke. the checks were not yet dishonored after the bank received the report in the early morning of December 15. testified that she would normally copy the details stated in the report and transfer in on a "pink slip. Raul Diaz. JJ. It will be noted that there was no reason for the bank to send the letter to Petrophil Corporation since the latter was not a client nor was it demanding any explanation. we reiterate.2 Respondent hesitated as she was afraid they would not be able to pay the loan.000. which fact. bad faith. As pointed out by the court a quo. They have been living separately from each other prior to the present controversy. a 100% Filipino corporation engaged in selling pharmaceutical products. Still later. THE COURT OF APPEALS and OLYMPIA FERNANDEZPUEN. 109803. although the facts show otherwise. or exemplary damages to petitioners. On demand of petitioners that their names be cleared. finding no reversible error in the judgment appealed from. At that time. the actions taken by the bank after the incident clearly show that there was neither malice nor bad faith. Diaz attributing the dishonor of their checks to 'operational error'.000. 1978.000. J. with costs against petitioners.: The present case arose from a complaint for "Nullification of Real Estate Mortgage"1 filed by private respondent Olympia Fernandez-Puen against her estranged husband.characterized as baseless. used to be its General Manager.. plaintiffs-appellants had discovered the letter of Mr. Petitioner.. or wanton attitude. He proposed that her paraphernal lot in Makati be used as collateral. He assured her that the loan would not exceed P300. malice." 36 On the above premises which irresistibly commend themselves to our acceptance. Thus. Chee Puen.. it took plaintiffs-appellants about six (6) months after the dishonor of the checks to demand that defendant-appellee pay them P1. Chee Puen.R. She resides in Timog Avenue. Her husband.00 as damages. informed respondent that their company needed a three hundred thousand peso (P300. C. The records show that on April 25. Respondent Court of Appeals perceptively observed that "all these somehow pacified plaintiffs-appellants (herein petitioners) for they did not thereafter take immediate punitive action against the defendant-appellee (herein private respondent). It knew that it was confronted with a client who obviously was not willing to admit any fault on his part. Private respondent is the president and majority stockholder of Global.. Quezon City. Clearly. Republic of the Philippines SECOND DIVISION G. 37 the bank may not be held responsible for such damages in the absence of fraud.J. to say the least. 38 WHEREFORE. It will be recalled that the credit standing of the Morans with Petrophil Corporation was involved. Padilla. Later. The attempt to unduly ride on the letter of Mr. Diaz speaks for itself. the letter was sent by respondent bank to Petrophil explaining that the dishonor of the checks was due to "operational error.00 and she was asked to sign three (3) sets of blank forms of . and petitioner Philippine Bank of Communications before the Regional Trial Court of Pasig. the letter was merely intended to accommodate the request of the Morans and was part of the series of damage-control measures taken by the bank to placate petitioners. DECISION PUNO. he went to the Petrophil Corporation to personally redeem the checks. SO ORDERED. it would be a mistake to construe that letter as an admission of guilt on the part of the bank. then the general manager of Global. Inc. the branch manager. we find no cogent and sufficient to award actual. as well as the extent of diligence expected of it in handling the accounts entrusted to its care. concur. Inc. Chee Puen." However. Although we take judicial notice of the fact that there is a fiduciary relationship between a bank and its depositors. the bank considered it more prudent to send the letter. It never realized that it would thereafter be used by petitioners as one of the bases of their legal action. displeased them.000. considering the totality of the circumstances surrounding its writing. while he lives in Bel-Air Village. vs. Respondents. 1998 PHILIPPINE BANK OF COMMUNICATIONS. Nocon and Puno. No. even went for this purpose to the Moran residence to facilitate their application for a manager's check. Makati. more than anything. April 20. therefore. respondent bank ran the risk of losing the business of an important and influential member of the financial community if it did not do anything to assuage the feelings of petitioners. the same is hereby AFFIRMED.00) loan for its operational expenses. but rather a clear intent to mollify an obviously agitated client. moral. Narvasa." 35 In the present case. hospital equipment and supplies. 000. this petition where it is contended: "1. 1986. respondent presented Francisco Cruz. had it notarized by Atty. Arzadon in the presence of witnesses.00) loan was approved without undergoing the usual bank procedure. the trial court rendered judgment in favor of respondent. . She claimed that her residence certificate used to notarize the mortgage application form was spurious. "The defendants are ordered to pay plaintiff. respondent and Chee Puen had a quarrel because respondent refused to give the cash allegedly needed for Global. respondent filed this case against Chee Puen and petitioner to nullify the subject mortgage deed. Chee Puen had the mortgage document later notarized by Atty. respondent alleged that she did not authorize Chee Puen to mortgage her property to secure the aforesaid P3 M loan.PB Com) null and void. 18 SCRA 732. New Civil Code)." Hence. he mortgaged respondent's paraphernal lot in Makati. which compelled the plaintiff to incur expenses to protect her interest. When Chee Puen left. using a residence certificate bearing respondent's forged signature. At the trial. Respondent signed the blank mortgage forms due to Chee Puen's representation. In her complaint. He also submitted a "Secretary's Certificate of Board Resolution" (marked as Exhibit "H") where he misrepresented himself as president and acting corporate secretary of Global. petitioner bank maintained that respondent and Chee Puen went to its office in April. further. A special meeting of Global's board of directors was called and it passed a resolution replacing Chee Puen as official signatory of its checks.000.000. Puen. as it is hereby." On November 20. and the Register of Deeds of Rizal (Makati branch) to cancel the subject real estate mortgage in favor of Philippine Bank of Communications upon plaintiff's payment of the prescribed fees.real estate mortgage (REM) of petitioner bank. plaintiff is entitled to an award of attorney's fees and expenses of litigation. Chee Puen threatened respondent to leave their company. using the blank real estate mortgage forms signed by her. jointly and severally. Neither was the verity of the "Secretary's Certificate of Board Resolution" (Exh. It appears that Chee Puen then applied for a three million peso (P3. (97379) S-4748 of the Province of Rizal to the plaintiff. Puen has been guilty of bad faith and defendant Philippine Bank of Communications of gross negligence amounting to bad faith (See Soberano vs. pars. Inc. Jr. "The counterclaims of defendants are dismissed for lack of merit. consisting of one (1) original and two (2) duplicate original copies. For its part.000. He wrote down in pencil the figure 300 under the space provided for the amount to be loaned and indicated with checkmarks the spaces where respondent should sign. On May 30. "IN VIEW OF ALL THE FOREGOING. Inc.00).. On the occasion. ordering defendant Philippine Bank of Communications to deliver the owner's duplicate copy of TCT No. 738). deleted therefrom. C-3 and 4 . The three-million peso (P3. The Honorable Court of Appeals erred in affirming the nullification of the subject real estate mortgage by the lower court.00 for attorney's fees and expenses of litigation should be.000. Supervising Document Examiner of the PC-CIS Crime Laboratory. Cruz testified that the subject mortgage contract. (2) and (5). respondent chanced upon Chee Puen while encashing two (2) checks for Global. Inc. for and as attorney's fees and expenses of litigation. Respondent tore the checks into pieces (Exhibits "E" and "F") as he has been disauthorized to manage the company. contained respondent's genuine signatures. the amount of Fifty Thousand Pesos (P50.000. thus: "WHEREFORE. On February 16.00) loan from petitioner bank for Global. as it is hereby. the teller informed respondent that Chee Puen had obtained a loan of P3. but the signatures were affixed before the typewritten entries therein were prepared. "H") ascertained. afterwards. affirmed in all its aspects except that the portion of the judgment ordering defendants to pay plaintiff jointly and severally the amount of P50. He disclosed. He opined that it was written by another person. L-19407.3 It is established that petitioner bank did not investigate Chee Puen's authority to mortgage respondent's property. the Court of Appeals5 modified the decision of the trial court. Manila Railroad Co. She accomplished and signed the mortgage contract in its office and. To secure the loan. After further investigation. declaring the real estate mortgage (Exhs. the Court renders judgment in favor of plaintiff and against defendants Philippine Bank of Communications and Chee C. that respondent's alleged signature on the residence certificate presented to notary public Arzadon differed from respondent's specimen signatures. "SO ORDERED. respondent personally delivered a copy of the board resolution to the Buendia branch of petitioner bank. (Article 2208. Edilberto Arzadon. the decision under appeal should be.. The relevant portion of it decision4 provides: "Considering that defendant Chee C. in February 1981. 1978 to apply for the loan. to prove that she signed the subject mortgage forms in blank.000. Respondent's signature in her residence certificate was not verified. 1966.000. Three (3) years later. November 23. Inc. "SO ORDERED. 1981. 1992.00 from the bank. The Honorable Court of Appeals erred in affirming the ruling of the lower court that the petitioner is not entitled to its compulsory counterclaim. Under Article 1342 of the Civil Code. "3." Implementing this substantive law. section 2 (a) of Rule 131 provides: "Whenever a party has by his own declaration. On this date. a third person to the contract. 1978. As soon as the investigation was completed. and hence the "Secretary's Certificate of Board Resolution" to that effect is false and fraudulent. Her complaint for annulment cannot by any stretch of the imagination be characterized as a stale demand. and fourth. These prompt and decisive actions on the part of the respondent do not warrant the assumption that she has abandoned or declined to assert her right to annul the subject real estate mortgage. The Honorable Court of Appeals erred in affirming the ruling of the lower court that the respondent was not estopped/barred from questioning the legality/validity of the real estate mortgage." We reject the first contention. "T"."7 The established facts preclude the application of estoppel against the respondent. In Chung Ka Bio v. Its essential elements are: (1) conduct on the part of defendant or one under whom he claims. the other would be harmed materially if the actor is later permitted to assert any claim inconsistent with his earlier conduct. Chee Puen misrepresented to her that the loan would be no more than P300. estoppel in our jurisdiction has become an equitable defense that is both substantive and remedial. He also submitted to the petitioner bank a "Secretary's Certificate of Board Resolution" where he falsely stated that he was President and Acting Corporate Secretary of Global." By its incorporation in the Civil Code. second. act or omission. 00019600 when compared with her standard signatures were written by two different persons" (Exh. There is no doubt also that Chee Puen was never the President of Global. Respondent did not deliberately or intentionally lead the petitioner bank to believe that she was putting up her paraphernal property to secure a P3 M loan of Global. an administrative complaint in the Central Bank against the petitioner and a complaint for nullification of Real Estate Mortgage in the RTC of Pasig. As a banking institution.9 In the case at bar. replacing Chee Puen as check signatory.. either by words. Respondent discovered the fraud perpetrated by Chee Puen only on February 16. act or omission be permitted to falsify it. and relies reasonably or justifiably. a disbarment complaint against Atty. She saw him still encashing checks of the corporation and they had a confrontation. The same official also found that the "questioned signature of Olympia Fernandez-Puen appearing in the Residence Certificate No. she signed the mortgage application in blank. IN VIEW WHEREOF.8 we held that unlike the statute of limitation. Inc. Furthermore. petitioner bank was grossly negligent when (a) it took no step to verify whether the respondent was really offering her paraphernal property as collateral. Costs against petitioner.000. Inc. Supervising Document Examiner of the PC-CIS Crime Laboratory found and concluded that "the three (3) questioned handwritten signatures of Olympia Fernandez-Puen appearing in the real estate mortgage document were signed before the typewritten entries were prepared" (Exh. Inc. in any litigation arising out of such declaration. Francisco Cruz. Inc. Inc. It was Chee Puen who made the misrepresentation thus defrauding respondent herself. "N-2").'s P3 M loan with her paraphernal land. an admission or representation is rendered conclusive upon the person making it and cannot be denied or disproved as against the person relying thereon. "T-2"). it is futile for petitioner bank to insist that the real estate mortgage contract should not be nullified. We cannot also subscribe to the proposition of petitioner bank that we apply the equitable defense of laches against the respondent. Respondent has not consented to collateralize Global. the misrepresentation of a third person will vitiate consent if it has resulted in substantial mistake and the same is mutual. It is an affirmative defense and the burden of proving it rests on the defendant. petitioner's reliance on the mortgage application signed in blank by respondent is not a reasonable reliance. The testimony of the private respondent is well corroborated by other evidence. Inc. 1981."2. laches as an equitable defense usually bars only the equitable enforcement of a right but not the right itself. Chee Puen then applied for a P3 M loan. In light of these established facts. The business of a bank is affected with public interest and it should observe a higher standard of diligence when dealing with the public. and (c) conducted no investigation on the authenticity of the "Secretary's Certificate of Board Resolution" dated April 27. conduct or silence. laches does not involve mere lapse or passage of time but is principally an impediment to the assertion or enforcement of a right which has become under the circumstances inequitable or unfair to permit. Metro Manila. he cannot. "N". We also reject petitioner's plea that the equitable principle of estoppel6 be applied against the respondent. Inc. Neither will it matter that petitioner bank itself was misled by Chee Puen.. and to act upon such belief. Due to her trust on Chee Puen. expects or foresees that the other would act upon the information given or that a reasonable person in the actor's position would expect or foresee such action. She was later informed by the bank cashier of the P3 M loan negotiated by Chee Puen. notice or suspicion of the true facts. the evidence does not show the lapse of an unreasonable length of time before the respondent sued to annul the real estate mortgage of her property to the petitioner bank. upon that communication. Edilberto Arzadon who notarized the mortgage deed. Respondent promptly investigated the unauthorized loan. the actor knows.00. Mr. the actor who usually must have knowledge. (b) made no credit check on respondent and Global. Its successful invocation can therefore bar a right and not merely its equitable enforcement. respondent went to the Buendia branch of petitioner bank to submit the board resolution of Global. giving rise to the situation complained of. Article 1431 provides that "through estoppel. communicates something to another in a misleading way. intentionally and deliberately led another to believe a particular thing true. Case law tells us that the elements of estoppel are: "first. He had the mortgage application notarized using a forged residence certificate of the respondent. . respondent filed a criminal case for falsification against Chee Puen. (4) injury or prejudice to the defendant in the event relief is accorded to the complainant. IAC. The private respondent proved that it was not her intent to mortgage her lot to secure a P3 M loan of Global. (2) delay in asserting complainant's right after he had knowledge of the defendant's conduct and after he has an opportunity to sue. Unlike estoppel. the other in fact relies. third. the petition is dismissed. (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit. 00. she inaccurately wrote 2900823. and attorney's fees of P4.204. but. Amount 007383 — P1. in her deposit slip. in cash. the judgment appealed from is REVERSED and a new one entered thereby ordering defendant to pay plaintiff nominal damages of P2. a businesswoman.e. reversing the trial court's decision. Agoncillo for private respondent.00 007387 — 2. it rendered judgment. The counterclaim of defendant is dismissed for lack of merit. temperate and moderate damages of P5. with costs against him. which found the appeal meritorious. In her complaint. Petitioner bank concedes that it is its obligation to honor checks issued by private respondent which are sufficiently funded.Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.716. The Regional Trial Court (Branch XXXIV) of Calamba. On 15 May 1980. Hence. viz: Check No.00 007387 — 4.000. Laguna. J. Private respondent went to the Court of Appeals. petitioner.299. asserted that it was due to private respondent's fault that her checks were dishonored. It averred that instead of stating her correct account number. made regular deposits. plaintiff is hereby adjudged to pay the defendant reasonable attorney's fee in the amount of FIVE THOUSAND PESOS (P5. THE INTERMEDIATE APPELLATE COURT and EMME HERRERO. in its answer.00 007400 — 4. judgment is hereby rendered in favor of the defendant and against the plaintiff. David B. DISMISSING the complaint for lack of merit.281. Laguna.500. on 27 February 1984. all the checks were dishonored due to "insufficient funds.262. private respondent averred that she." The last check No. Among such rules.00.000. however. Petitioner. Petitioner Citytrust Banking Corporation is now before us in this petition for review on certiorari.00 007492 — 6.00) plus cost of suit. The appellate court ruled: WHEREFORE. dismissed the complaint for lack of merit. collaborating counsel for private respondent. Agcaoili and Associates for petitioner. is the following printed provision: .. 29000823. No. with petitioner Citytrust Banking Corporation at its Burgos branch in Calamba. 84281 May 27.00. private respondent has also the duty to use her account in accordance with the rules of petitioner bank to which she has contractually acceded. Humberto B. 1994 CITYTRUST BANKING CORPORATION.507. i. she deposited with petitioner the amount of Thirty One Thousand Five Hundred Pesos (P31.000. vs. in order to amply cover six (6) postdated checks she issued. contained in its "brochures" governing current account deposits.00 007384 — 1. 007400. respondents. on 15 July 1988.00 When presented for encashment upon maturity.000. it contends.00).R. thus: WHEREFORE.: This case emanated from a complaint filed by private respondent Emme Herrero for damages against petitioner Citytrust Banking Corporation. Basco. was personally redeemed by private respondent in cash before it could be redeposited. starting September of 1979. VITUG. The bank must record every single transaction accurately. For. Far East Bank & Trust Co. as pointed out by defendant. down to the last centavo. the depositors are not concerned with banking procedure. Herrero" was erroneous and would be rejected by the computer. "Emme E. "B")." In fact. That is the responsibility of the bank and its employees. To post a deposit in somebody else's name despite the name of the depositor clearly written on the deposit slip is indeed sheer negligence which could have easily been avoided if defendant bank exercised due diligence and circumspection in the acceptance and posting of plaintiff's deposit. reiterated in Bank of Philippine Islands vs. we similarly said. At least. efficient and satisfactory service. "B"). could have been avoided at the first instance had the teller of defendant bank performed her duties efficiently and well. particularly businessmen. and it is its duty to protect in return its many clients and depositors who transact business with it. it does not earn interest. As proof thereof plaintiff alludes to five particular incidents where plaintiff admittedly wrongly indicated her account number in her deposit slips (Exhs. This has to be done if the account is to reflect at any given time the amount of money the depositor can dispose of as he sees fit. it behooved upon defendant bank to see to it and without recklessness — that the depositor was accurately credited therefor. the complete name of plaintiff depositor appears in bold letters on the deposit slip (Exh. We view the use of numbers as simply for the convenience of the bank but was never intended to disregard the real name of its depositors. A blunder on the part of the bank. 206 SCRA 408. plaintiff's deposit had to be consigned to the suspense accounts pending verification. We are not persuaded that defendant bank was not free from blame for the fiasco. Decision). 2. it contained only seven (7) digits instead of eight (8). Herrero. including the assurance that their deposits will be duly credited them as soon as they are made. indeed. after its deliberations. "N". ways and means are available whereby deposits with erroneous account numbers are properly credited depositor's correct account numbers. Second. This is so because it is not likely to commit an error in one's name than merely relying on numbers which are difficult to remember. After all. any delay in crediting their account can be embarrassing to them as in the case of plaintiff. even if it be true that there was error on the part of the plaintiff in omitting a "zero" in her account number. Inc. 1985. and as promptly as possible. that — Having accepted a deposit in the course of its business transactions. like plaintiff. That is. defendant's teller should not have fed her deposit slip to the computer knowing that her account number written thereon was wrong as it contained only seven (7) digits. if any. "J". "L". In the first place. yet. For then she could have readily detected that the account number in the name of "Emma E. . Depositors are only concerned with the facility of depositing their money. part of the training and standard operating procedure of the bank's employees.In making a deposit . lending out money and collecting interests. especially a number with eight (8) digits as the account numbers of defendant's depositors. in cautioning depository banks on their fiduciary responsibility. but were nevertheless properly credited her deposit (pp. Plaintiff's account is a "current account" which should immediately be posted. AC-G. Exactly the same issue was addressed by the appellate court. "O" and "P"). it is a fact that her name. It is also its obligation to see to it that all funds invested with it are properly accounted for and duly posted in its ledgers. can cause the depositor not a little embarrassment if not also financial loss and perhaps even civil and criminal litigation. who are supposed to be always "on-the-go". CV No. was erroneous because. This is controlling in determining in whose account the deposit is made or should be posted.. This. the depositor expects the bank to treat his account with utmost fidelity. The bank is engaged in business impressed with public interest. . Court of Appeals. confident that the bank will deliver it as and to whomever he directs. which. 183 SCRA 360. that — In every case. Nov. is clearly written on said deposit slip (Exh. the forbearance should be commensurated with prompt. prom. "Emma E. made the following findings and conclusions: 1 We cannot uphold the position of defendant. Herrero". We have already ruled in Mundin v. vs. the teller should not have accepted plaintiff's deposit without correcting the account number on the deposit slip which. and withdrawing therefrom.R. according to defendant. We agree with plaintiff that — . and that the deposit was made in her name. We subscribe to the above disquisitions of the appellate court. even in computerized systems of accounts. 4-5. There could be no mistaking in her name. . or should be. . They add that failure on the part of the defendant to do so is negligence for which they are liable. As it happened. In Simex International (Manila). kindly insure accuracy in filing said deposit slip forms as we hold ourselves free of any liability for loss due to an incorrect account number indicated in the deposit slip although the name of the depositor is correctly written. such as the dishonor of a check without good reason. quoting the court a quo in an almost identical set of facts. 03639. earning interest thereon. It should not be a matter of the bank alone receiving deposits. obviously. . Intermediate Appellate Court. On the other hand. whether such account consists only of a few hundred pesos or of millions. In the case before Us. For. Bank clients are supposed to rely on the services extended by the bank. vs. always having in mind the fiduciary nature of their relationship.. the petitioner ex-officio sheriff of Valenzuela City set the sale of the personal properties at public auction on September 16.. 1991. 2003] PHILIPPINE COMMERCIAL INTERNATIONAL BANK. with a moratorium on the payment of interest during the extension of the same. 6572 and 6580 on October 3. On their fifth to eighth causes of action. 6572 and 6580. Metro Container Corporation (MCC) and the spouses Manuel and Janet Ley obtained loans from the petitioner Philippine Commercial International Bank (PCIB) amounting to around to P98. which are more than nominal but less than compensatory damages. LC Builders & Developers Corporation (LC Builders). and as such. The two awards are incompatible and cannot be granted concurrently. may be vindicated or recognized.. 1991 with the RTC of Makati. and the sale of properties covered by TCT Nos. MANUEL T. CLERK OF COURT AND EX-OFFICIO SHERIFF OF THE REGIONAL TRIAL COURT OF PASIG. 43131 on September 24. 1991 of the property covered by TCT No. No. petitioners. 1991. The private respondents defaulted in the payment of their obligations in the amount of P105.. however. 131 SCRA 271). the private respondents. 31251 nullifying the Order of the Regional Trial Court (RTC) of Makati[2] in Civil Case No.. Metro Manila. LC BUILDERS & DEVELOPERS. J. the appellate court's decision is AFFIRMED. and we accordingly agree with the Court of Appeals in granting to her nominal damages but not in similarly awarding temperate or moderate damages.The point is that as a business affected with public interest and because of the nature of its functions. Republic of the Philippines SECOND DIVISION [G. the appealed decision is MODIFIED by deleting the award of temperate or moderate damages. Before any of the auction sales could proceed. WHEREFORE. Valenzuela. Intermediate Appellate Court. otherwise known as the Chattel Mortgage Law. temperate or moderate damages. petitioner PCIB foreclosed the said mortgages before the lapse of the said extension. 43131. No costs in this instance. which has been violated or invaded by the defendant. 2224. The private respondents as plaintiffs had eight causes of action against the petitioner. Branch 147. the private respondents alleged inter alia that the notice of sale of the chattels was defective because (a) it included the sale of the chattels for the payment of loans not covered by the said chattels. New Civil Code). 1991. They also executed three chattel mortgages over several of their movable properties in favor of petitioner PCIB. On August 16.[3] In due course. On their first to fourth causes of action. Nominal damages are given in order that a right of the plaintiff. failed to pay their account. SR. on the other hand. and its property situated in Valenzuela City covered by TCT Nos. COURT OF APPEALS.R. 91-2495 dated February 23. Temperate or moderate damages.145 and despite demands made by petitioner PCIB. JR. METRO MANILA. 114951. Presiding Judge.442. We agree with petitioner. vs. the private respondents as plaintiffs therein alleged inter alia that petitioner PCIB had agreed to the extensions of the due dates of the private respondents’ loan to March 1992. EX-OFFICIO SHERIFF OF THE REGIONAL TRIAL COURT OF VALENZUELA. petitioner PCIB filed separate requests for extrajudicial foreclosure of the amended real estate mortgages with the petitioner ex-officio sheriff of the RTC of Pasig City and with the petitioner ex-officio sheriff of the RTC of Valenzuela. and a letter for the extrajudicial foreclosure of chattel mortgage with the petitioner ex-officio sheriff of the RTC of Valenzuela. any other sale of the plaintiffs’ assets. METRO CONTAINER CORP.000 evidenced by eighteen promissory notes. the requests to foreclose the chattel mortgages were premature. INC. for injunction and damages with a prayer for the issuance of a temporary restraining order. (b) it refers to the foreclosure of only one chattel mortgage but the properties sought to be sold covered all the properties subject of the three chattel mortgages. The private respondents prayed that a temporary restraining order or writ of preliminary injunction be issued enjoining the defendants sheriffs from conducting already scheduled auction sales. filed a complaint against the petitioners PCIB and the ex-officio sheriffs on September 10. Meanwhile. through their counsel. and any other . the petitioner ex-officio sheriff of Pasig City set the sale at public auction on September 24. DECISION CALLEJO. however. LEY CONSTRUCTION & DEVELOPMENT CORP. the private respondents Ley Construction & Development Corporation (Ley Construction). along with nominal damages. Manila Banking Corp. 2221.800.R. that it is wrong to award. the bank is under obligation to treat the accounts of its depositors with meticulous care. and (c) it failed to comply with the requirements of Section 14 of Act No. To secure the said loans. seeking to enjoin the said sheriffs from selling at public auction the real and personal properties covered by the mortgage contracts. respondents. the law firm of Quisumbing Torres & Evangelista. may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot. The Antecedents Between January 1988 to April 1990. New Civil Code. SP No. 1993 lifting the writ of preliminary injunction earlier issued by the said RTC. we also find need for vindicating the wrong done on private respondent. In all other respects. LEY and JANET C. Regional Trial Court of Makati. the private respondents executed real estate mortgages and amended real estate mortgages over its property situated in Mandaluyong covered by Transfer Certificate of Title (TCT) No. 1508. be proved with reasonable certainty (Art. 1991 at the compound of the mortgagors at Barrio Pulang Lupa.: This is a petition for review on certiorari of the Decision[1] of the Court of Appeals in CA-G. In the instant case. from the nature of the case. LEY. July 18. and not for the purpose of indemnifying the plaintiff for any loss suffered by him (Art. METRO MANILA and JUDGE TEOFILO GUADIZ. [18] Petitioner PCIB filed a second counter-manifestation that service to the law firm of San Vicente De Leon & Associates should be considered valid and binding on the private respondents because the law firm of Quisumbing Torres & Evangelista had already withdrawn its appearance as counsel of the private respondents in CA-G. Petitioner PCIB filed a petition for certiorari and mandamus[7] with the Court of Appeals (CA) for the nullification of the October 16.000. the law firm of Quisumbing Torres & Evangelista withdrew their appearance as counsel for the private respondents with the conformity of the latter.[6] On September 16. it was serving a copy of its answer to the complaint on the private respondents themselves. Malaya alleged in his appearance that the same was with the conformity of the private respondents.foreclosure of the real estate mortgages and chattel mortgages and ordering the restructuring of the obligations of the plaintiffs Ley Construction and LC Builders so that they could be repaid on easier terms over a period of several years or at least until the current recession in the construction industry is over.000. and (b) the extension alleged by the private respondents to have been granted to them by petitioner PCIB to pay their obligation had already lapsed.033. 1992 Orders of the RTC. petitioner PCIB filed a motion for reconsideration of the October 16. the RTC issued an order lifting the writ of preliminary injunction it previously issued for the following reasons: (a) there was no opposition to the petitioners’ motion. petitioner PCIB filed a motion to dismiss on the ground that it did not grant the private respondents any extension to pay their account. 27573. the law firm of San Vicente De Leon & Associates filed a manifestation with the RTC reiterating therein that it was not the counsel of record in the said case. 1991 Order. [13] Petitioner PCIB filed a counter-manifestation stating that since the law firm of Quisumbing Torres & Evangelista had withdrawn its appearance and the law firm of San Vicente De Leon & Associates had entered its appearance. 1993.[16] The petitioner served a copy of the said motion on the law firm of San Vicente De Leon & Associates.[10] Entry of judgment was made of record on February 8. Noel M. the bond filed by the private respondents in the amount of P1. petitioner PCIB filed on February 3. The private respondents posted the requisite injunction bond of P1. Malaya. 1993 its answer to the complaint in Civil Case No. 1993. 1991 on the following grounds: (a) at the time of the filing of the said second motion.[19] The private respondents did not file any opposition to the said motion. [20] Atty. On January 14. 1993.000. 1991 auction sales.[5] On September 12. Instead of filing an answer to the complaint. and October 3. SP No. but the court denied the said motion per its Order on February 26. serving a copy thereof on the petitioner’s counsel. the private respondents as plaintiffs had no cause of action against the petitioner. nonetheless.[15] Simultaneous with the filing of its answer to the complaint. hence. conditioned upon the posting of a bond by the private respondents in the amount of P1. The petitioner served a copy of the said manifestation to the private respondents. With the dismissal of its petition by the CA. 1993 on the private respondents.000. 91-2495 as it was not the counsel of record in the said case.[8] The law firm of San Vicente De Leon & Associates entered its appearance as new counsel for the private respondents.070. and as such was not authorized to represent the private respondents. the RTC issued an order denying the motion to dismiss and granting a writ of preliminary injunction enjoining the conduct of any of the auction sales. 1991. On October 16. The private respondents thereafter engaged the service of Atty. 1991.R. 1993. hence. and (b) the continued effectivity of the writ of preliminary injunction had become improvident. 1991. the CA rendered its decision[9] dismissing the petition. 1992.[14] Petitioner PCIB further manifested that. who entered his appearance as counsel for the private respondents in Civil Case No. petitioner PCIB filed a second motion to lift the writ of preliminary injunction issued by the court on October 16. and likewise failed to appear during the hearing of February 12. 1993. and to condemn defendant PCIB to pay damages. On November 20. The said law firm was the counsel of the private respondents only in CA-G. the copy of the petitioners’ answer to the complaint was duly served on the private respondents through the latter law firm.000. through the law firm of San Vicente De Leon & Associates. 1991 auction sale. Petitioner PCIB prayed to the court to order the private respondents to indicate which law office was their counsel. The application for the issuance of a preliminary injunction was set for hearing. judgment be rendered making permanent any writ of preliminary injunction which may have been issued by the court. were served with a copy of the said entry of judgment.[12] On February 4.R. The case was raffled to the RTC of Makati Branch 147[4] and docketed as Civil Case No.[17] On February 8. the RTC issued a temporary restraining order temporarily enjoining the petitioners sheriffs and their respective deputies from proceeding with the September 16 and 24. 27573 and not in Civil Case No. 91-2495. 1993. 1991. 1993. While the case was still pending with the said court. SP No. Petitioner PCIB served a copy of the said answer on the private respondents on February 4. respectively. 1993. He did not file any opposition or comment on the second motion of petitioner PCIB. the RTC issued another temporary restraining order enjoining the petitioner ex-officio sheriff of the RTC of Valenzuela and his deputies from proceeding with the October 3.49. It also served a copy of the second motion to lift the writ of preliminary injunction on February 9. 912495 before the RTC. serving a copy thereof on the law firm of San Vicente De Leon & Associates. 91-2495 on February 15. the law firm of San Vicente De Leon & Associates filed a manifestation with the RTC that it had no authority to represent the private respondents in Civil Case No. the private respondents’ obligation had reached P161. 1991 and February 26. and after due proceedings.[11] The private respondents. 91-2495 in the RTC of Makati. On February 23.000 was grossly inadequate.[21] . With the lifting of the writ of preliminary injunction, the petitioner ex-officio sheriff of the RTC of Pasig issued on March 1, 1993 a notice of sheriff’s sale, scheduling the sale of the Mandaluyong property on March 30, 1993.[22] On March 2, 1993, the petitioner ex-officio sheriff of the RTC of Valenzuela likewise issued a notice of sheriff’s sale setting the sale of the Valenzuela properties also on March 30, 1993.[23] The sale of the mortgaged chattels at public auction was scheduled on March 18, 1993 in front of the compound of the private respondents in Valenzuela, Metro Manila, where the chattels were located. The private respondents were served with copies of the said notices. As required, the notices of sale for the real properties in Valenzuela were published in the Metropolitan Newsweek on its March 2, 13 and 20, 1993 issues. Instead of filing with the RTC of Makati in Civil Case No. 91-2495 a motion for the reconsideration of its February 23, 1993 Order or a supplemental complaint therein, the private respondents filed on March 17, 1993 with the RTC of Manila, through Atty. Malaya, a complaint for injunction and damages against the petitioners docketed as Civil Case No. 93-65135[24] with a prayer for a temporary restraining order to enjoin the respondents and proceeding with the auction sale of the mortgaged chattels on March 18, 1993. The private respondents alleged inter alia that the sale at public auction of the chattels had been enjoined by the RTC of Makati, Branch 147; and that they were suddenly notified that the sale at public auction was reset on March 18, 1993; they were not given the requisite notice of the sale of the mortgaged chattels on March 18, 1993 as mandated by Act No. 1508; and that the sale at public auction was to be conducted in a private place in front of the compound of the private respondents in Valenzuela and not in a public place as mandated by the said law. On the same day, Executive Judge Rosalio dela Rosa of the RTC of Manila issued a temporary restraining order enjoining the sale of the mortgaged chattels.[25] The case was raffled to Branch 34 of the court.[26] On March 18, 1993, the petitioners, as defendants therein, filed a motion to dismiss the complaint on the ground that the private respondents had no cause of action against them, serving a copy thereof to Atty. Malaya. In a parallel development, the private respondents, through Atty. Malaya, opted to file a reply to the answer of petitioner PCIB. He filed a Motion dated March 23, 1993 to admit reply in Civil Case No. 91-2495 to the answer of petitioner PCIB. A copy of the motion was duly served on the counsel of petitioner PCIB. The private respondents set the hearing of their motion on April 2, 1993 at 10:00 a.m. The foreclosure sale of the mortgaged real properties in Mandaluyong and Valenzuela proceeded as scheduled on March 30, 1993 with petitioner PCIB as the highest bidder. On March 30, 1993, the petitioner sheriff of the RTC of Valenzuela executed a certificate of sale over the said properties in favor of the petitioner.[27] On March 31, 1993, the petitioner sheriff of the RTC of Pasig executed a certificate of sale over the properties in favor of petitioner PCIB. The private respondents were furnished with copies of the said certificates. On March 31, 1993, the private respondents, through the Quisumbing Torres & Evangelista Law Office, filed in Civil Case No. 91-2495 an emergency motion for reconsideration, set for hearing on April 9, 1993 with an application for temporary restraining order of the February 23, 1993 Order of the court lifting the writ of preliminary injunction previously issued, for the reinstatement of the writ of preliminary injunction issued by the court on October 16, 1991,[28] and for the expansion of the coverage of the said writ, thus: WHEREFORE, plaintiffs urgently and respectfully pray that the Order dated 23 February 1993 be reconsidered, that the writ of preliminary injunction be immediately reinstated, and that said writ be expanded to enjoin defendants and their deputies, employees and agents from implementing the foreclosure and sheriff’s sale of 30 March 1993, including but not limited to (a) the issuance of the certificate of sale, (b) the annotation of the sheriff’s sale on Transfer Certificate of Title No. 43131, (c) the filing of any petition for a writ of possession of the subject real property, and (d) the consolidation of title in favor of defendant PCIB. In the meantime and pending the hearing and resolution of this Emergency Motion, plaintiffs urgently and respectfully pray for the issuance of a temporary restraining order enjoining defendants and their deputies, employees and agents from implementing the foreclosure and sheriff’s sale of 30 March 1993, including but not limited to (a) the issuance of the certificate of sale, (b) the annotation of the sheriff’s sale on Transfer Certificate of Title No. 43131, and (c) the filing of any petition for writ of possession of the subject real property.[29] The private respondents alleged inter alia that they had not been served with a copy of the second motion of petitioner PCIB for the lifting of the writ of preliminary injunction heretofore issued by the court, as well as a copy of the order of the court lifting the same. They also alleged that Atty. Noel M. Malaya was merely their collaborating counsel. Petitioner PCIB opposed the emergency motion of the private respondents, alleging inter alia that the said motion was a mere scrap of paper as the private respondents’ counsel of record is Atty. Malaya; the motion was set on Good Friday; the sales at public auction of the Mandaluyong and Valenzuela properties had already been consummated; and that private respondents indulged in forum shopping by earlier filing a complaint in the RTC of Manila in Civil Case No. 93-65135 with a plea for a temporary restraining order to abort the March 18, 1993 sale at public auction of the mortgaged chattels, instead of filing a motion for reconsideration of the February 23, 1993 Order of the RTC in Civil Case No. 91-2495.[30] The private respondents were served with a copy of the said pleading of petitioner PCIB through Atty. Malaya. The private respondents, through the Quisumbing Torres & Evangelista Law Office, filed a reply to the opposition of the petitioners. They alleged inter alia that their emergency motion was not a mere scrap of paper because Atty. Malaya was their collaborating counsel.[31] However, the RTC of Makati did not issue any temporary restraining order. The private respondents filed an amended notice of hearing for their emergency motion on April 13, 1993 at 8:30 a.m. but served a copy thereof on petitioner PCIB only at 11:00 a.m. of the same day. The branch clerk of court reset the hearing of the said motion on April 16, 1993 at 8:30 a.m. In the meantime, on April 1, 1993, petitioner PCIB filed an ex-parte petition with the RTC of Pasig for the issuance of a writ of possession over the property covered by TCT No. 43131 sold by the petitioner sheriff of the RTC of Pasig at public auction to petitioner PCIB.[32] On April 26, 1993, petitioner PCIB filed a petition for a writ of possession with the RTC of Valenzuela City over the properties sold at public auction. The case was raffled to Branch 75 of the court.[33] The private respondents, through Atty. Vicente T. Verdadero, filed an opposition to the said petition.[34] On May 24, 1993, the RTC of Valenzuela issued an order granting the petition for a writ of possession on a bond of P1,200,000 to be approved by the court.[35] Petitioner PCIB assured the court that: The petitioner likewise assured the respondent that the former will not disrupt the operation of the respondent which employs more or less 5,000 people and will not also take possession of the chattels inside the compound of the respondent corporation referring to heavy machineries because the mortgages on the chattels have not yet been foreclosed by the petitioner. With these assurances made by the petitioner thru counsel to respondent, the court has no alternative except to give due course to the instant petition for issuance of a writ of possession pursuant to Act 3135 as amended by Act 4118 pending redemption which will expire on March 31, 1994.[36] Meanwhile, on April 29, 1993, the RTC of Manila, Branch 34, issued an order granting the petitioners’ motion to dismiss in Civil Case No. 93-65135 on the ground of the pendency of Civil Case No. 91-2495 filed with the RTC of Makati. The court ratiocinated that it had no power to interfere by injunction with the judgment or orders of the RTC of Makati of concurrent or coordinate jurisdiction.[37] The private respondents did not file any motion for reconsideration of the said order. With the dismissal of the complaint in Civil Case No. 93-65135, the deputy sheriff of Valenzuela issued a notice of sheriff’s sale on April 21, 1993 setting the sale of the mortgaged chattels at the compound of the private respondents in Valenzuela on May 4, 1993.[38] On May 3, 1993 or barely four days after the dismissal by the RTC of Manila of Civil Case No. 93-65135 and barely a day before the sale at public auction, the private respondents, through Atty. Malaya, filed another complaint[39] with the RTC of Manila against the petitioner and the sheriff of Valenzuela with a prayer for temporary restraining order to enjoin the said sheriff and petitioner PCIB from conducting the auction sale of the mortgaged chattels on May 4, 1993. The case was raffled to Branch 54.[40] The private respondents alleged inter alia that in Civil Case No. 91-2495, the RTC of Makati had lifted the writ of preliminary injunction it had previously issued but that the private respondents had filed a motion for the reconsideration thereof which remained unresolved; their complaint for injunction and damages in Civil Case No. 93-65135 was still pending with the RTC of Manila and thus the temporary restraining order issued by the said court had already been lifted. The sheriff set the sale at public auction of the mortgaged chattels on May 4, 1993 without giving the mortgagees notice thereof as required by Act 1508. Despite the allegations of the private respondents in their complaint, Executive Judge Rosalio dela Rosa of the RTC of Manila issued on the said date, a temporary restraining order enjoining the sale of the mortgaged chattels at public auction.[41] As a consequence, the petitioner ex-officio sheriff of Valenzuela had to cancel the auction sale of the mortgaged chattels on May 4, 1993 and to reset the same on June 14, 1993.[42] On June 10, 1993, the private respondents, through the Quisumbing, Torres & Evangelista Law Office, filed a petition for certiorari and mandamus with the CA, docketed as CA-G.R. SP No. 31251, for the nullification of the February 23, 1993 Order of the RTC of Makati in Civil Case No. 91-2495, lifting the writ of preliminary injunction it previously issued. Although the sale of the chattels at public auction set on June 14, 1993 was the subject of the private respondents’ complaint in Civil Cases Nos. 93-65135 and 93-65757, the petition prayed for the issuance of a temporary restraining order enjoining the sale of the mortgaged chattels on June 14, 1993. The private respondents argued that they had not been served with a copy of the second motion to lift the writ of preliminary injunction. The service of a copy of the said motion on the law firm of San Vicente De Leon & Associates instead of the law firm of Quisumbing Torres & Evangelista was ineffectual insofar as the private respondents were concerned, as the law firm of Quisumbing Torres & Evangelista remained as their counsel of record in Civil Case No. 91-2495. The law firm of San Vicente De Leon & Associates was the counsel of record of the private respondents only in CA-G.R. SP No. 27573. The private respondents were denied their right to due process when the RTC issued its February 23, 1993 Order without affording them a chance to be heard on the petitioners’ second motion. On August 13, 1993, the CA rendered its decision in CA-G.R. SP No. 31251 setting aside the February 23, 1993 Order of the RTC of Makati, declaring the same null and void and restoring the status of the parties prior to the issuance of the said order. The decretal portion of the decision reads: WHEREFORE and upon all the foregoing, the order of respondent court dated February 23, 1993 and all subsequent proceedings arising from the said questioned order are hereby SET ASIDE as null and void. The parties are restored to the status quo ante, i.e., to their respective positions before the issuance of the order of February 23, 1993.[43] The CA ruled that the service to the San Vicente De Leon & Associates Law Office of the petitioners’ second motion to lift the writ of preliminary injunction was not binding on the private respondents since their counsel of record in Civil Case No. 912495 was the Quisumbing Torres & Evangelista Law Office. The private respondents were denied their right to due process when the RTC granted the second motion of the petitioners without affording the private respondents their right to be heard thereon. The private respondents were not guilty of forum shopping in filing their complaint with the RTC of Manila in Civil Case No. 93-65135. Petitioner PCIB filed a motion for the reconsideration of the decision of the CA. Meanwhile, on August 19, 1993, the RTC of Manila, Branch 54, issued an order in Civil Case No. 93-65757 dismissing the complaint of the private respondents, holding that the latter engaged in forum shopping and that it was improper for the said court to interfere with a case pending in the RTC of Makati being a court of equal rank, and more so with the pending certiorari filed in CA-G.R. SP No. 31251 with the CA.[44] The court stated that it was leaving it up to petitioner PCIB (defendants therein) to take steps for disciplinary action against the counsel of the private respondents (the plaintiffs therein). The private respondents did not appeal the order. On April 13, 1994, the CA issued an order in CA-G.R. SP No. 31251 denying petitioner PCIB’s motion for reconsideration. [45] In the meantime, the trial court issued an order on July 28, 1994 in Civil Case No. 91-2495 dismissing the case for failure of the private respondents to prosecute the same.[46] On September 12, 1994, the private respondents filed a motion for reconsideration of the said order.[47] Hence, the petition at bar. The petitioners aver that contrary to the ruling of the CA, the private respondents were accorded their right to due process. When the Makati RTC came out with its February 23, 1993 Order granting their second motion for the lifting of the writ of preliminary injunction heretofore issued by the said court, the private respondents had no counsel when petitioner PCIB filed its second motion and had to serve a copy thereof on the private respondents. The private respondents engaged in a rigodon de abogados thus confusing the petitioners, besides being grossly negligent in failing to respond to and oppose the second motion of petitioner PCIB and in failing to file a motion for reconsideration of the February 23, 1993 Order of the RTC before filing their emergency motion. The private respondents resorted to forum shopping to abort the sale at public auction of the mortgaged chattels before and after filing their emergency motion. The RTC had the authority to dissolve ex parte the writ of preliminary injunction heretofore issued by it for the reason that the continued effectivity of the writ of preliminary injunction heretofore issued by it had become improvident. Finally, the RTCs of Pasig City and Valenzuela City had already issued writs of possession over the subject properties sold at public auction. The CA should have dismissed the private respondents’ petition for certiorari and mandamus, for being moot and academic. In their comment on the petition, the private respondents aver that their counsel of record in Civil Case No. 91-2495 was the Quisumbing Torres & Evangelista Law Office and not the firm of San Vicente De Leon & Associates. The service on the latter law firm of a copy of the second motion of petitioner PCIB was not binding on the private respondents. The RTC of Makati denied the private respondents the right to due process when it granted ex parte the second motion of petitioner PCIB and lifted the writ of preliminary injunction heretofore issued by it without affording the private respondents a chance to be heard on the said motion. They acted with due diligence in filing their emergency motion to stave off the sale at public auction of the mortgaged chattels on May 4, 1993. Neither did they commit forum shopping in filing their complaint in Civil Case No. 93-65153 with the RTC of Manila, as their causes of action in the said case[48] were different from their principal causes of action before the Makati RTC in Civil Case No. 93-2495.[49] The petition is impressed with merit. We agree with the private respondents that their counsel of record when they filed their complaint with the RTC of Makati in Civil Case No. 91-2495 was the Quisumbing Torres & Evangelista Law Office. The firm withdrew its appearance as counsel for the private respondents and was substituted by San Vicente De Leon & Associates as counsel of said parties only in the CA case. Thus, despite the withdrawal by the Quisumbing Torres & Evangelista Law Office as counsel of the private respondents in CA-G.R. SP No. 27573, it remained as counsel of the private respondents in Civil Case No. 91-2495 pending in the RTC of Makati. Petitioner PCIB was mandated to serve a copy of its second motion for the lifting of the writ of preliminary injunction on the private respondents through their counsel of record, Quisumbing Torres & Evangelista Law Office, conformably to Section 2, Rule 13 of the Rules of Court, as amended, which reads: Section 2. Filing and service, defined. – Filing is the act of presenting the pleading or other papers to the clerk of court. Service is the act of providing a party with a copy of the pleading or paper concerned. If any party has appeared by counsel, service upon him shall be made upon his counsel or one of them, unless service upon the party himself is ordered by the court. Where one counsel appears for several parties, he shall only be entitled to one copy of any paper served upon him by the opposite side. The service of pleadings and processes must be made on counsel and not on the parties.[50] There was no order from the trial court directing the service of the petitioner’s second motion on the private respondents personally. Prescinding from petitioner PCIB’s procedural faux pas, we do not agree with the ruling of the CA that the private respondents were denied their right to due process. In the case of Development Bank of the Philippines v. Court of Appeals, , [51] we ruled that the essence of due process is that a party be afforded a reasonable opportunity to be heard in support of his defense. What the law abhors and prohibits is the absolute absence of the opportunity to be heard. Hence, a party cannot feign denial of due process when he had been afforded the opportunity to present his side. In Bernardo v. Court of Appeals,[52] we ruled that lack of opportunity to be heard and not necessarily absence of prior notice constitutes a violation of due process. As long as a party is given the opportunity to be heard either through oral arguments or through pleadings, such as a motion for reconsideration, and defend his interest in due course, he would have no reason to complain for it is this opportunity to be heard that makes up the essence of procedural due process.[53] In this case, the private respondents were accorded their right to due process but by their negligence they failed to take the appropriate immediate remedies to protect their rights and interests. Worse, the private respondents indulged in forum shopping and flagrantly violated the principle of judicial stability. As aforestated, the private respondents were served with a copy of the petitioner’s second motion on February 9, 1993. They secured the professional services of Atty. Malaya as their counsel who filed his notice of appearance on February 15, 1993. As such new counsel of the private respondents, he was presumed and obliged to acquaint himself with all the antecedent processes and pleadings of the parties, and all the proceedings that may have transpired prior to his appearance as counsel.[54] It was also incumbent on the said counsel to communicate with the private respondents’ counsel of record, Quisumbing Torres & Evangelista Law Office, to ascertain the status of the case and of any pleadings that may have been filed by petitioner PCIB. The private respondents were also obliged to apprise their counsel, Atty. Malaya, of the service on them by petitioner PCIB on February 9, 1993 of its second motion for the lifting of the writ of preliminary injunction heretofore issued by the trial court. This is to enable the new counsel, Atty. Malaya, to prepare and file with dispatch the appropriate pleadings to protect the private respondents’ rights and interests. and (d) the consolidation of title in favor of defendant PCIB. or three days after the scheduled sale at public auction of the mortgaged real properties on March 30. It behooved the private respondents to file with deliberate speed their motion for the reconsideration of the February 23. v. to enjoin the sale at public auction of the real properties earlier set on March 31. 1993 by the petitioners ex-officio sheriffs. It was not unreasonable for the RTC of Makati to assume that the private respondents would no longer file any opposition to or comment on the petitioner’s second motion. 1993 Order of the trial court was likewise served on them. thus impelling the petitioners to litigate before the RTC of Manila in Civil Case No. through their counsel.In Gold Line Transit Inc. a complaint for injunction with the RTC of Manila in Civil Case No. Thus. on their perception that the latter court was not the proper venue to grant injunctive relief. They should give all the necessary assistance to their counsel.[58] In Bugnay Construction & Development Corporation v. through counsel. upon receiving the notices of sale at public auction of the mortgaged real estate and chattels. It is incredible that the private respondents filed their complaint for injunction in the RTC of Manila to enjoin the sale of the same mortgaged chattels subject of their complaint in the RTC of Makati. the said counsel was able to confirm that the trial court had indeed issued its February 23. The petitioners sheriffs forthwith issued notices of the sale of the mortgaged real properties at public auction on March 30. filed with the trial court on March 23. 1993 Order of the trial court to thwart the sale at public auction of the real properties set on March 30. Intermediate Appellate Court. On March 31. What is so disconcerting is that the private respondents. 91-2495 with the RTC of Makati.[57] The CA ratiocinated that the private respondents believed that the said complaints affected the properties situated in areas apart from those over which the RTC of Makati could act and that they had no apparent intention to procure thereby something which they had not been able to get from another court. In so doing. and thus resolved petitioner PCIB’s second motion.[56] The private respondents cannot feign ignorance of the said order of the RTC of Makati because they. including but not limited to (a) the issuance of the certificate of sale. 43131. Ramos. 93-65135 on March 17.. where the party having filed an action in one branch of the regional trial court shops for the same remedies of a restraining order and a writ of preliminary injunction in another branch of the same court. were obliged. The private respondents dilly-dallied and failed to do so. the private respondents filed. 93-65135 and 93-65757 for injunctive relief after the RTC of Makati set aside on February 23. by filing their petitions in separate fori. failed to file any comment or opposition to the second motion of petitioner PCIB. employees and agents from implementing the foreclosure and sheriff’s sale of 30 March 1993. the counsel of the private respondents was obliged to proceed posthaste to the RTC of Makati and ascertain if it had lifted the writ of preliminary injunction heretofore issued by it. 1993.[59] we ruled that: This rule has been equally applied in the recent case of Limpin. A copy of the February 23. 1993 Order of the trial court. 1993 Order of the RTC of Makati but even for an expanded writ of preliminary injunction.m. 1993. Atty. However. the private respondents temporized and filed their emergency motion only on March 31. The CA erred in holding that the private respondents did not indulge in forum shopping when they filed their complaints for injunction in the RTC of Manila in Civil Cases Nos. one remedy much later than the other. The records indicate that the private respondents filed their complaint for injunction in Civil Case No. an emergency motion was filed in the RTC of Makati in Civil Case No. The private respondents were served with copies of the said notices as required by law. We ruled therein that: . Even a cursory reading of the complaints of the private respondents in said cases would readily show the utter untenability of the CA’s ruling. et al. et al. 1993 granting the second motion of petitioner PCIB and lifting the writ of preliminary injunction. 93-65135 and respond to the emergency motion of the private respondents before the RTC of Makati in which they prayed not only for the reconsideration of the February 23. obviously to vex the petitioners and derail the placid. the private respondents. 91-2495 with a plea for a temporary restraining order or writ of preliminary injunction to abort the sale at public auction. the private respondents are guilty of forum shopping. It is reasonable to presume that the said counsel did so. For sure. 1993 Order setting aside the said writ on motion of petitioner PCIB. through their counsel. The private respondents likewise failed to consult with their counsel. through Quisumbing Torres & Evangelista Law Office. Malaya did confer with the Quisumbing Torres & Evangelista Law Office and that the private respondents turned over to their new counsel the copy of petitioner PCIB’s second motion that had been served on them. for at stake is their interest in their case. inexpensive and speedy administration of justice. 1993 a Motion to Admit their Reply to the answer of petitioner PCIB to the complaint of the private respondents. Malaya. 1993 the writ of preliminary injunction heretofore issued by it. thus allowing the sale at public auction of the mortgaged real and personal properties.[55] we ruled that litigants represented by counsel should not expect that all they need to do is sit back and relax and await the outcome of the case. 1993 without a whimper of protest. 1993 and of the mortgaged chattels on March 18. It is safe to presume that Atty. Malaya. It is incredible that the private respondents were able to file a motion to admit their reply to the answer of petitioner PCIB and yet failed to file a motion for the reconsideration of the February 23. 1993. 91-2495 and secured injunctive relief from the court to enjoin the sale of the mortgaged chattels at public auction located in the compound of the private respondents in Valenzuela (now Valenzuela City).. vs. 93-65135 and 93-65757 despite the pendency of their complaint for injunction in Civil Case No. 1993. It is clear as day that the private respondents filed their complaints in Civil Cases Nos. The RTC of Makati issued its Order on February 23. 1993 on the eve of the sale at public auction of the chattels to enjoin the same. The private respondents then believed that the RTC of Makati was the proper court from which they could secure injunctive relief to frustrate the sale at public auction of the mortgaged chattels in Valenzuela. through Atty. The private respondents insouciantly allowed the sale at public auction of the mortgaged real properties to proceed on March 30. The private respondents even opted to split their remedies into two. to make immediate inquiries from the office of the petitioners ex-officio sheriffs why the sale at public auction of the mortgaged properties were set when the trial court had issued a writ of preliminary injunction barring said sale. 1993 at 8:30 a. or to file a supplemental complaint in Civil Case No. setting the hearing of the said motion on April 2. through two sets of lawyers. For his part. Judge Laron. 1993 after the sale at public auction of the real properties with a prayer for an expanded preliminary injunction not only to thwart the sale at public auction that had already been a fait accompli but also to enjoin-… defendants and their deputies. Worse. Jr. (c) the filing of any petition for a writ of possession of the subject real property. (b) the annotation of the sheriff’s sale on Transfer Certificate of Title No. 91-2495. for gross abuse of judicial processes. Having failed to obtain the reliefs to which they were not entitled in the first place from the “Solano Court. the private respondents should have filed in Civil Case No.[65] Hence. in the Court of First Instance for Makati. 9. 91-2495 filed on 10 September 1991 sought mainly the restructuring of the loan agreement between the parties. Litis pendentia as a ground for the dismissal of an action has the following essential requisites: (a) identity or parties. 91-2495 prayed for a restructuring of their loans with petitioner PCIB. the defense of litis pendentia in one case is a bar to the other or others. or the place where the mortgaged property may be found.4. (b) identity of rights asserted and relief prayed for. 1991 on the private respondents. 1508. 93-65757 which was filed on 3 May 1993. at Makati. a sinister scheme to give a semblance of justification for their plea for injunctive relief in the RTC of Manila. Civil Case No. 9. 1991 but also to enjoin the said sale at public auction permanently. the petitioner sheriff of Valenzuela stated that the sale at public auction would be held at the compound of the private respondents in Valenzuela where the said chattels were stored. they should have questioned the said sale in their complaint in Civil Case No. for the first time. they subsequently instituted two (2) actions in the ‘Beltran Court’ for the same purpose. they insist that they were not guilty of forum shopping for the reasons stated in the CA decision. The first case. 91-2495 a supplemental complaint or a motion for reconsideration with the Makati RTC for the reconsideration of its February 23. escape the operation of the principle that one and the same cause of action shall not be twice litigated. 93-65135. sought to enjoin the sheriff’s foreclosure sale scheduled on 4 May 1993 which was also violative of Act No. It bears stressing that the essence of forum shopping is the filing of multiple suits involving the same parties for the same cause or action. at the Mortgagee’s option. 93-65135 and 93-65757 are the same. the private respondents had agreed.3. 9.1. Moreover. and the sale at public auction set on September 16.[66] If the private respondents believed that the sale of the chattels at their compound was a violation of Act 1508. 93-65135. thus: 9.[67] we held that “if a party is allowed to urge one ground at a time. Civil Case No. The auction sale of the mortgaged properties may be held. The fifth to eighth causes of action of the private respondents in Civil Case No.[64] In this case. the nullification of the notice of sale at public auction. regardless of which party is successful would amount to res judicata in the other case. Clearly.[60] We do not agree with the private respondents.” the Court of Appeals. at the Mortgagee’s option.“So. 1508. In case of judicial foreclosure. they sought for the nullification of the sales at public auction on March 18. and the Supreme Court. 1993 because of the sale of the mortgaged chattels at the private respondents’ compound in Valenzuela where the chattels were located and for failure of the petitioner sheriff of Valenzuela to serve them notice of the said sale as provided for in Act 1508. 91-2495. It bears stressing that the action in Civil Case No. their remedy was to file a supplemental complaint in Civil Case No.[69] .”[68] Moreover. what has thus far been said more than amply demonstrates Sarmiento’s and Basa’s act of forum shopping. the other party may ask for summary dismissal of the two cases. 1993 and May 4. 93-65135 and 9365757 on their claim that. It exists where the essential requisites of litis pendentia are present or where a final judgment in one case will amount to res judicata in another.” Even the private respondents belie the CA’s conclusion because in their comment on the petition at bar. Civil Case No. Not only did the private respondents pray for injunctive relief to enjoin the sale at public auction of the mortgaged chattels on September 16. the place where the Mortgagee’s branch mentioned above is situated. under the chattel mortgages. 1991 because the said notice was defective for inter alia non-compliance with Act 1508. for the purpose of obtaining a favorable judgment or other relief. The records show that the petitioner sheriff of the RTC of Valenzuela served a copy of the notice of sheriff’s sale of the chattels set on September 16. either simultaneously or successively. If the position of the private respondents was correct. filed on 17 March 1993 sought to enjoin the sheriff’s foreclosure sale scheduled on 18 March 1993 which violated the requirement of personal notice under Act No. violating in the process the ruling against splitting causes of action. Second. Metro Manila. In Florendo v. The claim of the private respondents is but an afterthought. They did so. 912495 did not become functus officio with the lifting of the writ of preliminary injunction issued by the said court. they also sought as one of their causes of action. the relief being founded on the same facts. Vda. The sanction is inescapable: dismissal of both actions. it would result in piecemeal and endless litigation which the law seeks to avoid. 91-2495 and their causes of action in Civil Cases Nos. 1993 Order. 93-65135. that the sale at public auction may be held at any place where the chattels may be found: 12. only in their complaint in Civil Case No. or at least such parties who represent the same interests in both actions. Although the private respondents in Civil Case No. De Gonzalez.[61] This Court ruled that where a litigant sues the same party against whom another action or actions for the alleged violations of the same right and the enforcement of the same relief is/are still pending. They did not. [62] In such a case. 91-2495 pending in the Makati RTC and those in the Manila RTC in Civil Cases Nos. The accusation of forum shopping is therefore baseless.2. First. 91-2495 and not a separate complaint in Civil Case No. in their complaint in the said cases. (c) the identity with respect to the two preceding particulars in the two cases is such that any judgment that may be rendered in the pending case.[63] The well-entrenched rule is that a party cannot by varying the form of action or adopting a different method of presenting his case. the action for foreclosure may be filed. too. 93-65135 and 93-65757 complaints were for injunction with damages with a plea for injunctive relief to enjoin the sale at public auction of the said mortgaged chattels. the cases arose from different sets of facts and involved different issues and incidents over which the petitioners are entitled to relief. The private respondents cannot evade the application of the doctrine of litis pendentia in Civil Cases Nos. the parties as well as the chattels subject of Civil Case No. or even all grounds except one or two. The two branches of the RTC of Manila saw through the nefarious ploy of the private respondents and issued separate orders dismissing the complaints on the ground of litis pendentia. The trial court had the inherent power to control its processes and orders so as to make them conformable to law and justice. always under the control of the said court. 93-65757 even directed the private respondents to pay jointly and severally to the petitioners treble costs. The private respondents were able to frustrate the February 23. 1993. Moreover.[74] The private respondents filed on March 17. 1993 only to be stymied anew when the private respondents filed another complaint docketed as Civil Case No. cannot and are not permitted to intervene with their respective cases. and gave the petitioners the option to initiate disciplinary action against the counsel of the private respondents. The private respondents did not even appeal the order of the two branches of the RTC of Manila. 93-65757. the sale at public auction of the chattels on March 18. The decision of the Court of Appeals in CA-G. with two different branches of the court. the order may be modified and rescinded by it upon sufficient grounds shown at any time before judgment. through temporary restraining orders issued by the RTC of Manila. no court has the power to interfere by injunction with the judgment or decrees of a court of concurrent jurisdiction having the power to grant relief sought by injunction. Although the sale at public auction of the chattels had been enjoined by the RTC of Manila in Civil Case No. much less with their orders or judgments. 1993 Order. via the issuance of the temporary restraining order prayed for by the private respondents. despite the admission made in their complaint that the RTC of Makati had already enjoined the said sale at public auction. the private respondents sought injunctive relief from the CA to enjoin the sale at public auction of the chattels on June 14.[71] Thus. 65135 had not yet become final and executory. the petition is GRANTED. 1993 despite the pendency of their complaint with the RTC of Manila in Civil Case No. The private respondents admitted in their complaint that their emergency motion for the reconsideration of the February 23. 1993 Order or file a supplemental complaint in Civil Case No. 28-91 on forum shopping. and seriously hamper the administration of justice. The sale at public auction had to be reset to May 4. 1993 Order of the RTC of Makati was still unresolved. 1993 had to be reset. the RTC of Makati had jurisdiction to order the said sheriff to comply with the law. as may be determined by the trial courts concerned. This is without prejudice to the liability for contempt of the counsels for the private respondents for violation of the Supreme Court Circular No. 1993 when the RTC of Manila issued in Civil Case No. The various branches of the RTC having as they have the same or equal authority and exercising as they do concurrent and coordinate jurisdiction should not. the RTC of Manila enjoined.[70] The February 23. praying for a temporary restraining order and writ of preliminary injunction to enjoin the said sale at public auction. 1993 Order. 93-65135 for injunction with a plea for a temporary restraining order and writ of preliminary injunction to enjoin only the sale at public auction of the chattels on March 18. forum shopping. Even if the said sheriff failed to comply with Act 1508 in setting the sale at public auction of the mortgaged chattels.[73] The private respondents even brazenly violated the principle of judicial stability. at the time the private respondents filed their complaint in Civil Case No. SP No. In fine. What the RTC of Makati allowed in its February 23. 93-65757. praying for injunctive relief to enjoin the sale at public auction of the mortgage chattels as decreed by the RTC of Makati per its February 23. it behooved the private respondents to file their motion with the RTC of Makati for the reconsideration of its February 23. The private respondents did not allege in its complaint that the RTC of Makati had lifted the said writ heretofore issued by it. the ex-officio sheriff of Valenzuela was one of the respondents before the RTC of Makati over whom and over whose actuations the said court had supervision and control. praying for the same injunctive relief. hence. 91-2495 is DISMISSED WITH PREJUDICE. IN LIGHT OF ALL THE FOREGOING. Because of the temporary restraining order issued by the RTC of Manila. and through the assailed decision of the CA. 31251 is REVERSED AND SET ASIDE. otherwise the private respondents may correctly be declared as indulging in forum shopping. 1993 Order of the RTC of Makati not only once but three times. 1993. 93-65135 and 93-65757. 93-65757 another temporary restraining order. and violation of the principle of judicial stability. the RTC of Makati had assumed jurisdiction over the foreclosure of the mortgaged real properties and chattels including all incidents related to the conduct and actuations of the sheriffs thereof. 91-2495 instead of filing two separate complaints one after another. The complaint of the private respondents in Civil Case No. docketed as Civil Case Nos. A contrary rule would lead to confusion. 1993 Order of the RTC of Makati lifting the writ of preliminary injunction heretofore issued by it and allowing the sale at public auction of the personal properties by the petitioners sheriffs after petitioner PCIB had posted the requisite bond was an interlocutory order. 1993.[72] After all. the private respondents filed their petition for certiorari and prohibition with a plea for a temporary restraining order or writ of preliminary injunction to enjoin the sale of the mortgaged chattels at public auction on June 14. We note that the RTC of Manila in Civil Case No. 1993 their complaint with the RTC of Manila in Civil Case No. the Order of the RTC of Manila in Civil Case No.R. Accordingly. modify or vacate the said judgment or order is not only possessed but is restricted to the court in which the judgment or order is rendered or issued. which essentially states that the judgment or order of a court of competent jurisdiction may not be interfered with by any court of concurrent jurisdiction for the simple reason that the power to open. Costs against the private respondents. 93-65757.In this case. 93-65757 with the RTC of Manila on May 3. . The petitioner sheriff had to reset the said sale on June 14. Actually. b. and c. (2) comment of First Metro Investment Corporation (FMIC). December 8. (Tevesteco).R.Stevedoring. the bank dishonored the check as it was "drawn against insufficient funds" since the balance of FMIC's current account was only P20 million after the transfer of P80 million to Tevesteco.99. 1993. and (3) motion of its counsel to fix attorney's fee. 840107473-0 with BPI Family Bank* San Francisco del Monte Branch (Quezon City) and deposited METROBANK check no. 898679 worth P100 million. Inc. 1989.667.) Before us for resolution are: (1) motion of BPI Family Savings Bank.00 as reasonable attorney’s fees. respondent FMIC.687. FMIC was able to recover only the amount of P14.Republic of the Philippines [G. 89-5280 for a sum of money with damages against BPI Family Bank. 2004] BPI vs. leaving a balance of P65. SO ORDERED. the parties.332. leaving a deposit of only P20 million.01 as advanced 17% interest for one year and P20 million. FMIC filed with the Regional Trial Court. Makati City Civil Case No.72[2] payable to itself and drawn against its deposit with BPI Family Bank (San Fernando Del Monte Branch). for your information. 1989.321.01 (or P65. seeking a reconsideration/clarification of this Court's Decision dated May 21. in their written communications.01). opened current account No. the facts of this case are: On August 25. 89-5280.667. vs. it issued BPI Family Bank check No. Barely four days after. 1989. the amount of P80 million with interest at the legal rate from the time this complaint was filed less P14. thus: “WHEREFORE.678. Inc. through its Executive Vice President Antonio Ong. 132390. petitioner.687. is a resolution of this Court dated DEC 8 2004.321. FMIC learned about this and in order to recover immediately its deposit. BPI Family Bank then paid in advance FMIC the amount of P14.332. the dispositive portion of which reads: “Premises considered. judgment is rendered in favor of plaintiff. or on August 29. this Court hereby modifies the decision of the trial court and adjudges BPI Family Bank liable to First Metro Investment Corporation for the amount of P65. considering all the foregoing. GR No 132390 (BPI Family Savings Bank. agreed that BPI Family Bank would guarantee the payment of 17% per annum interest on the P100 million deposited (or P14.000. the amount of P100. To recapitulate.321. the cost.99 plus interest at 17% per annum . provided FMIC would maintain its deposit for a period of one year.[1] Earlier.332.687.” On appeal by both parties. the Court of Appeals rendered a Decision affirming the assailed Decision with modification. No. But upon presentation for payment on September 13.99).01 representing the 17% interest per annum.667. First Metro Investment Corporation. 129077 for P86.646. Consequently. Inc.667.. FIRST METRO SPECIAL THIRD DIVISION Gentlemen: Quoted hereunder. respondent.057. BPI Family Bank fraudulently transferred P80 million from FMIC's deposit to the savings account of Tevesteco Arrastre . Branch 146. ordering defendant to pay: a. the trial court rendered its Decision in Civil Case No. 2004 which denied its petition for review on certiorari.[3] On October 1. " BPI Family Bank cannot feign ignorance of the terms of its agreement with respondent FMIC for these are based on documentary evidence. it transferred fraudulently P80 million from FMIC's current account to the savings account of Tevesteco. confirms the latter's assertion. Court of Appeals[4] and Rizal Commercial Banking Corporation vs. recognizing the obligatory force of contracts. until now. which are not present here.[7] this Court aptly held: "The law. vs. will not permit a party to be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof.321." retains and makes use of the bank deposit of FMIC to . BPI Family Bank filed with this Court a petition for review on certiorari. thus: "August 15. unless the stipulation is contrary to law.332. G. 1997 of the Court of Appeals. In the instant motion for reconsideration. 1990. thus. Sarmiento Trucking Corp.[6] Records glaringly show that bad faith and fraud obviously characterize the history of this case. Plaza Lorenzo Ruiz Binondo. 1989 until fully restored. good customs. prior to the one year maturity date. In fact. 1989 up to August 24.321. that which is agreed to in a contract is the law between the contracting parties.. This bank has delayed payment for 15 long years and now asks this Court "to reward the delay" by reducing the legal rate of interest from 17% per annum to only 12%. From this Decision. thus. Metro Manila Gentlemen: This is to guarantee the payment of interest for your deposit equivalent to 17% per annum of whatever amount deposited. or from August 25. this 17% interest shall itself earn interest at 12% from October 4. then Branch Manager of BPI Family Bank. In its comment on the motion.[8] It bears reiterating that it was BPI Family Bank which breached its duty or obligation when.) JAIME SEBASTIAN Manager" FMIC further asserts that the terms of payment of interest are very clear .99 should earn interest of 17% only for one year. SO ORDERED. we rendered a Decision denying the petition. BPI Family Bank literally "holds on. and obligations arising from such contract have the force of law and should be complied with in good faith. BPI Family Bank contends that we erred (1) in affirming the Appellate Court's award of 17% interest per annum on the principal amount of P65. FMIC asserts that when it deposited its money with BPI Family Bank. morals. A breach upon the contract confers upon the injured party a valid cause for recovering that which may have been lost or suffered. It is elementary that nothing beneficial or lucrative should arise from subterfuge or deception. In fact. until the amount of the entire obligation is fully paid. and (b) compute the rate of interest on the interest in accordance with our Decisions in Eastern Shipping Lines vs. the term of FMIC's deposit. In FGU Insurance Corp.332. their agreement was that the P100 million is a time deposit for one year. Very truly yours. FMIC stresses that to sustain BPI Family Bank's argument is to reward it for deliberately defaulting in its obligation.321. Further.it is interest at 17% per annum. to earn 17% interest per annum. BPI Family Bank prays that we (a) reduce the interest due from 17% to 12% per annum on the amount of P65.P.332. Indeed. thereafter. We cannot vary the conditions stipulated upon by the parties. and (2) in imposing 12% legal interest on the 17% stipulated interest.. FMIC's deposit ceased to be a loan or obligation constituting a forbearance of money immediately after one year.[5] The award of 17% interest per annum on the principal amount BPI Family Bank maintains that the principal amount of P65.from August 29. the interest due should be reduced from 17% to 12% per annum on the amount of P65. On May 21. Alfa RTWManufacturing Corporation.321. addressed to FMIC. 1989 of Jaime Sebastian.99. public order or public policy.332. 1989 until fully paid. the letter dated August 15. or for 15 years.99. affirming the Decision dated July 4. (SGD. 1989 FIRST METRO INVESTMENT CORPORATION Wellington Bldg.99. but for each year that the deposited amount remains with BPI Family Bank. not just for one year. 2004. however. and current deposits of money in banks and similar institutions shall be governed by the provisions concerning loan. Responsibility arising from negligence in the performance of every kind of obligation is demandable. is imposed. the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). No interest. Davide.[10] this Court held: "The degree of diligence required of banks.[12]citing Eastern Shipping Lines. an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum.[9] this Court. i. Court of Appeals. Accordingly. Its unauthorized transfer of FMIC's deposit to the savings account of a third party. Jr. Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made. aware of its breach of duty and obligation and after using for its gain FMIC's deposit. In other words. is reached. above. be on the amount finally adjudged. We agree with FMIC that to reduce the 17% to only 12% is to reward BPI Family Bank for its violation of contract and undue delay in holding on to its (FMIC's) money. or through error induced by fraud of a third person. in Rizal Commercial Banking Corporation vs. this interim period being deemed to be by then an equivalent to a forbearance of credit. shall be 12% per annum from such finality until its satisfaction. The bank is the debtor and the depositor is the creditor. x x x. in any case. Imposing 12% legal interest on the 17% stipulated interest In relation to the determination and computation of rate of interest on the 17% stipulated interest. BPI Family Bank should not be rewarded for its fraudulent and unscrupulous act." The instant case involves an obligation arising from a loan. vs. When an obligation. shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. and it consists in the payment of a sum of money. in Far East Bank and Trust Company vs. not constituting a loan or forbearance of money. in the concept of actual and compensatory damages." Similarly." In Consolidated Bank and Trust Corporation vs. the rate of interest shall be 12% per annum to be computed from default. The fiduciary nature of their relationship with their depositors requires them to treat the accounts of their clients with the highest degree of care. constitutes breach of its duty to treat such deposit account with the highest degree of diligence. the degree of diligence required of banks is more than that of a good father of the family or of an ordinary business firm.[11] we ruled: "x x x (t)he business of banks is impressed with public interest.. The depositor lends the bank money and the bank agrees to pay the depositor on demand. as follows: 1. Certainly. speaking through Mr.[13] held: "II. The actual base for the computation of legal interest shall. this Court.[14] this Court held: "The contract between the bank and its depositor is governed by the provisions of the Civil Code on simple loan. Inc. is more than that of a good father of a family where the fiduciary nature of their relationship with their depositors is concerned. a loan or forbearance of money. the rate of interest. They are really loans because they earn interest.its detriment and prejudice. the rate of legal interest whether the case falls under paragraph 1 or paragraph 2. from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. Court of Appeals. where the demand is established with reasonable certainty. Furthermore.[15] this Court held that "bank deposits are in the nature of irregular deposits. The savings deposit agreement between the bank and the depositor is the contract that determines the rights and obligations of the parties. banks are duty bound to treat the deposit accounts of their depositors with the highest degree of care.." In Reyes vs." Undoubtedly. With regard particularly to an award of interest. even if the debtor acted in utmost good faith and by mistake as to the person of the creditor. prior to the one year maturity date. Querimit. has still the audacity to demand that such deposit should earn only 12% interest per annum. The respondent Bank was in turn a debtor of petitioner." Similarly. Fixed. Failure of the respondent Bank to honor the time deposit is failure to pay its obligation as a debtor and not a breach of trust arising from a depositary's . Alfa RTW Manufacturing Corporation. the interest due shall itself earn legal interest from the time it is judicially demanded. the interest due should be that which may have been stipulated in writing. 2. In Bank of Philippine Islands vs. x x x. the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art.. Chief Justice Hilario G. savings. Court of Appeals. 1169. i. held that "payment made by the debtor to the wrong party does not extinguish the obligation as to the creditor who is without fault or negligence. Court of Appeals. We cannot fathom why BPI Family Bank. BPI Family Bank utterly failed to exercise that degree of diligence required of it in dealing with FMIC. as well as the accrual thereof. There is a debtor-creditor relationship between the bank and its depositor. 1980. its depositor. When the judgment of the court awarding a sum of money becomes final and executory. When the obligation is breached.e. The petitioner here in making time deposits that earn interests with respondent Overseas Bank of Manila was in reality a creditor of the respondent Bank and not a depositor. In the absence of stipulation. A bank is under obligation to treat the accounts of its depositors with meticulous care whether such accounts consist only of a few hundred pesos or of millions of pesos. in Serrano vs.e. 3. Central Bank of the Philippines. Article 1980 of the Civil Code of the Philippines provides: "Art. 690. This issue was not contested before the trial court. which is P251. For an issue cannot be raised for the first time on appeal. the PI00 million deposit herein is also in the nature of a loan because it does not only earn interest at the stipulated rate of 17% per annum. he claims that the "understanding" between him and FMIC is that the latter will pay him a contingency fee based on quantum meruit (1) the amount of interest recoverable over and above 12% per annum on the principal amount of P65. This amount of P251. the total amount due.0745. Queensland Tokyo Commodities. 1989 until finality of judgment or P11. 1989.433. issues not raised in the trial court cannot be raised for the first time on appeal.921. but is also subject to payment in legal tender upon its maturity or after one year from August 25. WHEREFORE.494.921.[18] we held: "This Court cannot now.99 must earn an interest at the rate of 17% per annum from the date of execution until finality of this Decision. of years from the date of execution until finality of judgment[16] or P65. pass upon this issue.7383 x 12% x 15 = P19.321. . the outstanding balance on the principal amount corresponding to the time deposit of P65. for the first time on appeal.99 x 17% x 15 = P166. it cannot be raised for the first time on appeal before this Court.991. the interest of 17% percent per annum.52894.421. Questions raised on appeal must be within the issues framed by the parties and. 1989) until finality of this Court's Decision.[17] shall earn interest of 12% per annum until fully paid.321.0745 P19.332.433.597.332. The formula is: interest on interest = interest of 17% on P65.321.921. BPI Family Bank is hereby ordered to pay FMIC the following amounts: P65. Fixing of Attorney's fee Anent the motion of FMIC's counsel to fix his attorney's fee. Now.332.59344 (the total amount due as of the date of the finality of judgment). In Lim vs. Inc.321. computed from the date of the filing of the complaint (October 4.433. consequently.332. Furthermore.59344.106.421. the motion for reconsideration is DENIED.59344 shall earn an interest of 12% per annum until fully paid by BPI Family Bank." Verily.52894 (outstanding balance of the total deposit) (17% stipulated interest on the above outstanding balance for 15 years) (12% interest on the stipulated interest of 17% for 15 years) ---------------------------------------------------------------------------------------------------P251." Moreover.991. applying the above-quoted rulings. The motion of FMIC's counsel to fix his attorney's fee lacks merit. The formula is: interest = outstanding balance on the principal x 17% per annum x no. as long as unpaid.99 + + P166.597. Consequently.99 x 12% x number of years from the filing of the complaint on October 4. the date of the deposit.99.. the matter of fixing attorney's fee is addressed to FMIC and its counsel. the latter can avail of an appropriate legal remedy. and (2) the recoverable 12% interest on the 17% interest.690.failure to return the subject matter of the deposit. From the date of finality of this Decision.332. If they cannot agree on the amount. also earns interest. It must be raised seasonably in the proceedings before the lower court.321.