BANKING CASE DIGESTS
TOPIC: LOAN FUNCTIONS
NACAR VS. GALLERY FRAMES
Facts: Petitioner Nacar filed a complaint for constructive dismissal
against the respondent Gallery Frames.
On October 15, 1998, the Labor Arbiter ruled in favor of petitioner and
awarded the latter with backwages and separation pay in lieu of
reinstatement in the amount of P158, 919.92. The NLRC sustained the
decision of the Labor Arbiter. The Court of Appeals dismissed the
respondent’s appeal. Supreme Court denied the petition. On May 27,
2002, an Entry of Judgment was issued certifying that the resolution of
the Supreme Court became final and executory.
Petitioner then filed a Motion for Correct Computation, praying that
his backwages be computed from the date of his dismissal up to
the finality of the Resolution of the Supreme Court. Upon
recomputation, an updated amount of P471, 320. 31 was arrived at.
Respondent opposed. Petitioner now asserts that the reckoning point
for the computation should be on May 27, 2002, upon the
Resolution of the Supreme Court and not when the decision of the
Labor Arbiter was rendered on October 15, 1998.
Issue:
Whether or not recomputation should be allowed
Held:
Yes. By the nature of an illegal dismissal case, the reliefs continue to
add up until full satisfaction, as expressed under Article 279 of the
Labor Code. The recomputation of the consequences upon execution
of the decision does not constitute an alteration or amendment of the
final decision being implemented. The illegal dismissal ruling stands;
only the computation of monetary consequences of this dismissal is
affected, and this is not a violation of the principle of immutability of
final judgments. That the amount respondents shall now pay has
greatly increased is a consequence
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that it cannot avoid as it is the risk that it ran when it continued to
seek
recourses against the Labor Arbiter’s decision.
As regards the payment of legal interest, the BSP Monetary Board
issued Circular No. 799, Series of 2013, which provides that in the
absence of stipulation in loan contracts, the interest rate shall no
longer be 12%, but will be 6% per annum, effective July 1, 2013. The
12% per annum legal interest shall apply only until June 30, 2013.
Starting July 1, 2013, the new rate of 6% per annum shall be the
prevailing rate when applicable.
NEW SAMPAGUITA BUILDERS CONSTRUCTION, INC vs PHILIPPINE
NATIONAL BANK; G.R. No. 148753 | July 30, 2004
FACTS
1.NSB approved Board Resolution No. 05, s. 89 a uthorizing the company
to apply for or secure a Commercial Loan with PNB (P8M) under such
terms agreed by the Bank and NSB:
 Mortgaged the REP of NSB’s President/Chairman of the Board
 Authorized Petitioner-Spouses to secure the loan and sign
any/all documents that may be required by PNB
2.PNB approved NSB’s request. The P8M loan was broken down into a
Revolving Credit Line of P7.7M and an Unadvised Line of P 300K.
 Revolving Credit Line: a line of credit where the customer
pays a commitment fee to a financial institution to borrow
money, and is then allowed to use the funds when needed.
Usually used for operating purposes and the amount
drawn can fluctuate each month depending on the
customer's current cash flow needs.
 Unadvised Line: a line of credit approved by bank. Until
some specific event happens unadvised line of credit is not
disclosed to the borrower. When the event happens line of
credit is informed to the customer. Usually it is a request
for funding from the borrower.
BANKING CASE DIGESTS  ACCM 

3.NSB’s loan was secured by a mortgage on 10 REP and PN. NSB also SUPREME COURT RULING
signed the Credit Agreement relating to the Revolving Credit Line and 1. YES. NSB’S LOAN ACCOUNT WAS BLOATED WITH INTERESTS,
Unadvised Line PENALTIES, AND OTHER CHARGES
4.NSB failed to comply with its obligations under the PN.
5.Eduardo Dee wrote PNB for a request of a 90-day extension for the FIRST: PROMISSORY NOTES
payment of interests and the restructuring of its loan for another term. NSB’s accessory duty to pay interests on the loan DID NOT give PNB
NSB then tendered a P1M payment to PNB through 3 checks. unrestrained freedom to charge any rate other than that agreed upon.
6.PNB’s bank manager wrote to Dee informing him that NSB’s No interest shall be due unless expressly stipulated in writing. It would
proposal
be the zenith of farcicality to specify and agree upon rates that could
was acceptable provided   that the total payment should be different.
be subsequently upgraded at whim by only one party.
7.Dee wrote back the PNB branch manager reiterating his proposals
for
The unilateral determination and imposition of increased rates is
the settlement of NSB’s past due loan (P7M).
violative of the principle of mutuality of contracts. These one-sided
8.2 post-dated checks were dishonored.
impositions do not have the force of law between the parties
9.PNB wrote to Dee informing him to make good the dishonored checks
because such impositions are not based on the parties’ essential
or else consequences will arise.
equality.
10.NSB failed to pay their loan obligations within the timeframe given
them. Thus, foreclosure proceedings were instituted resulting in the
Although Escalation Clauses are valid, giving PNB unbridled right to
public auction of the mortgaged REP (P10.3M).
adjust the interest independently and upwardly would completely take
11.Later on, PNB informed NSB that the proceeds of the sale were
away NSB’s right to assent to an important modification in their
insufficient to cover its total claim of P12.5M and thus demanded that
agreement and negate the element of mutuality in their contracts.
NSB to pay the deficiencies.
12.NSB refused.
While the Usury Law ceiling on interest rates was lifted by CBC
Circular No. 905, nothing in said Circular grants lenders carte blanche
RTC: Dismissed PNB’s petition: No cause of action.
authority to raise interest rates to levels which would either enslave their
borrowers or lead to a hemorrhaging of their assets.
CA: Reversed RTC ruling:
 NSB did not avail of PNB’s Debt Relief Package; Increased in PNB’s
Assent to the increase cannot be implied from their request for loan
loan rates were authorized by law and the Monetary Board; and
restructuring or their lack of response to the statements of accounts
 The increases were binding upon NSB having been freely and sent by PNB. Such request does not indicate any agreement to an
voluntarily entered into via the signing of the Credit Agreements. interest increase. No one receiving a proposal to modify a loan
contract (specifically interest rate) is obliged to answer such proposal.
ISSUES
1. WON the loan accounts are bloated Aside from sending demand letters, PNB did not at all exercise its
2. WON the extrajudicial foreclosure and subsequent claim for option to enforce collection nor did it renew or extend the account. No
deficiency are valid and proper complaint for collection was filed with the courts. Instead a Petition for
Sale of Mortgaged Properties was filed with the Provincial Sheriff.
BANKING CASE DIGESTS
PNB did not follow the stipulation in the PN providing for conversion of
the portion that remained unpaid after 730 days from date of original
release – into a medium-term loan (subject to the applicable rate to be
applied from the dates of original release). Also, PNB did not supply
the interest rate to be charged on medium-term loans granted by
automatic conversion. Because of this, the legal rate of 12% per
annum on loans and forbearance of money shall be used as
prescribed by CB Circular 416.
SECOND: CREDIT AGREEMENTS
The First Credit Agreement cannot be given weight because it was not
signed by PNB through its branch manager, it was objected to by
NSB, and there was no attached annex that contained the General
Stipulations.
The Second Credit Agreement provided the prime rate plus applicable
spread on the Revolving Credit Line. However, it did not state any
provision on its increase or decrease. It was not the agreement but the
Credit Line that expired. Thus, the T&C continued to apply even if
drawdowns could no longer be made. (Gradual accessing of credit
funds; Drawdown happens when the loan monies are taken up by the
borrower. The loan will appear in the balance sheet as a liability. The
loan period will determine whether this is a long; medium or short term
liability.) The rate of 21.5% agreed upon in the 2nd PN continued to
apply until its conversion into a medium-term loan.
The Third Credit Agreement provided for the same rate of interest as
that in the 2nd Agreement but since there was no mention in the
3rd Agreement of any stipulation in increases or decreases in interest,
there would be no basis in for imposing amounts higher than the prime
rate plus spread.
THIRD: DISCLOSURE STATEMENTS
The DS furnished by PNB set forth the interest rates as those
respectively indicated in the PN. However, the three DS as well as the
two Credit Agreements did not provide for any increase in the
specified interest rates. Thus, none would now be permitted.
 ACCM 
UNJUSTIFIED PENALTIES OR INCREASES
When the borrower is not clearly informed of the DS prior to the
consummation of the availment or drawdown, the lender will have NO
RIGHT to collect upon such charge or increase thereof, even if
stipulated in the Notes. Since Notes are considered as contracts of
adhesion, not invalid per se, any apparent ambiguity in the loan
contract shall be construed against the one who caused it.
OTHER CHARGES UNWARRANTED
Since the penalty rate has again been unilaterally increased by PNB to
36% without its consent, the liquidated damages intended as penalty
shall be equitably reduced by the Court to zilch for being iniquitous
and unconscionable.
DEBT RELIEF PACKAGE NOT AVAILED OF
NSB failed to establish satisfactorily that it had been seriously and
directly affected by the economic slowdown in the peripheral areas of
the then US military bases. For short-term loans, there is still a need to
conduct a thorough review of the borrower’s repayment possibilities.
NSB has neither shown enough margin of equity based on the latest
loan value of hard collaterals to be eligible for the DRB. The branch
manager’s recommendation to restructure the loan not exceeding P8M
is not final but subject to the approval of PNB’s Branches Department
Credit Committee to be reported to its BOD.
Under the GBL, banks shall grant loans and other credit
accommodations only in amounts and for periods of time essential to
the effective completion of operations to be financed consistent with
safe and sound banking practices.
2. EXTRAJUDICIAL FORECLOSURE IS VALID BUT DEFICIENCY
CLAIMS ARE EXCESSIVE
■ The Bid Price is Adequate: It may be lower than the property’s
fair market value. A low bid price will make it subsequently
easier for the owner to redeem their properties.
BANKING CASE DIGESTS
As no redemption was exercised within a year after the date of
registration of the Certificate of Sale with the RD, petitioner-spouses
shall lose all their rights to the properties.
■ No Deficiency Claim Receivable: After the foreclosure and sale of
the mortgaged properties, the REM is extinguished. Although
the mortgagors, being third persons, are not liable for any
deficiency in the absence of a contrary stipulation, the action
for recovery of such amount – being clearly sureties to the
principal obligation – may still be directed against them.
However, PNB may only impose the 19.5% and 21.5% on the
respective availments and further reduced to the 12% legal
rate revision upon automatic conversion into medium-term
loans.
The payments made by NSB were pro-rated. On the basis of rates,
the deficiency claim receivable amounting to P2.1M vanishes. Instead,
there is an overpayment by more than P3.6M as shown in the
Schedules.
Under solutio indebiti  , there is no deficiency receivable in favor of PNB
but rather an excess claim or surplus payable by PNB to petitioner-
spouses.
GC DALTON INDUSTRIES, INC. vs. EQUITABLE PCI BANK
G.R. No. 171169. August 24, 2009.
 Respondent Equitable PCI Bank (EPB) extended a P30-million
credit line to Camden Industries, Inc. (CII) to allow CII to avail
several loans and purchase trust receipts.
 CII executed “hold- out agreement” in favor of EPB authorizing
it
to deduct from its savings account any amounts due.
 Petitioner GC Dalton Industries, Inc executed a third party
mortgage of its real properties in Quezon City and Malolos,
Bulacan as security for CII loans.
 CII did not pay its obligations despite respondent’s demands.
 ACCM 
 EPB filed a petition for extrajudicial foreclosure of GC Dalton’s
Bulacan properties. It was sold in public auction, EPB being
the highest bidder.
 On September 13, 2004, EPB filed an affidavit of consolidation
of ownership in Register of Deeds in Bulacan pursuant to
Section 47 of General Banking Laws. The TCTs were
cancelled and new ones were issued to EPB and f iled ex
parte motion for the issuance of a writ of possession.
 CII filed an action for specific performance with damages
against EPB, asserting that it had already paid its obligation in
full.
 RTC Pasig rendered decision in favor of GC Dalton, finding that
EPB had already deducted P 108,563,388.06 from CII saving’s
account, ordering EPB to return the overpayment amounting to P
94,136,902.40 and return the mortgage property to GC Dalton.
 Meanwhile, petitioner opposed the writ of possession granted
by RTC Bulacan. However, it was denied. The RTC Bulacan
granted the writ of possession in favor of EPB.
Issue: Whether or not GC Dalton has still legal interest over the
properties foreclosed by EPB
Ruling: No. The mortgagor loses all legal interest over the foreclosed
property after the expiration of the redemption period.21 Under
Section 47 of the General Banking Law, if the mortgagor is a juridical
person, it can exercise the right to redeem the foreclosed property
until, but not after, the registration of the certificate of foreclosure sale
within three months after foreclosure, whichever is earlier. Thereafter,
such mortgagor loses its right of redemption. Because consolidation of
title becomes a right upon the expiration of the redemption period,
respondent became the owner of the foreclosed properties.24
Therefore, when petitioner opposed the ex parte motion for the
issuance of the writ of possession on January 10, 2005 in the Bulacan
RTC, it no longer had any legal interest in the Bulacan properties.
Nevertheless, even if the ownership of the Bulacan properties had
already been consolidated in the name of respondent, petitioner still
had, and could have availed of, the remedy provided in Section 8 of
Act 3135. It could have filed a petition to annul
BANKING CASE DIGESTS
the August 3, 2004 auction sale and to cancel the December 19, 2005
writ of possession, within 30 days after respondent was given
possession. But it did not. Thus, inasmuch as the 30-day period to
avail of the said remedy had already lapsed, petitioner could no longer
assail the validity of the August 3, 2004 sale.
GOLDENWAY MERCHANDISING CORP. vs. EQUITABLE PCI BANK
Facts: Goldenway instituted a Real Estate Mortgage in favor of
EqPCIB over its real properties in Bulacan. The mortgage secured the
Php2million loan granted by the bank to Goldenway. As the latter
failed to settle its loan obligation, the bank extrajudicially foreclosed
the mortgage on December 2000 and the properties were sold to the
bank. A certificate of Sale was then issued on January 26, 2001 and it
was registered on February 16, 2001.
On March 8, 2001, Goldenway offered to redeem the properties by
tendering a check (Php 3.5M) but was told that redemption is no longer
possible because the certificate of sale had already been registered.
Goldenway filed a complaint for specific performance and damages
against the bank, asserting that it is the 1-yr period under Act 3135
which should apply and not the shorter redemption period under RA
8791. The bank, in its counterclaim, pointed out that Goldenway had all
the time to redeem from the time it received the demand letter and
notice of sale, and even assuming that the redemption was timely
made, it was not for the amount as required by law.
Trial Court:
 dismissed complaint and counterclaim; attempt to redeem was
already late;
 no valid redemption made because Atty. Abat-Vera of
Goldenway was not properly authorized by Goldenway BOD
CA: Sec. 47/ RA 8791 reveals the intention to shorten the period of
redemption for juridical persons and that the foreclosure of the
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mortgaged properties in this case when RA 8791 was already in effect
clearly falls within the purview of said provision.
Issue: WON Goldenway can redeem the properties
Ruling: No. Goldenway cannot redeem the properties.
In this case, the parties provided in their contract that upon
Goldenway’s
default, the entire loan obligation becoming due, the bank may
immediately foreclose the mortgage judicially in accordance with
the Rules of Court   or extrajudicially in accordance with Act 3135.
Sec. 47 of the General Banking Law amended Act 3135. Under the
new law, an exception is thus made in the case of juridical persons
which are allowed to exercise the right of redemption only until but not
after the registration of the certificate of foreclosure sale, and in no
case more than three months after foreclosure, whichever comes first.
Goldenway’s contention that Sec. 47 violates the  constitutional
proscription against impairment of the obligation of contract has no
basis. The purpose of the non-impairment clause of the Constitution is
to safeguard the integrity of contracts against unwarranted
interference by the State. Sec. 47 did not divest juridical persons of
the right to redeem their foreclosed properties but only modified the
time for the exercise of such right by reducing the 1-yr period originally
provided in Act 3135.
The legislature clearly intended to shorten the period of redemption for
 juridical persons whose properties were foreclosed and sold in
accordance with Act 3135. The difference in the treatment of juridical
persons and natural persons was based on the nature of the
properties foreclosed- whether these are used as residence for which
the more liberal 1-yr redemption period is retained, or used for
industrial or commercial purposes, in which case a shorter term is
deemed necessary to reduce the period of uncertainty in the
ownership of property and enable mortgagee banks to dispose sooner
of these acquired assets.
BANKING CASE DIGESTS
to restrain the bank officers from intermeddling with the property of
the bank in any way.
With respondent bank having been already placed under receivership, its
officers, inclusive of its acting president, Vicente G. Puyat, were no
longer authorized to transact business in connection with the bank’s
assets and
 property. Clearly then, the “exclusive option to purchase” granted by
Vicente G. Puyat was and still is unenforceable against Manila Bank.
2. No. As provided under Sec.30 on NCBA, the receiver
appointed by the Central Bank to take charge of the properties
of a bank placed under receivership only had authority to
administer the same for the benefit of its creditors. Granting or
approving an “exclusive option to purchase” is not an act of
administration, but an act of strict ownership, involving, as it
does, the disposition of property of the bank. Not being an
act of administration, the so-called “approval” by Atty. Renan
Santos amounts to no approval at all, a bank receiver not
being authorized to do so on his own.
In all, respondent bank’s receiver was without any power to
approve or ratify the “exclusive option to purchase ” granted by the late
Vicente G. Puyat, who, in the first place, was himself bereft of any
authority, to bind the bank under such exclusive option. Manila
Bank may not thus be compelled to sell the land and building in
question to petitioner Abacus under the terms of the latter’s
“exclusive option to purchase.”
BANCO FILIPINO SAVINGS AND MORTGAGE BANK VS. THE MONETARY
BOARD; G.R. No. 70054 December 11, 1991
Facts:
1.Banco Filipino Savings and Mortgage Bank commenced operations
on July 9, 1964. It has 89 operating branches with more than 3 million
depositors. It has an approved emergency advance of P119.7 million.
 ACCM 
2.The Monetary Board placed Banco Filipino Savings and Mortgage
Bank under conservatorship of Basilio Estanislao. He was later
replaced by Gilberto Teodoro as conservator on August 10, 1984.
Gilberto Teodoro submitted a report dated January 8, 1985 to
respondent The Monetary Board on the conservatorship of the bank.
3.Subsequently, another report dated January 23, 1985 was submitted
to the Monetary Board by Ramon Tiaoqui regarding the major findings
of examination on the financial condition of Banco Filipino Savings and
Mortgage Bank as of July 31, 1984, finding the bank one of insolvency
and illiquidity and provides sufficient justification for forbidding the bank
from engaging in banking.
4.The Monetary Board ordered the closure of Banco Filipino and
designated Mrs. Carlota P. Valenzuela as Receiver.
5.Banco Filipino filed a complaint with the RTC to set aside the action
of the Monetary Board placing the bank under receivership and filed
with the SC the petition for certiorari and mandamus.
6.Carlota Valenzuela, as Receiver and Arnulfo Aurellano and Ramon
Tiaoqui as Deputy Receivers of Banco Filipino submitted their report
on the receivership of the bank to the Monetary Board, finding that the
condition of the banking institution continues to be one of insolvency,
i.e., its realizable assets are insufficient to meet all its liabilities and
that the bank cannot resume business with safety to its depositors,
other creditors and the general public, and recommends the liquidation
of the bank.
7.Banco Filipino filed a motion before the SC praying that a restraining
order or a writ of preliminary injunction be issued to enjoin respondents
from causing the dismantling of Banco Filipino signs in its main office
and 89 branches. The SC ordered the issuance of the temporary
restraining order.
8.The SC directed the Monetary Board and Central Bank hold hearings at
which the Banco Filipino should be heard.
BANKING CASE DIGESTS
PRINCIPAL Issue: Whether or not the Central Bank and the Monetary
Board acted arbitrarily and in bad faith in finding and thereafter
concluding that Banco Filipino Savings and Mortgage Bank is insolvent,
and in ordering its closure
Ruling: YES, they acted arbitrarily in concluding that BFS is insolvent.
The closure and receivership of Banco Filipino Savings and Mortgage
Bank, which was ordered by the Monetary Board on is null and void.
The Monetary Board may order the cessation of operations of a bank
in the Philippines and place it under receivership upon a finding of
insolvency or when its continuance in business would involve probable
loss its depositors or creditors. If the Monetary Board shall determine
and confirm within 60 days that the bank is insolvent or can no longer
resume business with safety to its depositors, creditors and the
general public, it shall, if public interest will be served, order its
liquidation.
Under Section 29 of the Central Bank Act  , 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:
1. 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;
2. it shall be disclosed in the examination that the condition of
the bank is one of insolvency, or that its continuance in
business would involve probable loss to its depositors or
creditors;
3. the department head concerned shall inform the
Monetary Board in writing, of the facts; and
4. the Monetary Board shall find the statements of the
department head to be true.
Clearly, Tiaoqui based his report on an incomplete examination of the
bank and outrightly concluded that the latter's financial status was one
of insolvency or illiquidity. He arrived at the conclusion: that as of July
31,
 ACCM 
1984, total capital accounts consisting of paid-in capital and other
capital accounts such as surplus, surplus reserves and undivided
profits aggregated ₱351.8 million; that capital adjustments, however,
wiped out the capital accounts and placed the bank with a capital
deficiency amounting to ₱334.956 million; 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
₱600.4 million pursuant to the examination. The valuation which was
set up or deducted against the capital accounts of the bank in arriving
at the latter's financial condition. Tiaoqui admits the insufficiency and
unreliability of the findings of the examiner as to the setting up of
recommended valuation reserves from the assets of the bank.
The examination contemplated in Sec. 29 of the CB Act as a
mandatory requirement was not completely and fully complied with.
Despite the existence of the partial list of findings in the examination of
the bank, there were still highly significant items to be weighed and
determined such as the matter of valuation reserves, before these can
be considered in the financial condition of the bank. It would be a
drastic move to conclude prematurely that a bank is insolvent if the
basis for such conclusion is lacking and insufficient, especially if doubt
exists as to whether such bases or findings faithfully represent the real
financial status of the bank.
In arriving at the computation of realizable assets of Banco Filipino,
respondents used its books which undoubtedly are not reflective of the
actual cash or fair market value of its assets which is not the proper
procedure contemplated in Sec. 29 of the Central Bank Act.
The receivership of Banco Filipino, indicates that total liabilities of
₱4,540.84 million does not exceed the total assets of ₱4,981.53 million.
Likewise, the consolidated statement of condition of the bank prepared
by the Central Bank Authorized Deputy Receiver Artemio Cruz shows that
total assets amounting to ₱4,981,522,996.22 even exceeds total liabilities
amounting to ₱4,540,836,834.15.
BANKING CASE DIGESTS
Based on the foregoing, there was no valid reason for the
Valenzuela, Aurellano and Tiaoqui report to finally recommend the
liquidation of Banco Filipino instead of its rehabilitation.
ONG VS. COURT OF APPEALS; G.R. No. 112830. February 1, 1996.
 All claims against the insolvent bank should be filed in the
liquidation proceeding. The judicial liquidation is intended to prevent
multiplicity of actions against the insolvent bank. It is a pragmatic
arrangement 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.
Facts: Jerry Ong filed with the Regional Trial Court of Quezon City a
petition for the surrender of 2 TCTs against Rural Bank of Olongapo,
Inc. (RBO), represented by its liquidator Guillermo G. Reyes, Jr. and
deputy liquidator Abel Allanigue. The complaint stemed from 2 parcels
of land which was duly mortgaged by RBO in favor of petitioner to
guarantee the payment of Omnibus Finance, Inc., which is likewise
now undergoing liquidation proceedings of its money market
obligations to petitioner. Omnibus Finance, Inc., not having
seasonably settled its obligations to petitioner, the latter proceeded to
effect the extrajudicial foreclosure of said mortgages and the city
sheriff of Tagaytay City issued a certificate of sale in favor of petitioner
which were duly registered.
Respondents failed to seasonably redeem said parcels of land, for
which reason, petitioner has executed an affidavit of consolidation of
ownership which has not been submitted to the Registry of Deeds of
Tagaytay City, in view of the fact that possession of the aforesaid titles
or owner’s duplicate certificates of title remains with the RBO. To date,
petitioner has not been able to effect the registration of said parcels of
land in his name in view of the persistent refusal of respondents to
surrender RBO’s copies of its owner’s certificates of title for the parcels
of land covered by the two TCTs.
 ACCM 
Respondent RBO filed a motion to dismiss on the ground of res judicata
and that it was undergoing liquidation and it is the liquidation court
which has exclusive jurisdiction to take cognizance of petitioner’s
claim. Trial court denied the motion to dismiss because it found that
the causes of action in the previous and present cases were different
although it was silent on the jurisdictional issue. RBO filed a motion for
reconsideration but was similarly rejected. The Court of Appeals,
through a certiorari filed by RBO, annulled the challenged orders of the
trial court which sustained the jurisdiction of the trial court and denied
reconsideration thereof. Moreover, the trial judge was ordered to
dismiss the civil case without prejudice to the right of petitioner to file
his claim in the liquidation proceedings pending before the Regional
Trial Court of Olongapo City.
Issue: Whether or not the civil case against RBO may proceed
independently from the liquidation proceedings.
Held: Section 29, par. 3, of R.A. 265 as amended by P. D. 1827
provides
 –If the Monetary Board shall determine and confirm within (sixty days)
that the bank x x x is insolvent or cannot resume business with safety
to its depositors, creditors and the general public, it shall, if the public
interest requires, order its liquidation, indicate the manner of its
liquidation and approve a liquidation plan. The Central Bank shall, by
the Solicitor General, file a petition in the Court of First Instance
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 adjudicate disputed claims
against the bank x x x and enforce 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
All claims against the insolvent bank should be filed in the liquidation
proceeding. The judicial liquidation is intended to prevent multiplicity of
actions against the insolvent bank. It is a pragmatic arrangement
designed to establish due process and orderliness in the liquidation of
the bank, to obviate the proliferation of litigations and to avoid
injustice and
BANKING CASE DIGESTS
 The BSP issued the Certificate issued the Certificate of
Authority extending the corporate life of RBFI for another 50
years and it also approved the change of its name to Euro
Credit Incorporated, as well as the increase in the number of
the members of the BOD, from 5 to 11
 The Integrated Supervision Department II (ISD II) of the BSP
conducted a general examination on ECBI pursuant to Sec.
28 of the NCBA, and the members of the BOD were
immediately apprised of the findings
 In April 2008, the examiners from the Dept. of Loans and
Credit if the BSP cancelled the rediscounting line of ECBI,
which prompted Vivas to appeal the cancellation to the BSP
 The Monetary Board issued Resolution No. 1255 placing
ECBI under Prompt Corrective Action due to serious
findings and supervisory concerns so Vivas moved for
reconsideration
 The ISD II had invited the BOD of ECBI to discuss
matters on several instances but the meeting never
materialized
 The MB eventually imposed fine on ECBI and referred the
matter to the Office of Special Investigation for the filing of
appropriate legal action
 The OSI filed with the DOJ a complaint for Estafa
through Falsification of Commercial Documents a
 The MB then issued Resolution No. 276 placing ECBI
under receivership
ISSUE: WON ECBI’s placement under receivership was unwarranted
and
improper
RULING: No. Vivas Availed of the Wrong Remedy
To begin with, Vivas availed of the wrong remedy. The MB issued
Resolution No. 276, dated March 4, 2010, in the exercise of its power
under R.A. No. 7653.
 Under Section 30 thereof, any act of the MB placing a bank
under conservatorship, receivership or liquidation may not
be restrained or set aside except on a petition for certiorari.
 ACCM 
The Petition Should Have Been Filed in the CA
 MB is a quasi-judicial agency be filed in the Court of Appeals.
If it involves the acts or omissions of a quasi-judicial agency,
unless otherwise provided by law or the Rules, the petition
shall be filed in and cognizable only by the Court of Appeals.
Close Now, Hear Later
At any rate, if circumstances warrant it, the MB may forbid a bank from
doing business and place it under receivership without prior notice and
hearing.
Section 30 of R.A. No. 7653 provides, viz:
 Sec. 30. Proceedings in Receivership and Liquidation. –
Whenever, upon report of the head of the supervising or
examining department, the Monetary Board finds that a bank
or quasi-bank:
a. is unable to pay its liabilities as they become due in
the ordinary course of business: Provided, that this
shall not include inability to pay caused by
extraordinary demands induced by financial panic in
the banking community;
b. has insufficient realizable assets, as determined by
the Bangko Sentral, to meet its liabilities; or
c. cannot continue in business without involving
probable losses to its depositors or creditors; or
d. has willfully violated a cease and desist order under
Section 37 that has become final, involving acts or
transactions which amount to fraud or a dissipation
of the assets of the institution; in which cases, the
Monetary Board may summarily and without need for
prior hearing forbid the institution from doing
business in the Philippines and designate the
Philippine Deposit Insurance Corporation as receiver
of the banking institution.
The Court, in several cases, upheld the power of the MB to take over
banks without need for prior hearing. It is not necessary inasmuch as
the
BANKING CASE DIGESTS  ACCM 

law entrusts to the MB the appreciation and determination of whether

any or all of the statutory grounds for the closure and receivership of
the erring bank are present. The MB, under R.A. No. 7653, has been
invested with more power of closure and placement of a bank under
receivership for insolvency or illiquidity, or because the bank’s
continuance in business would probably result in the loss to depositors
or creditors.

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.