1. BUSUEGO v.

CA

ROMEO P. BUSUEGO, CATALINO F. BANEZ and RENATO F. LIM, petitioners,

vs. THE HONORABLE COURT OF APPEALS and THE MONETARY BOARD OF THE
CENTRAL BANK OF THE PHILIPPINES, respondents. [G.R. No. 95326. March 11, 1999]

Supervision and examination of banks.

Capital structure of banks and quasi-banks.

Facts:

The 16th regular examination of the books and records of the PAL Employees Savings
and Loan Association, Inc. ("PESALA") was conducted by a team of CB. Following the said
examination, several anomalies and irregularities committed by the herein petitioners;
PESALA's directors and officers, were uncovered, among which are:

1. Questionable investment in a multi-million peso real estate project (Pesalaville);

2. Conflict of interest in the conduct of business;
3. Unwarranted declaration and payment of dividends;
4. Commission of unsound and unsafe business practices.

Later the Central Bank ("CB") Supervision and Examination Section ("SES") Department
Director sent a letter to the Board of Directors of PESALA inviting them to a conference to
discuss subject findings noted in the said 16th regular examination, but petitioners did not
attend such conference.

Petitioner then (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, which was forthwith made by the Board.[2]

PESALA's Board of Directors sent to the CB SES Department Director a letter

concerning the 16th regular examination of PESALA's records.

The Monetary Board adopted and issued MB Resolution No. 805 wherein one of the
pertinent provisions is that: “5. To include the names of Mr. Catalino Banez, Mr. Romeo
Busuego and Mr. Renato Lim in the Sector's watchlist to prevent them from holding responsible
positions in any institution under Central Bank supervision; ×××.”

Petitioners opine that with the issuance of Monetary Board Resolution No. 805, “they are
now barred from being elected or designated as officers again of PESALA, 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.” According to them, 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.”

Petitioners filed a Petition for Injunction with Prayer for the Immediate Issuance of a
Temporary Restraining Order[4] before the Regional Trial Court. Said petition was granted.
 The trial court ruled that “WHEREFORE, judgment is hereby rendered declaring
Monetary Board Resolution No. 805 as void and inexistent. The writ of preliminary prohibitory
injunctions issued ××× is deemed permanent. Costs against respondent.”

The Monetary Board appeal with the CA. CA ruled that “WHEREFORE, the decision
appealed from is hereby reversed and another one entered dismissing the petition for
injunction.”

Dissatisfied with the said Decision of the Court of Appeals, petitioners have come to this
Court via the present petition for review on certiorari.

Issue: Whether or not the Monetary Board Resolution No. 805 is valid.

Ruling: YES.

Petitioners' contentions are untenable. It must be remembered that the Central Bank of
the. Philippines (now Bangko Sentral ng Pilipinas), through the Monetary Board, is the
government agency charged with the responsibility of administering the monetary,
banking and credit system of the country[19] and is granted the power of supervision and
examination over banks and non-bank financial institutions performing quasi-banking
functions, of which savings and loan associations, such as PESALA, form part of[20].

The special law governing savings and loan association is Republic Act No. 3779, as
amended, otherwise known as the “Savings and Loan Association Act.” Said law authorizes
the Monetary Board to conduct regular yearly examinations of the books and records of savings
and loan associations, to suspend, a savings and loan association for violation of law, to decide
any controversy over the obligations and duties of directors and officers, and to take remedial
measures, among others. Section 28 of Rep. Act No. 3779, reads:

“SEC. 28. Supervisory powers over savings and loan associations. - In addition to whatever
powers have been conferred by the foregoing provisions, the Monetary Board shall have the
power to exercise the following:
×××
(c) To conduct at least once every year, and whenever- necessary, any inspection,
examination or investigation of the books and records, business affairs, administration, 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. Whenever an inspection, examination or investigation is conducted under this
grant of power, the person authorized to do so may seize books and records and keep them
under his custody after giving proper receipts therefor; may make any marking or notation on
any paper, record, document or book to show that it has been examined and verified and may
padlock or seal shelves, vaults, safes, receptacles or similar containers and prohibit the opening
thereof without first securing authority therefor, for as long as may be necessary in connection
with the investigation or examination being conducted. 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, officer or employee of any association under the supervision of the Monetary
Board;
×××
(d) After proper notice and hearing, to suspend a savings and loan association for violation
of law, for unsafe and unsound practices or for reason of insolvency. The Monetary Board may
likewise, 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, orders, instructions, rules
and regulations promulgated by the Monetary Board or in a manner substantially prejudicial to
the interest of the government, depositors or creditor, take over the management of the savings
and loan association after due hearing, until a new board of directors and officers are elected
and qualified without prejudice to the prosecution of the persons responsible for such
violations. The management by the Monetary Board shall be without expense to the savings
and loan association, except such as is actually necessary for its operation, 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, depositors or creditors;
×××
(f) To decide, after appropriate notice and hearings any controversy as to the rights or
obligations of the savings and loan association, its directors, officers, stockholders and
members under its charter, and, by order, to enforce the same;
×××
(l) To conduct such investigations, take such remedial measures, 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, and impose upon associations, whether stock or non-
stock their directors and/or officers administrative sanctions under Sections 34-A or 34-B of
Republic Act Two Hundred sixty-five, as amended.”

From the foregoing, it is gleanable that the Central Bank, through the Monetary
Board, is empowered to conduct investigations and examine the records of savings and loan
associations. If any irregularity is discovered in the process, the Monetary Board may impose
appropriate sanctions, such as suspending the offender from holding office or from being
employed with the Central Bank, or placing the names of the offenders in a watchlist.
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.”
As may be gathered from the records, 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, no notice or, hearing was necessary. Until such time that the
petitioners have proved their innocence, they may be preventively suspended from holding
office so as not to influence the conduct of investigation, and to prevent the commission of
further irregularities.

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. Petitioners can still practice their profession or engage in business as
long as these are not within the ambit of Monetary Board Resolution No. 805.

All things studiedly considered, the court upholds the validity of Monetary Board
Resolution No. 805 and affirms the decision of the respondent court.

3. ANA MARIA A. KORUGA v. TEODORO O. ARCENAS, (GR No. 168332), 2009-06-19

Facts:
Koruga is a minority stockholder of Banco Filipino. On August 20, 2003, she filed a complaint
before the Makati RTC. Koruga's complaint alleged:
10. 1 Violation of Sections 31 to 34 of the Corporation Code ("Code") which prohibit self-
dealing and conflicts of interest of directors and officers
10.2 Right of a stockholder to inspect the records of a corporation (including financial
statements) under Sections 74 and 75 of the Code
10.3 Receivership and Creation of a Management Committee

On September 12, 2003, Arcenas, et al. filed their Answer raising, among others, the trial court's
lack of jurisdiction to take cognizance of the case. They also filed a Manifestation and Motion
seeking the dismissal of the case. In an Order dated October 18, 2004, the trial court denied the
Manifestation and Motion. On February 9, 2005, the CA issued a 60-day TRO enjoining Judge
Marella from conducting further proceedings in the case.

On February 22, 2005, the RTC issued a Notice of Pre-trial[9] setting the case for pre-trial on
June 2 and 9, 2005. Arcenas, et al. filed a Manifestation and Motion[10] before the CA,
reiterating their application for a writ of... preliminary injunction. Thus, on April 18, 2005, the CA
issued the assailed Resolution, which reads in part:
(C)onsidering that the Temporary Restraining Order issued by this Court on February 9, 2005
expired on April 10, 2005, it is necessary that a writ of preliminary injunction be issued in order
not to render ineffectual whatever final resolution this Court may render... in this case, after the
petitioners shall have posted a bond

Dissatisfied, Koruga filed a Petition for Certiorari under Rule 65 of the Rules of Court. Koruga
alleged that the CA effectively gave due course to Arcenas, et al.'s petition when it issued a writ
of preliminary injunction without factual or legal basis.

Meanwhile, on March 13, 2006, this Court issued a Resolution granting the prayer for a TRO
and enjoining the Presiding Judge of Makati RTC, Branch 138, from proceeding with the hearing
of the case upon the filing by Arcenas, et al. of a P50,000.00 bond.

In their Petition, Arcenas, et al. asked the Court to set aside the Decision of the CA in CA-G.R.
SP No. 88422, which denied their petition, having found no grave abuse of discretion on the part
of the Makati RTC. The CA said that the RTC Orders were interlocutory in nature and, thus,
may be assailed by certiorari or prohibition only when it is shown that the court acted without or
in excess of jurisdiction or with grave abuse of discretion.

Issues:
Which body has jurisdiction over the Koruga Complaint, the RTC or the BSP?

Ruling:

We hold that it is the BSP that has jurisdiction over the case. The acts complained of pertain to
the conduct of Banco Filipino's banking business. The law vests in the BSP the supervision over
operations and activities of banks.

Specifically, the BSP's supervisory and regulatory powers include (1) the conduct of
examination to determine compliance with laws and regulations if the circumstances so warrant
as determined by the Monetary Board; (2) Overseeing to ascertain that laws and Regulations
are complied with; (3) Regular investigation which shall not be oftener than once a year from the
last date of examination to determine whether an institution is conducting its business on a safe
or sound basis; (4) Inquiring into the solvency and liquidity of the institution.

Correlatively, the General Banking Law of 2000 specifically deals with loans contracted by bank
directors or officers, thus:
SECTION 36. Restriction on Bank Exposure to Directors, Officers,
Stockholders and Their Related Interests.
The Monetary Board may regulate the amount of loans, credit accommodations
and guarantees that may be extended, directly or indirectly, by a bank to its
directors, officers, stockholders and their related Interests, as well as investments
of such bank in enterprises owned or... controlled by said directors, officers,
stockholders and their related interests.

Furthermore, the authority to determine whether a bank is conducting business in

an unsafe or unsound manner is also vested in the Monetary Board.
Finally, the New Central Bank Act grants the Monetary Board the power to
impose administrative sanctions on the erring bank.

Section 37.

The Monetary Board may, at its discretion, impose upon... any bank or quasi-
bank, their directors and/or officers... or any commission of irregularities, and/or
conducting business in an unsafe or unsound manner as may be determined by
the Monetary Board.

Koruga's invocation of the provisions of the Corporation Code is misplaced. In an earlier case
with similar antecedents, we ruled that:
The Corporation Code, however, is a general law applying to all types of
corporations, while the New Central Bank Act regulates specifically banks and
other financial institutions, including the dissolution and liquidation thereof. As
between a general and special... law, the latter shall prevail - generalia
specialibus non derogant.

Consequently, it is not the Interim Rules of Procedure on Intra-Corporate Controversies, or Rule

59 of the Rules of Civil Procedure on Receivership, that would apply to this case. Instead,
Sections 29 and 30 of the New Central Bank Act should be followed
Section 30.
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.

Actions of the Monetary Board taken under this section or under Section 29 of
this Act shall be final and executory, and may not be restrained or set aside by
the court except on petition for certiorari on the ground that the action taken was
in excess of jurisdiction or with such grave abuse of discretion as to amount to
lack or excess of jurisdiction.

The appointment of a receiver under this section shall be vested exclusively with
the Monetary Board.
 On the strength of these provisions, it is the Monetary Board that exercises
exclusive jurisdiction over proceedings for receivership of banks.

From the foregoing disquisition, there is no doubt that the RTC has no jurisdiction to hear and
decide a suit that seeks to place Banco Filipino under receivership. The court's jurisdiction could
only have been invoked after the Monetary Board had taken action on the matter and only 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 (Rule 65).

4. REYES v. RBSMI

ALBERTO V. REYES, WILFREDO B. DOMO-ONG and HERMINIO C.

PRINCIPIO, petitioners, vs. RURAL BANK OF SAN MIGUEL (BULACAN), INC.,
represented by HILARIO P. SORIANO, President and Principal Stockholder, respondent.
J. Tinga:

Facts:

Petitioners Deputy Governor Alberto Reyes, Director Wilfredo B. Domo-Ong, and Herminio
Principo (Reyes, Et. Al.) are officials of Bangko Sentral.

In 1996, RBSMI underwent periodic examination by the BSP. The examination team headed by
Principio noted 20 serious exceptions/violations and deficiencies of RBSMI.

Through Resolution No. 96, the Monetary Board required RBSMI to submit within 15 days a
written explanation with respect to the findings of the examiner. It also directed the Department
of Rural Banks (DRB), to verify, monitor and report to the Deputy Governor, Supervision and
Examination Sector (SES) on the findings/exceptions noted, until the same shall have been
corrected.
Soriano alleged that sometime in March 1997, Reyes started urging him to consider selling the
bank. He specified that on May 28, 1997, Reyes introduced him through telephone to Mr.
Exequiel Villacorta, President and Chief Executive Officer of the TA Bank. They agreed to meet
on the following day. In his Affidavit, Villacorta confirmed that he and Soriano indeed met but the
meeting never got past the exploratory stage since he (Villacorta) immediately expressed
disinterest because Soriano wanted to sell all his equity shares while he was merely
contemplating a possible buy-in.
Soriano further alleged that when the talks with Villacorta failed, Reyes asked him whether he
wanted to meet another buyer, to which he answered in the affirmative. Thereafter, Reyes
introduced him by telephone to Benjamin P. Castillo of the Export and Industry Bank (EIB),
whom he met on June 26, 1997. No negotiation took place because Soriano desired a total sale
while EIB merely desired a joint venture arrangement or a buy-in to allow EIB to gain control of
RBSMI.
In a letter dated May 19, 1999, addressed to then BSP Governor Singson, RBSMI charged the
petitioners with violation of Republic Act No. 6713 (Code of Conduct and Ethical Standards for
Public Officials and Employees). The Monetary Board (MB) of the BSP created an Ad
Hoc Committee to investigate the matter.
Reyes, et. al. filed this petition for appeal wherein CA found them administratively liable for the
violating the standards of professionalism as prescribed by the Code of Conduct and Ethical
Standards for Public officials and Employees (RA 6713) in that they used the distressed
financial condition of respondent Rural Bank of San Miguel as the subject of a case study in one
of the Bangko Sentral ng Pilipinas seminars and did the brokering of the Rural Bank of San
Miguel, Inc. (RBSMI).

The company had been noted many serious violations/ exceptions by every periodic
examinations conducted by the BSP.Reyes started urging him to consider selling the bank to
which, they met up 2 bank owners as prospective buyer. No negotiation took place as conflict of
ideas between all contracting parties

Held:
There was no evidence of showing that either Reyes or Domo-Ong distributed or used the
materials nor negligence by making liable to certain extent. The court equates brokering to with
unprofessionalism. But Reyes did not commit any acts that constitute “brokering”. For a broker
is a negotiator or one who is engaged for others on a commission, negotiating contracts relative
to property with the custody of which he has no concern.e performance of certain acts for
meonetray consideration or compensation. All Reyes did was to introduce the two bank owners
and nothing more. The administrative complaint is dismissed and exonerated all the petitioners.

6. FIRST PHILIPPINE INTERNATIONAL BANK v. RIVERA

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. [G.R. No. 115849 January 24, 1996]

Appointment of Conservator.

Facts:
In the course of its banking operations, the defendant Producer Bank of the Philippines
acquired six parcels of land. 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.

Said plaintiffs, upon the suggestion of BYME Investments 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 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.

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. 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, under Section 28-A of
Republic Act No. 265 (otherwise known as the Central Bank Act) as follows:
 Whenever, on the basis of a report submitted by the appropriate supervising or
examining department, 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, the Monetary Board may appoint a conservator to 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 of the bank or non-bank
financial intermediary performing quasi-banking functions, any provision of law to the contrary
notwithstanding, and such other powers as the Monetary Board shall deem necessary.

In the first place, this issue of the Conservators 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. As already stated earlier, issues not raised
and/or ventilated in the trial court, let alone in the Court of Appeals, cannot be raised for the first
time on appeal as it would be offensive to the basic rules of fair play, justice and due
process.[43]

In the second place, there is absolutely no evidence that the Conservator, at the
time the contract was perfected, actually repudiated or overruled said contract of sale. The
Banks acting conservator at the time, Rodolfo Romey, never objected to the sale of the property
to Demetria and Janolo. What petitioners are really referring to is the letter of Conservator
Encarnacion, who took over from Romey after the sale was perfected on September 30, 1987
(Annex V, 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.

In the third place, while admittedly, the Central Bank law gives vast and far-
reaching powers to the conservator of a bank, 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. Such powers, enormous and extensive as they are,
cannot extend to the post-facto repudiation of perfected transactions, otherwise they would
infringe against the non-impairment clause of the Constitution.[44] If the legislature itself cannot
revoke an existing valid contract, how can it delegate such non-existent powers to the
conservator under Section 28-A of said law?

Obviously, therefore, Section 28-A merely gives the conservator power to revoke
contracts that are, under existing law, deemed to be defective - i.e., void, voidable,
unenforceable or rescissible. Hence, the conservator merely takes the place of a banks board of
directors. 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. Ineluctably, his power
is not unilateral and he cannot simply repudiate valid obligations of the Bank. His authority
would be only to bring court actions to assail such contracts - as he has already done so in the
instant case. A contrary understanding of the law would simply not be permitted by the
Constitution. Neither by common sense. To rule otherwise would be to enable a failing bank to
become solvent, at the expense of third parties, 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, yielding nothing to perfected contractual rights nor vested interests of the third
parties who had dealt with the Bank.