CENTRAL BANK VS CA 208 SCRA 652

The following requisites, therefore, must be present before the order of conservatorship may be set aside by a court: 1. The appropriate pleading must be filed by the stockholders of record representing the majority of the capital stock of the bank in the proper court; 2. Said pleading must be filed within ten (10) days from receipt of notice by said majority stockholders of the order placing the bank under conservatorship; and 3. There must be convincing proof, after hearing, that the action is plainly arbitrary and made in bad faith. -the order placing petitioner herein under conservatorship had long become final and its validity could no longer be litigated upon before the trial court.

- a bank retains its juridical personality even if placed under conservatorship; 44 it is neither replaced nor substituted by the conservator who, per Section 28-A of the Central Bank Act, as amended by P.D. No. 1932, shall only: . . . take charge of the assets, liabilities, and the management of that institution, collect all monies and debts due said institution and exercise all powers necessary to preserve the assets of the institution, reorganize the management thereof, and restore its viability. He shall have the power to overrule, or revoke the actions of the previous management and board of directors . . ., any provision of law to the contrary notwithstanding, and such other powers as the Monetary Board shall deem necessary. PRODUCERS BANK VS NLRC Under Section 28-A, the Monetary Board may place a bank under the control of a conservator when it finds that the bank is continuously unable or unwilling to maintain a condition of solvency or liquidity .In Central Bank of the Philippines v. Court of Appeals,23 the Court declared that the order placing petitioner herein under conservatorship had long become final and its validity could no longer be litigated upon. Petitioner was not only experiencing a decline in its profits, but was reeling from tremendous losses triggered by a bank-run which began in 1983. In such a depressed financial condition, petitioner cannot be legally compelled to continue paying the same amount of bonuses to its employees. Thus, the conservator was justified in reducing the mid-year and Christmas bonuses of petitioner's employees. To hold otherwise would be to defeat the reason for the conservatorship which is to preserve the assets and restore the viability of the financially precarious bank. Ultimately, it is to the employees' advantage that the conservatorship achieve its purposes for the alternative would be petitioner's closure whereby employees would lose not only their benefits, but their jobs as well MONETARY BOARD VS VALENZUELA the Supervision and Examination Department (SED) of the Bangko Sentral ng Pilipinas (BSP) conducted examinations of the books After the examinations, exit conferences were held with the officers or representatives of the banks wherein the SED examiners provided them with copies of Lists of Findings/Exceptions containing the deficiencies discovered during the examinations. These banks were then required to comment and to undertake the remedial measures stated in these lists within 30 days from their receipt of the lists, which remedial measures included the infusion of additional capital. Though the banks claimed that they made the additional capital infusions, petitioner Chuchi Fonacier, officer-in-charge of the SED, sent separate letters to the Board of Directors of each bank, informing them that the SED found that the banks failed to carry out the required remedial measures. In response, the banks requested that they be given time to obtain BSP approval to amend their Articles of Incorporation, that they have an opportunity to seek investors. They requested as well that the basis for the capital infusion figures be disclosed, and noted that none of them had received the Report of Examination (ROE) which finalizes the audit findings. They also requested meetings with the BSP audit teams to reconcile audit figures. In response, Fonacier reiterated the banks failure to comply with the directive for additional capital infusions. The petition is meritorious. In Lim v. Court of Appeals it was stated: The requisites for preliminary injunctive relief are: (a) the invasion of right sought to be protected is material and substantial; (b) the right of the complainant is clear and unmistakable; and (c) there is an urgent and paramount necessity for the writ to prevent serious damage. As such, a writ of preliminary injunction may be issued only upon clear showing of an actual existing right to be protected during the pendency of the principal action. The twin requirements of a valid injunction are the existence of a right and its actual or threatened violations. Thus, to be entitled to an injunctive writ, the right to be protected and the violation against that right must be shown.[8] These requirements are absent in the present case.

In granting the writs of preliminary injunction, the trial court held that the submission of the ROEs to the MB before the respondent banks would violate the right to due process of said banks. This is erroneous. The respondent banks have failed to show that they are entitled to copies of the ROEs. They can point to no provision of law, no section in the procedures of the BSP that shows that the BSP is required to give them copies of the ROEs. Sec. 28 of RA 7653, or the New Central Bank Act, which governs examinations of banking institutions, provides that the ROE shall be submitted to the MB; the bank examined is not mentioned as a recipient of the ROE. The respondent banks cannot claim a violation of their right to due process if they are not provided with copies of the ROEs. The same ROEs are based on the lists of findings/exceptions containing the deficiencies found by the SED examiners when they examined the books of the respondent banks. As found by the RTC, these lists of findings/exceptions were furnished to the officers or representatives of the respondent banks, and the respondent banks were required to comment and to undertake remedial measures stated in said lists. Despite these instructions, respondent banks failed to comply with the SEDs directive. Respondent banks are already aware of what is required of them by the BSP, and cannot claim violation of their right to due process simply because they are not furnished with copies of the ROEs. Respondent banks were held by the CA to be entitled to copies of the ROEs prior to or simultaneously with their submission to the MB, on the principles of fairness and transparency. Further, the CA held that if the contents of the ROEs are essentially the same as those of the lists of findings/exceptions provided to said banks, there is no reason not to give copies of the ROEs to the banks. This is a flawed conclusion, since if the banks are already aware of the contents of the ROEs, they cannot say that fairness and transparency are not present. If sanctions are to be imposed upon the respondent banks, they are already well aware of the reasons for the sanctions, having been informed via the lists of findings/exceptions, demolishing that particular argument. The ROEs would then be superfluities to the respondent banks, and should not be the basis for a writ of preliminary injunction. Also, the reliance of the RTC on Banco Filipino v. Monetary Board[9] is misplaced. The petitioner in that case was held to be entitled to annexes of the Supervision and Examination Sectors reports, as it already had a copy of the reports themselves. It was not the subject of the case whether or not the petitioner was entitled to a copy of the reports. And the ruling was made after the petitioner bank was ordered closed, and it was allowed to be supplied with annexes of the reports in order to better prepare its defense. In this instance, at the time the respondent banks requested copies of the ROEs, no action had yet been taken by the MB with regard to imposing sanctions upon said banks. The issuance by the RTC of writs of preliminary injunction is an unwarranted interference with the powers of the MB. Secs. 29 and 30 of RA 7653[10] refer to the appointment of a conservator or a receiver for a bank, which is a power of the MB for which they need the ROEs done by the supervising or examining department. The writs of preliminary injunction issued by the trial court hinder the MB from fulfilling its function under the law. The actions of the MB under Secs. 29 and 30 of RA 7653 may not be restrained or set aside by the court except on petition for certiorari on the ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction. The writs of preliminary injunction order are precisely what cannot be done under the law by preventing the MB from taking action under either Sec. 29 or Sec. 30 of RA 7653. As to the third requirement, the respondent banks have shown no necessity for the writ of preliminary injunction to prevent serious damage. The serious damage contemplated by the trial court was the possibility of the imposition of sanctions upon respondent banks, even the sanction of closure. Under the law, the sanction of closure could be imposed upon a bank by the BSP even without notice and hearing. The apparent lack of procedural due process would not result in the invalidity of action by the MB. This was the ruling in Central Bank of the Philippines v. Court of Appeals.[11] This close now, hear later scheme is grounded on practical and legal considerations to prevent unwarranted dissipation of the banks assets and as a valid exercise of police power to protect the depositors, creditors, stockholders, and the general public. The writ of preliminary injunction cannot, thus, prevent the MB from taking action, by preventing the submission of the ROEs and worse, by preventing the MB from acting on such ROEs. The trial court required the MB to respect the respondent banks right to due process by allowing the respondent banks to view the ROEs and act upon them to forestall any sanctions the MB might impose. Such procedure has no basis in law and does in fact violate the close now, hear later doctrine. We held in Rural Bank of San Miguel, Inc. v. Monetary Board, Bangko Sentral ng Pilipinas: It is well-settled that the closure of a bank may be considered as an exercise of police power. The action of the MB on this matter is final and executory. Such exercise may nonetheless be subject to judicial inquiry and can be set aside if found to be in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction.[12] The respondent banks cannotthrough seeking a writ of preliminary injunction by appealing to lack of due process, in a roundabout manner prevent their closure by the MB. Their remedy, as stated, is a subsequent one, which will determine whether the closure of the bank was attended by grave abuse of discretion. Judicial review enters the picture only after the MB has taken action; it cannot prevent such action by the MB. The threat of the imposition of sanctions, even that of closure, does not violate their right to due process, and cannot be the basis for a writ of preliminary injunction. The close now, hear later doctrine has already been justified as a measure for the protection of the public interest. Swift action is called for on the part of the BSP when it finds that a bank is in dire straits. Unless adequate and determined efforts are taken by the government against distressed and mismanaged banks, public faith in the banking system is certain to deteriorate to the prejudice of the national economy itself, not to mention the losses suffered by the bank depositors, creditors, and stockholders, who all deserve the protection of the government.[13] The respondent banks have failed to show their entitlement to the writ of preliminary injunction. It must be emphasized that an application for injunctive relief is construed strictly against the pleader.[14] The respondent banks cannot rely on a simple appeal to procedural due process to prove entitlement. The requirements for the issuance of the writ have not been proved. No invasion of the rights of respondent banks has been shown, nor is their right to copies of the ROEs clear and unmistakable. There is also no necessity for the writ to prevent serious damage. Indeed the issuance of the writ of preliminary injunction tramples upon the powers

of the MB and prevents it from fulfilling its functions. There is no right that the writ of preliminary injunction would protect in this particular case. In the absence of a clear legal right, the issuance of the injunctive writ constitutes grave abuse of discretion. [15] In the absence of proof of a legal right and the injury sustained by the plaintiff, an order for the issuance of a writ of preliminary injunction will be nullified.[16] Courts are hereby reminded to take greater care in issuing injunctive relief to litigants, that it would not violate any law. The grant of a preliminary injunction in a case rests on the sound discretion of the court with the caveat that it should be made with great caution.[17] Thus, the issuance of the writ of preliminary injunction must have basis in and be in accordance with law. All told, while the grant or denial of an injunction generally rests on the sound discretion of the lower court, this Court may and should intervene in a clear case of abuse.[18] WHEREFORE, the petition is hereby GRANTED. The assailed CA Decision dated September 30, 2008 in CA-G.R. SP No. 103935 is hereby REVERSED. The assailed order and writ of preliminary injunction of respondent Judge Valenzuela in Civil Case Nos. 08119243, 08-119244, 08-119245, 08-119246, 08-119247, 08-119248, 08-119249, 08-119250, 08-119251, and 08-119273 are hereby declared NULL and VOID. CENTRAL BANK VS CA 220 536 Based on examination reports submitted by the Supervision and Examination Sector (SES), Department II, of the Central Bank (CB) "that the financial condition of TSB is one of insolvency and its continuance in business would involve probable loss to its depositors and creditors," 3 the Monetary Board (MB) issued on 31 May 1985 Resolution No. 596 ordering the closure of TSB, forbidding it from doing business in the Philippines, placing it under receivership, and appointing Ramon V. Tiaoqui as receiver. Tiaoqui assumed office on 3 June 1985. 4 Meanwhile, on 9 August 1985; Central Bank and Ramon Tiaoqui filed a motion to dismiss the complaint before the RTC for failure to state a cause of action, i.e., it did not allege ultimate facts showing that the action was plainly arbitrary and made in bad faith, which are the only grounds for the annulment of Monetary Board resolutions placing a bank under conservatorship, and that TSB was without legal capacity to sue except through its receiver.7 Petitioners' motion to dismiss was premised on two grounds, namely, that the complaint failed to state a cause of action and that the Triumph Savings Bank was without capacity to sue except through its appointed receiver. Concerning the first ground, petitioners themselves admit that the Monetary Board resolution placing the Triumph Savings Bank under the receivership of the officials of the Central Bank was done without prior hearing can be the subject of judicial review and may be set aside should it be found that the same was issued with arbitrariness and in bad faith. The first issue raised before Us is whether absence of prior notice and hearing may be considered acts of arbitrariness and bad faith sufficient to annul a Monetary Board resolution enjoining a bank from doing business and placing it under receivership. Otherwise stated, is absence of prior notice and hearing constitutive of acts of arbitrariness and bad faith? Under Sec. 29 of R.A. 265, 15 the Central Bank, through the Monetary Board, is vested with exclusive authority to assess, evaluate and determine the condition of any bank, and finding such condition to be one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors, forbid the bank or non-bank financial institution to do business in the Philippines; and shall designate an official of the CB or other competent person as receiver to immediately take charge of its assets and liabilities Contrary to the notion of private respondent, Sec. 29 does not contemplate prior notice and hearing before a bank may be directed to stop operations and placed under receivership. When par. 4 (now par. 5, as amended by E.O. 289) provides for the filing of a case within ten (10) days after the receiver takes charge of the assets of the bank, it is unmistakable that the assailed actions should precede the filing of the case. Plainly, the legislature could not have intended to authorize "no prior notice and hearing" in the closure of the bank and at the same time allow a suit to annul it on the basis of absence thereof It may be emphasized that Sec. 29 does not altogether divest a bank or a non-bank financial institution placed under receivership of the opportunity to be heard and present evidence on arbitrariness and bad faith because within ten (10) days from the date the receiver takes charge of the assets of the bank, resort to judicial review may be had by filing an appropriate pleading with the court. This "close now and hear later" scheme is grounded on practical and legal considerations to prevent unwarranted dissipation of the bank's assets and as a valid exercise of police power to protect the depositors, creditors, stockholders and the general public We stressed in Central Bank of the Philippines v. Court of Appeals 20 that . . . the banking business is properly subject to reasonable regulation under the police power of the state because of its nature and relation to the fiscal affairs of the people and the revenues of the state (9 CJS 32). Banks are affected with public interest because they receive funds from the general public in the form of deposits. Due to the nature of their transactions and functions, a fiduciary relationship is created between the banking institutions and their depositors. Therefore, banks are under the obligation to treat with meticulous care and utmost fidelity the accounts of those who have reposed their trust and confidence in them (Simex International [Manila], Inc., v. Court of Appeals, 183 SCRA 360 [1990]).

Admittedly, the mere filing of a case for receivership by the Central Bank can trigger a bank run and drain its assets in days or even hours leading to insolvency even if the bank be actually solvent. The procedure prescribed in Sec. 29 is truly designed to protect the interest of all concerned, i.e., the depositors, creditors and stockholders, the bank itself, and the general public, and the summary closure pales in comparison to the protection afforded public interest. At any rate, the bank is given full opportunity to prove arbitrariness and bad faith in placing the bank under receivership, in which event, the resolution may be properly nullified and the receivership lifted as the trial court may determine. Once again We refer to Rural Bank of Buhi, Inc. v. Court of Appeals, 21 and reiterate Our pronouncement therein that . . . the law is explicit as to the conditions prerequisite to the action of the Monetary Board to forbid the institution to do business in the Philippines and to appoint a receiver to immediately take charge of the bank's assets and liabilities. They are: (a) an examination made by the examining department of the Central Bank; (b) report by said department to the Monetary Board; and (c) prima facieshowing that its continuance in business would involve probable loss to its depositors or creditors. In sum, appeal to procedural due process cannot just outweigh the evil sought to be prevented; hence, We rule that Sec. 29 of R.A. 265 is a sound legislation promulgated in accordance with the Constitution in the exercise of police power of the state. Consequently, the absence of notice and hearing is not a valid ground to annul a Monetary Board resolution placing a bank under receivership. The absence of prior notice and hearing cannot be deemed acts of arbitrariness and bad faith. Thus, an MB resolution placing a bank under receivership, or conservatorship for that matter, may only be annulled after a determination has been made by the trial court that its issuance was tainted with arbitrariness and bad faith. Until such determination is made, the status quo shall be maintained, i.e., the bank shall continue to be under receivership. As regards the second ground, to rule that only the receiver may bring suit in behalf of the bank is, to echo the respondent appellate court, "asking for the impossible, for it cannot be expected that the master, the CB, will allow the receiver it has appointed to question that very appointment." Consequently, only stockholders of a bank could file an action for annulment of a Monetary Board resolution placing the bank under receivership and prohibiting it from continuing operations. 22 In Central Bank v. Court of Appeals, 23 We explained the purpose of the law . . . in requiring that only the stockholders of record representing the majority of the capital stock may bring the action to set aside a resolution to place a bank under conservatorship is to ensure that it be not frustrated or defeated by the incumbent Board of Directors or officers who may immediately resort to court action to prevent its implementation or enforcement.

. Common sense and public policy dictate then that the authority to decide on whether to contest the resolution should be lodged with the stockholders owning a majority of the shares for they are expected to be more objective in determining whether the resolution is plainly arbitrary and issued in bad faith. MANALO VS CA

On July 19, 1983, S. Villanueva Enterprises, represented by its president, Therese Villanueva Vargas, obtained a loan of three million pesos (P3,000,000.00) and one million pesos (P1,000,000.00) from the respondent PAIC Savings and Mortgage Bank and the Philippine American Investments Corporation (PAIC), respectively. To secure payment of both debts, Vargas executed in favor of the respondent and PAIC a Joint First Mortgage1 over two parcels of land registered under her name. One of the lots, located in Pasay City with an area of nine hundred nineteen square meters (919 sq. m.) and covered by TCT No. 6076, is the subject of the present case. 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."2 S. Villanueva Enterprises defaulted in paying the amortizations due. Despite repeated demands from the respondent, it failed to settle its loan obligation. Accordingly, respondent instituted extrajudicial foreclosure proceedings over the mortgaged lots. On August 22, 1984, the Pasay City property was sold at a public auction to the respondent itself, after tendering the highest bid. The respondent then caused the annotation of the corresponding Sheriff's Certificate of Sale3 on the title of the land on December 4, 1984. After the lapse of one year, or the statutory period extended by law to a mortgagor to exercise his/her right of redemption, title was consolidated in respondent's name for failure of Vargas to redeem. On October 29, 1986, the Central Bank of the Philippines filed a Petition4 for assistance in the liquidation of the respondent with the Regional Trial Court. The petition was given due course in an Order5 dated May 19, 1987. It appears that from the years 1986 to 1991, Vargas negotiated with the respondent (through its then liquidator, the Central Bank) for the repurchase of the foreclosed property. The negotiations, however, fizzled out as Vargas cannot afford the repurchase price fixed by the respondent based on the appraised value of the land at that time. On October 4, 1991, Vargas filed a case for annulment of mortgage and extrajudicial foreclosure sale before Branch 116 of the Pasay City Regional Trial Court. On July 22, 1993, the court rendered a decision6 dismissing the complaint and upholding the validity of the mortgage and foreclosure sale. On appeal, the appellate court upheld the assailed judgment and declared the said mortgage and foreclosure proceedings to be in accord with law.7 This decision of the Court of Appeals subsequently became final and executory when we summarily dismissed Vargas' Petition for Review on Certiorari for having been filed beyond the reglementary period.8

In the meantime, on June 22, 1992, respondent petitioned the Regional Trial Court, Branch 112, of Pasay City, herein court a quo, for the issuance of a writ of possession for the subject property in Civil Case No. 9011. This is in view of the consolidation of its ownership over the same as mentioned earlier. Vargas and S. Villanueva Enterprises, Inc. filed their opposition thereto. After which, trial ensued. During the pendency of Civil Case No. 9011 (for the issuance of a writ of possession), Vargas, on December 23, 1992, executed a Deed of Absolute Sale9 selling, transferring, and conveying ownership of the disputed lot in favor of a certain Armando Angsico. Notwithstanding this sale, Vargas, still representing herself to be the lawful owner of the property, leased the same to petitioner Domingo R. Manalo on August 25, 1994. Pertinent provisions of the lease agreement10 state: "3. (a) The lease is for a period of ten year lease (sic), involving 450 square meters, a portion of the above 919 square meter property. Petitioner then sought relief with the Court of Appeals, filing therein a Petition for Certiorari. While this was awaiting resolution, he entered into another lease agreement,19 this time with the respondent, represented by its liquidator, over the same 450 sq. m. portion of the lot. The contract fixed a period of one month beginning January 28, 1999, renewable for another month at the exclusive option of the lessor, respondent PAIC Bank. We will first resolve the jurisdictional and procedural questions raised by the petitionerI. Petitioner postulates that the lower court should have dismissed respondent's "Ex-Parte Petition for Issuance of Writ of Possession" in Civil Case No. P-9011 for want of jurisdiction over the subject matter of the claim. The power to hear the same, he insists, exclusively vests with the Liquidation Court pursuant to Section 29 of Republic Act No. 265, otherwise known as The Central Bank Act.22 He then cites our decision in Valenzuela v. Court of Appeals,23 where we held that "if there is a judicial liquidation of an insolvent bank, all claims against the bank should be filed in the liquidation proceeding." For going to another court, the respondent, he accuses, is guilty of forum shopping. These contentions can not pass judicial muster. The pertinent portion of Section 29 states: "x x x The liquidator designated as hereunder provided shall, by the Solicitor General, file a petition in the Regional Trial Court reciting the proceedings which have been taken and praying the assistance of the court in the liquidation of such institution. The court shall have 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 liabilities of the stockholders and do all that is necessary to preserve the assets of such institution and to implement the liquidation plan approved by the Monetary Board, x x x"24 (emphasis supplied.) Petitioner apparently failed to appreciate the correct meaning and import of the above-quoted law. The legal provision only finds operation in cases where there are claims against an insolvent bank. In fine, the exclusive jurisdiction of the liquidation court pertains only to the adjudication of claims against the bank. It does not cover the reverse situation where it is the bank which files a claim against another person or legal entity. This interpretation of Section 29 becomes more obvious in the light of its intent. The requirement that all claims against the bank be pursued in the liquidation proceedings filed by the Central Bank is intended to prevent multiplicity of actions against the insolvent bank and designed to establish due process and orderliness in the liquidation of the bank, to obviate the proliferation of litigations and to avoid injustice and arbitrariness.25 The lawmaking body contemplated that for convenience, only one court, if possible, should pass upon the claims against the insolvent bank and that the liquidation court should assist the Superintendents of Banks and regulate his operations.26 Petitioner next casts doubt on the capacity of the respondent to continue litigating the petition for the issuance of the writ. He asserts that, being under liquidation, respondent bank is already a "dead" corporation that cannot maintain the suit in the RTC. Hence, no writ may be issued in its favor. The argument is devoid of merit. A bank which had been ordered closed by the monetary board retains its juridical personality which can sue and be sued through its liquidator. The only limitation being that the prosecution or defense of the action must be done through the liquidator.31 Otherwise, no suit for or against an insolvent entity would prosper. In such situation, banks in liquidation would lose what justly belongs to them through a mere technicality.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, which authorizes or empowers a liquidator to institute actions, 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, 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."