Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=82102:56143&catid=1573&Itemid=566
Timestamp: 2019-04-23 04:35:23+00:00

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ALFEO D. VIVAS, ON HIS BEHALF AND ON BEHALF OF THE SHAREHOLDERS OF EUROCREDIT COMMUNITY BANK, Petitioner, v. THE MONETARY BOARD OF THE BANGKO SENTRAL NG PILIPINAS AND THE PHILIPPINE DEPOSIT INSURANCE CORPORATION, Respondents.
This is a petition for prohibition with prayer for the issuance of a status quo ante order or writ of preliminary injunction ordering the respondents to desist from closing EuroCredit Community Bank, Incorporated (ECBI) and from pursuing the receivership thereof. The petition likewise prays that the management and operation of ECBI be restored to its Board of Directors (BOD) and its officers.
In its letter, dated February 20, 2009, the BSP directed ECBI to explain why it transferred the majority shares of RBFI without securing the prior approval of the MB in apparent violation of Subsection X126.2 of the Manual of Regulation for Banks (MORB).10 Still in another letter,11 dated March 31, 2009, the ISD II required ECBI to explain why it did not obtain the prior approval of the BSP anent the establishment and operation of the bank’s sub-offices.
The MB, on the other hand, posited that ECBI unjustly refused to allow the BSP examiners from examining and inspecting its books and records, in violation of Sections 25 and 34 of R.A. No. 7653. In its letter,13 dated May 8, 2009, the BSP informed ECBI that it was already due for another annual examination and that the pendency of its appeal before the MB would not prevent the BSP from conducting another one as mandated by Section 28 of R.A. No. 7653.
Thereafter, the MB issued Resolution No. 823,19 dated June 4, 2009, approving the issuance of a cease and desist order against ECBI, which enjoined it from pursuing certain acts and transactions that were considered unsafe or unsound banking practices, and from doing such other acts or transactions constituting fraud or might result in the dissipation of its assets.
On June 10, 2009, the OSI filed with the Department of Justice (DOJ) a complaint for Estafa Through Falsification of Commercial Documents against certain officials and employees of ECBI. Meanwhile, the MB issued Resolution No. 1164,20 dated August 13, 2009, denying the appeal of ECBI from Resolution No. 1255 which placed it under PCA framework. On November 18, 2009, the general examination of the books and records of ECBI with the cut-off date of September 30, 2009, was commenced and ended in December 2009. Later, the BSP officials and examiners met with the representatives of ECBI, including Vivas, and discussed their findings.21 On December 7, 2009, the ISD II reminded ECBI of the non-submission of its financial audit reports for the years 2007 and 2008 with a warning that failure to submit those reports and the written explanation for such omission shall result in the imposition of a monetary penalty.22 In a letter, dated February 1, 2010, the ISD II informed ECBI of MB Resolution No. 1548 which denied its request for reconsideration of Resolution No. 726.
It is grave abuse of discretion amounting to loss of jurisdiction to apply the general law embodied in Section 30 of the New Central Bank Act as opposed to the specific law embodied in Sections 11 and 14 of the Rural Banks Act of 1992.
Even if it assumed that Section 30 of the New Central Bank Act is applicable, it is still the gravest abuse of discretion amounting to lack or excess of jurisdiction to execute the law with manifest arbitrariness, abuse of discretion, and bad faith, violation of constitutional rights and to further execute a mandate well in excess of its parameters.
Vivas submits that the respondents committed grave abuse of discretion when they erroneously applied Section 30 of R.A. No. 7653, instead of Sections 11 and 14 of the Rural Bank Act of 1992 or R.A. No. 7353. He argues that despite the deficiencies, inadequacies and oversights in the conduct of the affairs of ECBI, it has not committed any financial fraud and, hence, its placement under receivership was unwarranted and improper. He posits that, instead, the BSP should have taken over the management of ECBI and extended loans to the financially distrained bank pursuant to Sections 11 and 14 of R.A. No. 7353 because the BSP’s power is limited only to supervision and management take-over of banks.
Sec. 2. Petition for prohibition - When the proceedings of any tribunal, corporation, board, officer or person, whether exercising judicial, quasi-judicial or ministerial functions, are without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that the judgment be rendered commanding the respondent to desist from further proceedings in the action or matter specified therein, or otherwise granting such incidental reliefs as the law and justice require.
Section 4. When and where petition filed. — The petition shall be filed not later than sixty (60) days from notice of the judgment, order or resolution. In case a motion for reconsideration or new trial is timely filed, whether such motion is required or not, the sixty (60) day period shall be counted from notice of the denial of said motion.
Even in the absence of such provision, the petition is also dismissible because it simply ignored the doctrine of hierarchy of courts. True, the Court, the CA and the RTC have original concurrent jurisdiction to issue writs of certiorari , prohibition and mandamus. The concurrence of jurisdiction, however, does not grant the party seeking any of the extraordinary writs the absolute freedom to file a petition in any court of his choice. The petitioner has not advanced any special or important reason which would allow a direct resort to this Court. Under the Rules of Court, a party may directly appeal to this Court only on pure questions of law.31 In the case at bench, there are certainly factual issues as Vivas is questioning the findings of the investigating team.
Strict observance of the policy of judicial hierarchy demands that where the issuance of the extraordinary writs is also within the competence of the CA or the RTC, the special action for the obtainment of such writ must be presented to either court. As a rule, the Court will not entertain direct resort to it unless the redress desired cannot be obtained in the appropriate lower courts; or where exceptional and compelling circumstances, such as cases of national interest and with serious implications, justify the availment of the extraordinary remedy of writ of certiorari , prohibition, or mandamus calling for the exercise of its primary jurisdiction.32 The judicial policy must be observed to prevent an imposition on the precious time and attention of the Court.
In any event, no grave abuse of discretion can be attributed to the MB for the issuance of the assailed Resolution No. 276.
Sec. 11. The power to supervise the operation of any rural bank by the Monetary Board as herein indicated shall consist in placing limits to the maximum credit allowed to any individual borrower; in prescribing the interest rate, in determining the loan period and loan procedures, in indicating the manner in which technical assistance shall be extended to rural banks, in imposing a uniform accounting system and manner of keeping the accounts and records of rural banks; in instituting periodic surveys of loan and lending procedures, audits, test-check of cash and other transactions of the rural banks; in conducting training courses for personnel of rural banks; and, in general, in supervising the business operations of the rural banks.
The Central Bank shall have the power to enforce the laws, orders, instructions, rules and regulations promulgated by the Monetary Board, applicable to rural banks; to require rural banks, their directors, officers and agents to conduct and manage the affairs of the rural banks in a lawful and orderly manner; and, upon proof that the rural bank or its Board of Directors, or officers are conducting and managing the affairs of the bank in a manner contrary to laws, orders, instructions, rules and regulations promulgated by the Monetary Board or in a manner substantially prejudicial to the interest of the Government, depositors or creditors, to take over the management of such bank when specifically authorized to do so by the Monetary Board after due hearing process until a new board of directors and officers are elected and qualified without prejudice to the prosecution of the persons responsible for such violations under the provisions of Sections 32, 33 and 34 of Republic Act No. 265, as amended.
The thrust of Vivas’ argument is that ECBI did not commit any financial fraud and, hence, its placement under receivership was unwarranted and improper. He asserts that, instead, the BSP should have taken over the management of ECBI and extended loans to the financially distrained bank pursuant to Sections 11 and 14 of R.A. No. 7353 because the BSP’s power is limited only to supervision and management take-over of banks, and not receivership.
Vivas argues that implementation of the questioned resolution was tainted with arbitrariness and bad faith, stressing that ECBI was placed under receivership without due and prior hearing, invoking Section 11 of R.A. No. 7353 which states that the BSP may take over the management of a rural bank after due hearing.33 He adds that because R.A. No. 7353 is a special law, the same should prevail over R.A. No. 7653 which is a general law.
The Court has taken this into account, but it appears from all over the records that ECBI was given every opportunity to be heard and improve on its financial standing. The records disclose that BSP officials and examiners met with the representatives of ECBI, including Vivas, and discussed their findings.34 There were also reminders that ECBI submit its financial audit reports for the years 2007 and 2008 with a warning that failure to submit them and a written explanation of such omission shall result in the imposition of a monetary penalty.35 More importantly, ECBI was heard on its motion for reconsideration. For failure of ECBI to comply, the MB came out with Resolution No. 1548 denying its request for reconsideration of Resolution No. 726. Having been heard on its motion for reconsideration, ECBI cannot claim that it was deprived of its right under the Rural Bank Act.
The doctrine is founded on practical and legal considerations to obviate unwarranted dissipation of the bank’s assets and as a valid exercise of police power to protect the depositors, creditors, stockholders, and the general public.40 Swift, adequate and determined actions must be taken against financially distressed and mismanaged banks by government agencies lest the public faith in the banking system deteriorate to the prejudice of the national economy.
Accordingly, the MB can immediately implement its resolution prohibiting a banking institution to do business in the Philippines and, thereafter, appoint the PDIC as receiver. The procedure for the involuntary closure of a bank is summary and expeditious in nature. Such action of the MB shall be final and executory, but may be later subjected to a judicial scrutiny via a petition for certiorari to be filed by the stockholders of record of the bank representing a majority of the capital stock. Obviously, this procedure is designed to protect the interest of all concerned, that is, the depositors, creditors and stockholders, the bank itself and the general public. The protection afforded public interest warrants the exercise of a summary closure.
In the case at bench, the ISD II submitted its memorandum, dated February 17, 2010, containing the findings noted during the general examination conducted on ECBI with the cut-off date of September 30, 2009. The memorandum underscored the inability of ECBI to pay its liabilities as they would fall due in the usual course of its business, its liabilities being in excess of the assets held. Also, it was noted that ECBI’s continued banking operation would most probably result in the incurrence of additional losses to the prejudice of its depositors and creditors. On top of these, it was found that ECBI had willfully violated the cease-and-desist order of the MB issued in its June 24, 2009 Resolution, and had disregarded the BSP rules and directives. For said reasons, the MB was forced to issue the assailed Resolution No. 276 placing ECBI under receivership. In addition, the MB stressed that it accorded ECBI ample time and opportunity to address its monetary problem and to restore and improve its financial health and viability but it failed to do so.
In light of the circumstances obtaining in this case, the application of the corrective measures enunciated in Section 30 of R.A. No. 7653 was proper and justified. Management take-over under Section 11 of R.A. No. 7353 was no longer feasible considering the financial quagmire that engulfed ECBI showing serious conditions of insolvency and illiquidity. Besides, placing ECBI under receivership would effectively put a stop to the further draining of its assets.
Lastly, the petitioner challenges the constitutionality of Section 30 of R.A. No. 7653, as the legislature granted the MB a broad and unrestrained power to close and place a financially troubled bank under receivership. He claims that the said provision was an undue delegation of legislative power. The contention deserves scant consideration.
In this case, under the two tests, there was no undue delegation of legislative authority in the issuance of R.A. No. 7653. To address the growing concerns in the banking industry, the legislature has sufficiently empowered the MB to effectively monitor and supervise banks and financial institutions and, if circumstances warrant, to forbid them to do business, to take over their management or to place them under receivership. The legislature has clearly spelled out the reasonable parameters of the power entrusted to the MB and assigned to it only the manner of enforcing said power. In other words, the MB was given a wide discretion and latitude only as to how the law should be implemented in order to attain its objective of protecting the interest of the public, the banking industry and the economy.
Velasco Jr., (Chairperson), Peralta, Abad, and Leonen, JJ., concur.
26City Engineer of Baguio v. Baniqued, G.R. No. 150270, November 26, 2008, 57 SCRA 617, 625.
27Guerrero v. Domingo, G.R. No. 156142, March 23, 2011, 646 SCRA 175, 180.
28Cabanero v. Torres, 61 Phil, 522 (1935); Agustin v. De la Fuente, 84 Phil 525 (1949); Navarro v. Lardizabal, 134 Phil. 331 (1968); Heirs of Eugenia V. Roxas, Inc. v. Intermediate Appellate Court, 255 Phil 558 (1989).
29Montes v. Court of Appeals, 523 Phil 98, 110 (2006).
30 G.R. Nos. 154470-71, September 24, 2012 , 681 SCRA 521, 555 (citing United Coconut Planters Bank v. E. Ganzon, Inc., G.R. No. 168859, June 30, 2009, 591 SCRA 321, 338-341).
31Philippine Veterans Bank v. Benjamin Monillas, 573 Phil 298, 315 (2008).
32Springfield Development Corp., Inc. v. Hon. Presiding Judge of RTC, Branch 40., Cagayan de Oro City, Misamis Oriental, 543 Phil. 298, 315 (2007).
33Section 11. The power to supervise the operation of any rural bank by the Monetary Board as herein indicated shall consists in placing limits to the maximum credit allowed to any individual borrower; in prescribing the interest rate; in determining the loan period and loan procedures; in indicating the manner in which technical assistance shall be extended to rural banks; in imposing a uniform accounting system and manner of keeping the accounts and records of rural banks; in instituting periodic surveys of loan and lending procedures, audits, test-check of cash and other transactions of the rural banks; and, in general in supervising the business operations of the rural banks.
38 245 Phil. 263 (1988).
40Bangko Sentral ng Pilipinas Monetary Board v. Antonio-Valenzuela, G.R. No. 184778, October 2, 2009, 602 SCRA 698.
41Gutierrez v. Department of Budget and Management, G.R. No. 153266, March 18, 2010, 616 SCRA 1, 25.
42Dasmariñas Water District v. Leonardo-De Castro, G.R. No. 175550, September 17, 2008, 565 SCRA 624, 637.
43Eastern Shipping Lines, Inc. v. Philippine Overseas Employment Administration, 248 Phil 762, 771 (1998).

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