PDIC vs. vs. Philippine Countryside Rural Bank, Inc.

SUPREME COURT REPORTS ANNOTATED VOLUME 640 1/19/22, 9:01 PM
Note.·The Deed of Donation which is one of mortis

causa, not having followed the formalities of a will, it is
void and transmitted no right to petitionersÊ mother. (Aluad
vs. Aluad, 569 SCRA 697 [2008])
··o0o··
G.R. No. 176438. January 24, 2011.*
PHILIPPINE DEPOSIT INSURANCE CORPORATION

(PDIC), petitioner, vs. PHILIPPINE COUNTRYSIDE
RURAL BANK, INC., RURAL BANK OF CARMEN
(CEBU), INC., BANK OF EAST ASIA (MINGLANILLA,
CEBU), INC., and PILIPINO RURAL BANK (CEBU),
INC., respondents.
Remedial Law; Actions; Forum Shopping; Definition of Forum

Shopping; There is forum shopping where the elements of litis
pendentia are present.·In the recent case of Sameer Oversees
Placement Agency, Inc. v. Mildred R. Santos, 595 SCRA 67 (2009),
the Court discussed the matter of forum shopping: Forum shopping
is defined as an act of a party, against whom an adverse judgment
or order has been rendered in one forum, of seeking and possibly
getting a favorable opinion in another forum, other than by appeal
or special civil action for certiorari. It may also be the institution of
two or more actions or proceedings grounded on the same cause on
the supposition that one or the other court would make a favorable
disposition. There is forum shopping where the elements of litis
pendentia are present, namely: (a) there is identity of parties, or at
least such parties as represent the same interest in both actions; (b)
there is identity of rights asserted and relief prayed for, the relief
being founded on the same set of facts; and (c) the identity of the
two preceding particulars is such that any judgment rendered in
the pending case, regardless of which party is successful, would
amount to res judicata in the other. It is expressly prohibited by this
https://www.central.com.ph/sfsreader/session/0000017e72757f39787c34d2000d00d40059004a/p/ARK067/?username=Guest Page 1 of 37
Court because it trifles with and abuses court processes, degrades

the
_______________
* SECOND DIVISION.
323
VOL. 640, JANUARY 24, 2011 323
Philippine Deposit Insurance Corporation (PDIC) vs. Philippine

Countryside Rural Bank, Inc.
administration of justice, and congests court dockets. A willful and

deliberate violation of the rule against forum shopping is a ground
for summary dismissal of the case, and may also constitute direct
contempt.
Same; Same; Same; There is a marked difference between the
reliefs sought under an action for declaratory relief and an action for
injunction.·There is a marked difference between the reliefs
sought under an action for declaratory relief and an action for
injunction. While an action for declaratory relief seeks a declaration
of rights or duties, or the determination of any question or validity
arising under a statute, executive order or regulation, ordinance, or
any other governmental regulation, or under a deed, will, contract
or other written instrument, under which his rights are affected,
and before breach or violation, an action for injunction ultimately
seeks to enjoin or to compel a party to perform certain acts.
Constitutional Law; Due Process; The essence of procedural due
process is found in the reasonable opportunity to be heard and
submit oneÊs evidence in support of his defense.·The essence of
procedural due process is found in the reasonable opportunity to be
heard and submit oneÊs evidence in support of his defense. The
Court finds that procedural due process was observed by the CA-
Cebu. The parties were afforded equal opportunity to present their
arguments. In the absence of any indication to the contrary, the CA-
Cebu must be accorded the presumption of regularity in the
performance of their functions. However, as discussed herein, the
matter of whether it erred in its conclusion and issuance of the
TRO, preliminary injunction and final injunction is another matter

altogether.
Banks and Banking; Bangko Sentral ng Pilipinas (BSP);
Monetary Board; Court is of the view that the Monetary Board
approval is not required for Philippine Deposit Insurance
Corporation (PDIC) to conduct an investigation on the Banks.·
After an evaluation of the respective positions of the parties, the
Court is of the view that the Monetary Board approval is not
required for PDIC to conduct an investigation on the Banks.
Same; Same; Same; Philippine Deposit Insurance Corporation
(PDIC); The primary purpose is to act as deposit insurer, as a co-
regulator of banks, and as receiver and liquidator of closed banks.·
The PDIC was created by R.A. No. 3591 on June 22, 1963 as an
324
324 SUPREME COURT REPORTS ANNOTATED

insurer of deposits in all banks entitled to the benefits of insurance

under the PDIC Charter to promote and safeguard the interests of
the depositing public by way of providing permanent and continuing
insurance coverage of all insured deposits. It is a government
instrumentality that operates under the Department of Finance. Its
primary purpose is to act as deposit insurer, as a co-regulator of
banks, and as receiver and liquidator of closed banks.
Same; Same; Same; Same; Process of Examination and
Investigation; The process of examination covers a wider scope than
that of investigation; Investigation does not involve a general
evaluation of the status of a bank; An examination entails a review
of essentially all the functions and facets of a bank and its operation.
·From the above-cited provisions, it is clear that the process of
examination covers a wider scope than that of investigation.
Examination involves an evaluation of the current status of a bank
and determines its compliance with the set standards regarding
solvency, liquidity, asset valuation, operations, systems,
management, and compliance with banking laws, rules and
regulation4es. Investigation, on the other hand, is conducted based
on specific findings of certain acts or omissions which are subject of
a complaint or a Final Report of Examination. Clearly, investigation

does not involve a general evaluation of the status of a bank. An
investigation zeroes in on specific acts and omissions uncovered via
an examination, or which are cited in a complaint. An examination
entails a review of essentially all the functions and facets of a bank
and its operation. It necessitates poring through voluminous
documents, and requires a detailed evaluation thereof. Such a
process then involves an intrusion into a bankÊs records.
Same; Same; Same; Same; Same; An examination of banks
requires the prior consent of the Monetary Board, whereas an
investigation based on an examination report, does not.·While in a
literary sense, the two terms may be used interchangeably, under
the PDIC Charter, examination and investigation refer to two
different processes. To reiterate, an examination of banks requires
the prior consent of the Monetary Board, whereas an investigation
based on an examination report, does not.
PETITION for review on certiorari of the decision and

resolution of the Court of Appeals-Cebu.
325
VOL. 640, JANUARY 24, 2011 325

Philippine Deposit Insurance Corporation (PDIC) vs.
Philippine Countryside Rural Bank, Inc.
The facts are stated in the opinion of the Court.

Office of the Government Corporate Counsel for
petitioner.
Pizarras & Associates Law Offices for respondents.
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45
of the Rules of Court filed by the Philippine Deposit
Insurance Corporation (PDIC) assailing the September 18,
2006 Decision of the Court of Appeals-Cebu (CA-Cebu),
which granted the petition for injunction filed by
respondents Philippine Countryside Rural Bank, Inc.
(PCRBI), Rural Bank of Carmen (Cebu), Inc. (RBCI), Bank
of East Asia (Minglanilla, Cebu), Inc. (BEAI), and Pilipino
Rural Bank (Cebu), Inc. (PRBI), all collectively referred to
as „Banks.‰ The dispositive portion of the CA-Cebu decision
reads:
„WHEREFORE, in view of all the foregoing premises, the

petition for injunction is hereby GRANTED. The respondent PDIC
is restrained from further conducting investigations or examination
on petitioners-banks without the requisite approval from the
Monetary Board.
SO ORDERED.‰1
In a resolution dated January 25, 2007, the CA-Cebu

denied petitionerÊs motion for reconsideration for „lack of
merit.‰2
The Facts
On March 9, 2005, the Board of Directors of the PDIC

(PDIC Board) adopted Resolution No. 2005-03-0323
approving
_______________
1 Rollo, p. 107. Penned by Justice Pampio A. Abarintos with Justice

Agustin S. Dizon and Justice Priscilla Baltazar-Padilla, concurring.
2 Id., at p. 111.
3 Id., at p. 113.
326

the conduct of an investigation, in accordance with

Section 9(b-1) of Republic Act (R.A.) No. 3591, as amended,
on the basis of the Reports of Examination of the Bangko
Sentral ng Pilipinas (BSP) on ten (10) banks, four (4) of
which are respondents in this petition for review. The said
resolution also created a Special Investigation Team to
conduct the said investigation, with the authority to
administer oaths, to examine, take and preserve testimony
of any person relating to the subject of the investigation,
and to examine pertinent bank records.
On May 25, 2005, the PDIC Board adopted another
resolution, Resolution No. 2005-05-056,4 approving the

conduct of an investigation on PCRBI based on a
Complaint-Affidavit filed by a corporate depositor, the
Philippine School of Entrepreneurship and Management
(PSEMI) through its president, Jacinto L. Jamero.
On June 3, 2005, in accordance with the two PDIC
Board resolutions, then PDIC President and Chief
Executive Officer Ricardo M. Tan issued the Notice of
Investigation5 to the President or The Highest Ranking
Officer of PCRBI.
On June 7, 2005, the PDIC Investigation Team
personally served the Notice of Investigation on PCRBI at
its Head Office in Pajo, Lapu-Lapu City.6According to
PDIC, in the course of its investigation, PCRBI was found
to have granted loans to certain individuals, which were
settled by way of dacion of properties. These properties,
however, had already been previously foreclosed and
consolidated under the names of PRBI, BEAI and RBCI.7
_______________
4 Id., at p. 115.
5 Id., at p. 116.
6 Id.
7 Id., at p. 25.
327
VOL. 640, JANUARY 24, 2011 327

On June 15, 2005, PDIC issued similar notices of

investigation to PRBI8 and BEAI.9
The notices stated that the investigation was to be
conducted pursuant to Section 9 (b-1) of the PDIC Charter
and upon authority of PDIC Board Resolution No. 2005-03-
032 authorizing the twelve (12) named representatives of
PDIC to conduct the investigation.10
The investigation was sought because the Banks were
found to be among the ten (10) banks collectively known as
„Legacy Banks.‰ The Reports of General and Special
Examinations of the BSP as of June 30, 2004, disclosed,

among others, that the Legacy Banks were commonly
owned and/or controlled by Legacy Plans Inc. (now Legacy
Consolidated Plans, Inc.), and Celso Gancayco delos
Angles, Jr. and his family.11
The notice of investigation was served on PRBI the next
day, June 16, 2005.12
On June 25, 2005, a separate notice of investigation13
was served on RBCI. The latter provided the PDIC
Investigation Team with certified copies of the loan
documents they had requested, until its president received
an order directing him not to allow the investigation.14
Subsequently, PRBI and BEAI refused entry to their
bank premises and access to their records and documents
by the PDIC Investigation Team, upon advice of their
respective counsels.15
_______________
8 Id., at p. 120.
9 Id., at p. 126.
10 Id., at pp. 120-121, 126-127, 132-133.
11 Id., at p. 20.
12 Id., at p. 27.
13 Id., at p. 132.
14 Id., at p. 29.
15 Id., at pp. 29-30.
328

On June 16 and 17, 2005, Atty. Victoria G. Noel (Atty.

Noel) of the Tiongson & Antenor Cruz Law Office sent
letters to the PDIC16 informing it of her legal advice to
PCRBI and BEAI not to submit to PDIC investigation on
the ground that its investigatory power pursuant to Section
9(b-1) of R.A. No. 3591, as amended (An Act Establishing
The Philippine Deposit Insurance Corporation, Defining Its
Powers And Duties And For Other Purposes), cannot be
differentiated from the examination powers accorded to

PDIC under Section 8, paragraph 8 of the same law, under
which, prior approval from the Monetary Board is required.
On June 17, 2005, PDIC General Counsel Romeo M.
Mendoza sent a reply to Atty. Noel stating that „PDICÊs
investigation power, as distinguished from the examination
power of the PDIC under Section 8 of the same law, does
not need prior approval of the Monetary Board.‰17 PDIC
then urged PRBI and BEAI „not to impede the conduct of
PDICÊs investigation‰ as the same „constitutes a violation
of the PDIC Charter for which PRBI and BEAI may be held
criminally and/or administratively liable.‰18
On June 27 and 28, 2005, the Banks, through counsel,
sought further clarification from PDIC on its source of
authority to conduct the impending investigations and
requested that PDIC refrain from proceeding with the
investigations.19
Simultaneously, the Banks wrote to the Monetary Board
requesting a clarification on the parameters of PDICÊs
power of investigation/examination over the Banks and for
an issuance of a directive to PDIC not to pursue the
investigations pending the requested clarification.20
_______________
16 Id., at pp. 134-135.

17 Id., at pp. 31, 136-141.
18 Id., at pp. 136-141.
19 Id., at pp. 142-159.
20 Id., at pp. 160-161.
329
VOL. 640, JANUARY 24, 2011 329

On June 28, 2005, PRBI and BEAI again received letters

from PDIC, dated June 24, 2005, which appeared to be
final demands on them to allow its investigation.21 PRBI
and BEAI replied that letters of clarification had been sent
to PDIC and the Monetary Board.22 Pending action on such
requests, PDIC was requested to refrain from proceeding

with the investigation.23
Notwithstanding, on July 11, 2005, the Banks received a
letter, dated July 8, 2005, from the PDIC General Counsel
reiterating its position that prior Monetary Board approval
was not a pre-requisite to PDICÊs exercise of its
investigative power.24
Not in conformity, on July 28, 2005, the Banks filed a
Petition for Declaratory Relief with a Prayer for the
Issuance of a TRO and/or Writ of Preliminary Injunction
(RTC Petition) before the Regional Trial Court of Makati
(RTC-Makati) which was docketed as Civil Case No. 05-
697.25
In the RTC Petition, the Banks prayed for a judgment
interpreting Section 9(b-1) of the PDIC Charter, as
amended, to require prior Monetary Board approval before
PDIC could exercise its investigation/examination power
over the Banks.26
PDIC filed a motion to dismiss alleging that the RTC
had no jurisdiction over the said petition since a breach
had already been committed by the Banks when they
received the notices of investigation, and because PDIC
need not secure prior Monetary Board approval since
„examination‰ and „investigation‰ are two different
terms.27
_______________
21 Id., at p. 579.
22 Id.
23 Id.
24 Id.
25 Id., at p. 572.
26 Id., at p. 579.
27 Id., at pp. 579-580.
330

Later, the Banks withdrew their application for a

temporary restraining order (TRO) reasoning that lower
courts cannot issue injunctions against PDIC. Thus, the
Banks instituted a petition for injunction with application
for TRO and/or Preliminary Injunction (CA-Manila
petition) before the Court of Appeals-Manila (CA-Manila).
The case was docketed as CA-G.R. SP No. 91038.28
Even before the CA-Manila could rule on the application
for a TRO and/or writ of preliminary injunction, the RTC-
Makati dismissed the petition on the ground that there
already existed a breach of law that isolated the case from
the jurisdiction of the trial court.29
The Banks filed a motion for reconsideration but it was
denied by the RTC for lack of merit.30 On February 10,
2006, the Banks filed a notice of appeal31 which they later
withdrew on February 28, 2006.32
In view of the dismissal of the RTC-Makati petition, the
CA-Manila dismissed the petition for injunction for being
moot and academic. In its Decision, dated February 1,
2006,33 the CA-Manila wrote:
„What remained for the petitioners to do was to litigate over the

breach or violation by ordinary action, as the circumstances ensuing
from the breach or violation warrant. The ordinary action may
either be in the same case, if the RTC permitted the conversion, in
which event the RTC may allow the parties to file such pleadings as
may be necessary or proper, pursuant to Sec. 5, Rule 63; or the
petitioners may file another action in the proper court (e.g.
including the Court of Appeals, should injunction be among the
reliefs to be
_______________
28 Id., at p. 219.
29 Id., at p. 260.
30 Id., at p. 337.
31 Id., at p. 338.
32 Id., at p. 340.
33 Id., at p. 433.
331
VOL. 640, JANUARY 24, 2011 331

sought) upon some cause of action that has arisen from the breach
or violation.‰34
Thereafter, on March 14, 2006, the Banks filed their

Petition for Injunction with Prayer for Preliminary
Injunction35 (CA-Cebu Petition) with the CA-Cebu (CA-
Cebu).
On March 15, 2006, the CA-Cebu issued a resolution
granting the BankÊs application for a TRO. This enjoined
the PDIC, its representatives or agents or any other
persons or agency assisting them or acting for and in their
behalf from conducting examinations/investigations on the
BanksÊ head and branch offices without securing the
requisite approval from the Monetary Board of BSP.36
During the pendency of the CA-Cebu petition, PDIC
filed with this Court a Petition for Certiorari, Prohibition
and Mandamus with Prayer for Issuance of Temporary
Restraining Order and/or Writ of Preliminary Injunction
under Rule 65 docketed as G.R. No. 173370.37 It alleged
that the CA-Cebu committed grave abuse of discretion
amounting to lack or excess of jurisdiction in taking
cognizance of the BanksÊ petition, and in issuing a TRO and
a writ of preliminary injunction.38
On July 31, 2006, this Court issued a resolution
dismissing the petition for certiorari in G.R. No. 173370.
The Resolution reads:
„Considering the allegations, issues and arguments adduced in

the petition for certiorari, prohibition and mandamus with prayer
for preliminary injunction and/or restraining order dated 19 July
2006, the Court resolves to DISMISS the petition for failure to
sufficiently show that the questioned resolution of the Court of
Appeals is
_______________
34 Id., at pp. 430-431.

35 Id., at p. 442.
36 Id., at p. 448.
37 Id.
38 Id., at p. 583.
332

tainted with grave abuse of discretion. Moreover, the petition failed

to conform with Rule 65 and other related provisions of the 1997
Rules of Civil Procedure, as amended, governing petitions for
certiorari, prohibition and mandamus filed with the Supreme
Court, since petitioner failed to submit a verified statement of
material date of receipt of the assailed resolution dated 16 May
2006 in accordance with Section 4, Rule 65 in relation to the second
paragraph of Section 3, Rule 46. In any event, the petition is
premature since no motion for reconsideration of the questioned
resolution of the Court of Appeals was filed prior to the availment of
this special civil action and there are no sufficient allegations to
bring the case within the recognized exceptions to this rule.‰39
On September 18, 2006, after both parties had

submitted their respective memoranda, the CA-Cebu
rendered a decision granting the writ of preliminary
injuction,40 pertinent portions of which read:
„[A]fter undergoing a series of amendments, the controlling law

with respect to PDICÊs power to conduct examination of banks is·
prior approval of the Monetary Board is a condition sine qua non for
PDIC to exercise its power of examination. To rule otherwise would
disregard the amendatory law of the PDICÊs charter.
The Court is not also swayed by the contention of respondent
that what it seeks to conduct is an investigation and not an
examination of petitionersÊ transactions, hence prior approval of the
Monetary Board is a mere surplusage.
The ordinary definition of the words „examination‰ and
„investigation‰ would lead one to conclude that both pertain to the
same thing and there seems to be no fine line differentiating one
from the other. BlackÊs Law Dictionary defines the word
„investigate‰ as „to examine and inquire into with care and
accuracy; to find out by careful inquisition; examination and the
word „examination‰ as an investigation. In CollinÊs Dictionary of
Banking and Finance, the word „investigation‰ is defined as an
„examination to find out what is wrong.‰
_______________
39 Id., at p. 152.
40 Id., at p. 94.
33
VOL. 640, JANUARY 24, 2011 33

In the case of Anti-Graft League of the Philippines, Inc. vs. Hon.

Ortega, et al.,41 the Supreme Court using BallentineÊs Law
Dictionary defines an „investigation‰ as an inquiry, judicial or
otherwise, for the discovery or collection of facts concerning the
matter or matters involved. Such common definitions would show
that there is really nothing to distinguish between these two (2)
terms as to support the PDIC view differentiating Section 9 (b-1)
from paragraph 8, Section 8 of the PDIC Charter. In the realm of
the PDIC rules, specifically under Section 3 of PDIC Regulatory
Issuance No. 2205-0242 „investigation‰ is defined as: Investigation
shall refer to fact-finding examination, study, inquiry, for
determining whether the allegations in a complaint or findings in a
final report of examination may properly be the subject of an
administrative, criminal or civil action.
From the foregoing definition alone, it can be easily deduced that
investigation and examination are synonymous terms. Simply
stated, investigation encompasses a fact-finding examination. Thus,
it is inconsistent with the rules if respondent PDIC be (sic) allowed
to conduct an investigation without the approval of the Monetary
Board.
Moreover, the Court sees that the rationale of the law in
requiring a (sic) prior approval from the Monetary Board whenever
an examination or in this case an investigation needs to be
conducted by the PDIC is obviously to ensure that there is no
overlapping of efforts, duplication of functions and more
importantly to provide a check and balance to the otherwise
unrestricted power of respondent PDIC to conduct investigations on
banks insured by it.
With the foregoing premises, this Court rules that a prior
approval from the Monetary Board is necessary before respondent
PDIC can proceed with its investigations on petitioners-banks.‰43
PDIC moved for reconsideration but it was denied in a

resolution dated January 25, 2007.44
Hence, this petition.
_______________
41 188 Phil. 55, 58; 99 SCRA 644, 648 (1980).

42 This should read „Regulatory Issuance No. 2005-02.‰
43 Rollo, pp. 102-104.
44 Id., at p. 110.
334

The Issues
I.
WHETHER RESPONDENT BANKS VIOLATED THE RULE
AGAINST FORUM SHOPPING WHEN THEY FILED THE
PETITION FOR INJUNCTION BEFORE THE COURT OF
APPEALS-CEBU.
II.
WHETHER THE PRONOUNCEMENT OF THE REGIONAL
TRIAL COURT OF MAKATI IN THE PETITION FOR
DECLARATORY RELIEF CONSTITUTES RES JUDICATA TO
THE PETITION FOR INJUNCTION IN THE COURT OF
APPEALS-CEBU.
III.
WHETHER PETITIONER WAS DEPRIVED OF ITS
OPPORTUNITY TO BE HEARD WHEN THE COURT OF
APPEALS-CEBU ISSUED THE WRIT OF INJUNCTION.
IV.
WHETHER THE ISSUES RAISED BY PETITIONERS ARE THE
SAME ISSUES RAISED IN G.R. NO. 173370 WHICH WAS
EARLIER DISMISSED BY THIS COURT.
V.
WHETHER THE COURT OF APPEALS ERRED IN FINDING
THAT PRIOR APPROVAL OF THE MONETARY BOARD OF THE

BANGKO SENTRAL NG PILIPINAS IS NECESSARY BEFORE
THE PDIC MAY CONDUCT AN INVESTIGATION OF
RESPONDENT BANKS.
The CourtÊs Ruling
I – Whether respondent banks vio-

lated the rule against forum shop-
ping when they filed the petition
for injunction before the Court of
Appeals-Cebu.
335
VOL. 640, JANUARY 24, 2011 335

II – Whether the pronouncement of

the Regional Trial Court of Makati
in the petition for declaratory
relief constitutes res judicata to
the petition for injunction in the
Court of Appeals-Cebu.
In the recent case of Sameer Oversees Placement Agency,
Inc. v. Mildred R. Santos,45 the Court discussed the matter
of forum shopping:
„Forum shopping is defined as an act of a party, against whom an

adverse judgment or order has been rendered in one forum, of
seeking and possibly getting a favorable opinion in another forum,
other than by appeal or special civil action for certiorari. It may also
be the institution of two or more actions or proceedings grounded on
the same cause on the supposition that one or the other court would
make a favorable disposition. There is forum shopping where the
elements of litis pendentia are present, namely: (a) there is identity
of parties, or at least such parties as represent the same interest in
both actions; (b) there is identity of rights asserted and relief prayed
for, the relief being founded on the same set of facts; and (c) the
identity of the two preceding particulars is such that any judgment
rendered in the pending case, regardless of which party is
successful, would amount to res judicata in the other. It is expressly

prohibited by this Court because it trifles with and abuses court
processes, degrades the administration of justice, and congests
court dockets. A willful and deliberate violation of the rule against
forum shopping is a ground for summary dismissal of the case, and
may also constitute direct contempt.‰46
_______________
45 G.R. No. 152579, August 4, 2009, 595 SCRA 67, 76-77.

46 Id., citing Philippine Islands Corporation for Tourism Development,
Inc. v. Victorias Milling Company, Inc., G.R. No. 167674, June 17, 2008,
554 SCRA 561, 569; Tegimenta Chemical Phils. v. Buensalida, G.R. No.
176466, June 17, 2008, 554 SCRA 670, 679; and Tapuz v. Del Rosario,
G.R. No. 182484, June 17, 2008, 554 SCRA 768, 782.
336

Juxtaposing the RTC-Makati, CA-Manila and CA-Cebu

petitions, what must be determined here, is whether the
elements of litis pendentia are present between and among
these petitions, i.e. whether (a) there is identity of parties,
or at least such parties as represent the same interest in
both actions; (b) there is identity of rights asserted and
relief prayed for, the relief being founded on the same set of
facts; and (c) the identity of the two preceding particulars is
such that any judgment rendered in the pending case,
regardless of which party is successful, would amount to
res judicata in the other.
The first element is clearly present as between the RTC-
Makati petition and the CA-Cebu petition. Both involved
the Banks on one hand, and the PDIC on the other.
The second and third elements of litis pendentia,
however, are patently wanting. The rights asserted and
reliefs prayed for were different, though founded on the
same set of facts. The RTC-Makati Petition was one for
declaratory relief while the CA-Manila Petition was one for
injunction with a prayer for preliminary injunction.
A petition for declaratory relief is filed by any person

interested under a deed, will, contract or other written
instrument, or whose rights are affected by a statute,
executive order or regulation, ordinance, or any other
governmental regulation, before breach or violation,
thereof, to determine any question of construction or
validity arising, and for a declaration of his rights or duties
thereunder.47
Injunction, on the other hand, is „a judicial writ, process
or proceeding whereby a party is directed either to do a
particular act, in which case it is called a mandatory
injunction, or to refrain from doing a particular act, in
which case it is called a prohibitory injunction. As a main
action, injunction seeks to
_______________
47 Rule 63, Section 1 Revised Rules of Civil Procedure.
337
VOL. 640, JANUARY 24, 2011 337

permanently enjoin the defendant through a final

injunction issued by the court and contained in the
judgment.‰48
Clearly, there is a marked difference between the reliefs
sought under an action for declaratory relief and an action
for injunction. While an action for declaratory relief seeks a
declaration of rights or duties, or the determination of any
question or validity arising under a statute, executive order
or regulation, ordinance, or any other governmental
regulation, or under a deed, will, contract or other written
instrument, under which his rights are affected, and before
breach or violation, an action for injunction ultimately
seeks to enjoin or to compel a party to perform certain acts.
Moreover, as stated in the RTC-Makati Decision,
because the Banks had already breached the provisions of
law on which declaratory judgment was being sought, it
was without jurisdiction to take cognizance of the same.
Any judgment rendered in the RTC-Makati petition would

not amount to res judicata in the CA-Manila Petition.
Thus, the RTC was correct in dismissing the case, having
been bereft of jurisdiction to take cognizance of the action
for declaratory judgment.
As between the CA-Manila and the CA-Cebu petitions,
the second and third elements of litis pendentia are absent.
The rights asserted and reliefs prayed for were different,
although founded on the same set of facts.
The CA-Manila Petition is a petition for injunction
wherein the Banks prayed that:
„1) Immediately upon filing of this Petition, a Writ of

Preliminary Injunction and/or Temporary Restraining Order be
issued commanding the respondent and all its officers, employees
and agents to cease and desist from proceeding with the
investigations sought to be conducted on the petitionersÊ head and
branch offices
_______________
48 PEZA v. Carantes, G.R. No. 181274, 23 June 2010, 621 SCRA 569.
338

while the Petition for Declaratory Relief before Branch 58 of the

Makati Regional Trial Court is pending.
2) After due proceedings, judgment be rendered declaring as
permanent the Writ of Preliminary Injunction and/or Temporary
Restraining Order prayed for above.
Other equitable reliefs are likewise prayed for.‰49
[Underscoring supplied]
The CA-Cebu Petition, on the other hand, is

denominated as a Petition for Injunction With Prayer for
Writ of Preliminary Injunction and/or Restraining Order.
The Banks prayed therein that:
„1) Upon filing of this Petition, a Writ of Preliminary Injunction
and/or Temporary Restraining Order be issued forthwith, enjoining

Respondent PDIC and all its officers, employees and agents to cease
and desist from conducting examinations/investigations on
Petitioner BanksÊ head and branch offices without securing the
requisite approval from the Monetary Board of the Bangko Sentral
ng Pilipinas, as required by Sec. 8, Paragraph 8 of the PDIC
Charter, as amended;
2) After due proceedings, judgment be rendered declaring as
permanent the Writ of Preliminary Injunction and/or Temporary
Restraining Order prayed for above.
Other equitable reliefs are likewise prayed for.‰50
As can be gleaned from the above-cited portions of the

CA-Manila and CA-Cebu petitions, the petitions seek
different reliefs.
Therefore, as between and among the RTC Makati, and
the CA-Manila and CA-Cebu petitions, there is no forum
shopping.
_______________
49 Rollo, p. 452.
50 Id., at p. 390.
339
VOL. 640, JANUARY 24, 2011 339

III – Whether petitioner was deprived

of its opportunity to be heard when
the Court of Appeals-Cebu issued the
writ of injunction.
PDIC alleges that the CA-Cebu, in issuing the TRO in
its March 15, 2006 Resolution, and subsequently, the
preliminary injunction in its May 16, 2006 Resolution,
violated the fundamental rule that courts should avoid
issuing injunctive relief which would in effect dispose of the
main case without trial.51 PDIC argues that a TRO is
intended only as a restraint until the propriety of granting
a temporary injunction can be determined, and it goes no
further than to preserve the status until that

determination.52 Moreover, its purpose is merely to
suspend proceedings until such time when there may be an
opportunity to inquire whether any injunction should be
granted, and it is not intended to operate as an injunction
pendente lite, and should not, in effect, determine the
issues involved before the parties can have their day in
court, or give an advantage to either party by proceeding in
the acquisition or alteration of the property the right to
which is disputed while the hands of the other party are
tied.53
On the other hand, the Banks claim that PDIC was
given every opportunity to present its arguments against
the issuance of the injunction.54 Its active participation in
the proceedings negates its assertion that it was denied
procedural due process in the issuance of the writ of
injunction.55 Citing Salonga v. Court of Appeals,56 the
Banks state that the essence
_______________
51 Id., at p. 669.
52 Id., at p. 671, citing Francisco, The Revised Rules of Court in the
Philippines, Vol. IV-A, 1971, p. 185.
53 Id., citing Government Service Insurance System v. Florendo, G.R.
No. 48603, September 29, 1989, 178 SCRA 76, 87.
54 Id., at p. 605.
55 Id., at p. 607.
56 336 Phil. 514, 528; 269 SCRA 534, 547 (1997).
340

of due process is the reasonable opportunity to be heard

and to submit evidence one may have in support of oneÊs
defense,57 and PDIC was able to do so.
On March 15, 2006, the CA-Cebu issued a resolution
granting their prayer for a 60-day TRO, and requiring
PDIC to file its comment.58 The latter thereafter filed its
Comment ad Cautelam dated March 30, 2006.59

[Underscoring ours]
On May 16, 2006, the CA-Cebu issued another
resolution, this time granting the prayer for a preliminary
injunction and requiring the parties to file their respective
memoranda. PDIC thereafter filed its memorandum dated
July 31, 2006.60
On September 18, 2006, the CA-Cebu promulgated its
Decision granting the Petition for Injunction.61 PDIC filed a
motion for reconsideration dated October 10, 2006,62 which
was subsequently denied.
The essence of procedural due process is found in the
reasonable opportunity to be heard and submit oneÊs
evidence in support of his defense.63 The Court finds that
procedural due process was observed by the CA-Cebu. The
parties were afforded equal opportunity to present their
arguments. In the absence of any indication to the contrary,
the CA-Cebu must be accorded the presumption of
regularity in the performance of their functions. However,
as discussed herein, the matter of whether it erred in its
conclusion and issuance of the TRO, preliminary injunction
and final injunction is another matter altogether.
_______________
57 Rollo, p. 605.
58 Id., at p. 606.
59 Id.
60 Id.
61 Id., at p. 94.
62 Id., at p. 606.
63 Republic of the Philippines v. Sandiganbayan, et al., 461 Phil. 598,
614; 416 SCRA 133, 145 (2003), citing Mutuc v. Court of Appeals, G.R.
No. 48108, September 26, 1990, 190 SCRA 43.
341
VOL. 640, JANUARY 24, 2011 341

IV – Whether the issues raised by
petitioner are the same issues raised

in G.R. No. 173370 which was earlier
dismissed by this Court.
In G.R. 173370, a petition for certiorari under Rule 65 of
the Rules of Court, PDIC alleged that the CA-Cebu
committed grave abuse of discretion amounting to lack or
excess of jurisdiction in taking cognizance of the BankÊs
petition, and in issuing a TRO and a writ of preliminary
injunction.64
In the case at bench, a petition for review under Rule 45,
PDICÊs core contention is that the CA-Cebu erred in finding
that prior approval of the Monetary Board of the BSP is
necessary before it may conduct an investigation of the
Banks.
Clearly then, the two petitions were of different nature
raising different issues.
G.R. 173370 challenged the CA-CebuÊs having taken
cognizance of the BankÊs petition and interlocutory orders
on the issuance of a TRO and a writ of preliminary
injunction. This case, however, strikes at the core of the
final decision on the merits of the CA-Cebu, and not merely
the interlocutory orders. While both G.R. 173370 and the
present case may have been anchored on the same set of
facts, that is, the refusal of the Banks to allow PDIC to
conduct an investigation without the prior consent of the
Monetary Board, the issues raised in the two petitions are
not identical. Moreover, the disposal of the first case does
not amount to res judicata in this case.
V – Whether the Court of Appeals-
Cebu erred in finding that prior ap-
proval of the Monetary Board of the
Bangko Sentral ng Pilipinas is nec-
essary before the PDIC may conduct
an investigation of respondent banks.
_______________
64 Rollo, p. 583.
342

PDIC is of the position that in order for it to exercise its

power of investigation, the law requires that:
„(a) The investigation is based on a complaint of a depositor or

any other government agency, or on the report of examination of
[the] Bangko Sentral ng Pilipinas (BSP) and/or PDIC; and,
(b) The complaint alleges, or the BSP and/or PDIC Report of
Examination contains adverse findings of, fraud, irregularities or
anomalies committed by the Bank and/or its directors, officers,
employees or agents; and,
(c) The investigation is upon the authority of the PDIC Board of
Directors.‰65
It argues that when it commenced its investigation on

the Banks, all of the aforementioned requirements were
met. PDIC stresses that its power of examination is
different from its power of investigation, in such that the
former requires prior approval of the Monetary Board
while the latter requires merely the approval of the PDIC
Board.66 It further claims that the power of examination
cannot be exercised within twelve (12) months from the last
examination conducted, whereas the power of investigation
is without limitation as to the frequency of its conduct. It
states that the purpose of the PDICÊs power of examination
is merely to look into the condition of the bank, whereas
the power of investigation aims to address fraud,
irregularities and anomalies based on complaints from
depositors and other government agencies or upon reports
of examinations conducted by the PDIC itself or by the
BSP.67
The Banks, on the other hand, are of the opinion that a
holistic reading of the PDIC charter shows that petitionerÊs
power of examination is synonymous with its power of
inves-
_______________
65 Id., at p. 673.
66 Id., at p. 82.
67 Id.
343
VOL. 640, JANUARY 24, 2011 343

tigation.68 They cite, as bases, the law dictionary

definitions, Section 8, Eighth paragraph69 and Section 9(b-
1)70 of the PDIC
_______________
68 Id., at pp. 474-479.

69 Section 8 of R.A. 3591 provides:
„POWERS AS A CORPORATE BODY
SECTION 8. The Corporation as a corporate body shall have the
power.·
xxx
Eighth – To conduct examination of banks with prior approval of the
Monetary Board: Provided, That no examination can be conducted within
twelve (12) months from the last examination date: Provided, however,
That the Corporation may, in coordination with the Bangko Sentral,
conduct a special examination as the Board of Directors, by an
affirmative vote of a majority of all its members, if there is a threatened
or impending closure of a bank; Provided, further, That, notwithstanding
the provisions of Republic Act No. 1405, as amended, Republic Act No.
6426, as amended, Republic Act No. 8791, and other laws, the
Corporation and/or the Bangko Sentral, may inquire into or examine
deposit accounts and all information related thereto in case there is a
finding of unsafe or unsound banking practice; Provided, That to avoid
overlapping of efforts, the examination shall maximize the efficient use of
the relevant reports, information, and findings of the Bangko Sentral,
which it shall make available to the Corporation; (As amended by R.A.
9302, 12 August 2004, R.A. 9576, 1 June 2009)
xxx‰
70 Section 9(b-1) of the PDIC Charter further provides that the Board
of Directors of the PDIC shall have the power to:
„POWERS AND RESPONSIBILITIES AND PROHIBITIONS
SECTION 9. xxx
(b) The Board of Directors shall appoint examiners who shall have
power, on behalf of the Corporation to examine any insured bank. Each
such examiner shall have the power to make a thorough examination of

all the affairs of the bank and in doing so, he shall have the power to
administer oaths, to examine and take and preserve the testimony of any
of the officers and agents thereof, and, to compel the presentation of
books, documents, papers, or records necessary in his judgment to
ascertain the facts relative to the condi
344

Charter, and Rule 1, Section 3(1) of PDIC Regulatory

Issuance No. 2005-02, which defines „investigation‰ as
follows:
(l) ÂInvestigationÊ shall refer to fact-finding examination, study or

inquiry for determining whether the allegations in a complaint or
findings in a final report of examination may properly be the
subject of an administrative, criminal or civil action.
The Banks further cite Section X658 of the Manual of

Regulations for Banks, which states:
„Sec. X658 · Examination by the BSP. The term ÂexaminationÊ

shall, henceforth, refer to an investigation of an institution under
the supervisory authority of the BSP to determine compliance with
laws and regulations. It shall include determination that the
institution is conducting its business on a safe and sound basis.
Examination requires full and comprehensive looking into the
operations and books of institutions, and shall include, but need not
be limited to the following:
a. Determination of the bankÊs solvency and liquidity
position;
_______________
tion of the bank; and shall make a full and detailed report of the condition of
the bank to the Corporation. The Board of Directors in like manner shall
appoint claim agents who shall have the power to investigate and examine all
claims for insured deposits and transferred deposits. Each claim agent shall
have the power to administer oaths and to examine under oath and take and
preserve testimony of any person relating to such claim. (As amended by E.O.
890, 08 April 1983; R.A. 7400, 13 April 1992)
(b-1) The investigators appointed by the Board of Directors shall have the
power on behalf of the Corporation to conduct investigations on frauds,
irregularities and anomalies committed in banks, based on reports of
examination conducted by the Corporation and Bangko Sentral ng Pilipinas or
complaints from depositors or from other government agency. Each such
investigator shall have the power to administer oaths, and to examine and take
and preserve the testimony of any person relating to the subject of
investigation. (As added by R.A. 9302, 12 August 2004)
xxx‰
345
VOL. 640, JANUARY 24, 2011 345

b. Evaluation of asset quality as well as determination of

sufficiency of valuation reserves on loans and other risk
assets;
c. Review of all aspects of bank operations;
d. Assessment of risk management system, including the
evaluation of the effectiveness of the bank managementÊs
oversight functions, policies, procedures, internal control and
audit;
e. Appraisal of overall management of the bank;
f. Review of compliance and applicable laws, rules and
regulations; and any other activities relevant to the above.‰
After an evaluation of the respective positions of the

parties, the Court is of the view that the Monetary Board
approval is not required for PDIC to conduct an
investigation on the Banks.
The disagreement stems from the interpretation of these
two key provisions of the PDIC Charter. The confusion can
be attributed to the fact that although „investigation‰ and
„examination‰ are two separate and distinct procedures
under the charter of the PDIC and the BSP, the words seem
to be used loosely and interchangeably.
It does not help that indeed these terms are very closely
related in a generic sense. However, while „examination‰
connotes a mere generic perusal or inspection,
„investigation‰ refers to a more intensive scrutiny for a

more specific fact-finding purpose. The latter term is also
usually associated with proceedings conducted prior to
criminal prosecution.
The PDIC was created by R.A. No. 3591 on June 22,
1963 as an insurer of deposits in all banks entitled to the
benefits of insurance under the PDIC Charter to promote
and safeguard the interests of the depositing public by way
of providing permanent and continuing insurance coverage
of all insured deposits. It is a government instrumentality
that operates under the Department of Finance. Its
primary purpose is
346

to act as deposit insurer, as a co-regulator of banks, and as

receiver and liquidator of closed banks.71
Section 1 of the PDIC Charter states:
„SECTION 1. There is hereby created a Philippine Deposit

Insurance Corporation hereinafter referred to as the „Corporation‰
which shall insure, as herein provided, the deposits of all banks
which are entitled to the benefits of insurance under this Act, and
which shall have the powers hereinafter granted.
The Corporation shall, as a basic policy, promote and safeguard
the interests of the depositing public by way of providing permanent
and continuing insurance coverage on all insured deposits.‰
Section 1 of R.A. No. 9576 further provides: An Act

Increasing the Maximum Deposit Insurance Coverage, and
in connection therewith, to Strengthen the Regulatory and
Administrative Authority, and Financial Capability of the
Philippine Deposit Insurance Corporation (PDIC),
amending for this purpose R.A. No. 3591, as Amended,
otherwise known as the PDIC Charter.
„SECTION 1. Statement of State Policy and Objectives.·It

is hereby declared to be the policy of the State to strengthen the
mandatory deposit insurance coverage system to generate,
preserve, maintain faith and confidence in the countryÊs banking

system, and protect it from illegal schemes and machinations.
Towards this end, the government must extend all means and
mechanisms necessary for the Philippine Deposit Insurance
Corporation to effectively fulfill its vital task of promoting and
safeguarding the interests of the depositing public by way of
providing permanent and continuing insurance coverage on all
insured deposits, and in helping develop a sound and stable
banking system at all times.‰
_______________
71 Republic Act No. 3591, as amended, Section 1.
347
VOL. 640, JANUARY 24, 2011 347

Under its charter, the PDIC is empowered to conduct

examination of banks with prior approval of the Monetary
Board:
„Eighth – To conduct examination of banks with prior approval of

the Monetary Board: Provided, That no examination can be
conducted within twelve (12) months from the last examination
date: Provided, however, That the Corporation may, in coordination
with the Bangko Sentral, conduct a special examination as the
Board of Directors, by an affirmative vote of a majority of all its
members, if there is a threatened or impending closure of a bank;
Provided, further, That, notwithstanding the provisions of Republic
Act No. 1405, as amended, Republic Act No. 6426, as amended,
Republic Act No. 8791, and other laws, the Corporation and/or the
Bangko Sentral, may inquire into or examine deposit accounts and
all information related thereto in case there is a finding of unsafe or
unsound banking practice; Provided, That to avoid overlapping of
efforts, the examination shall maximize the efficient use of the
relevant reports, information, and findings of the Bangko Sentral,
which it shall make available to the Corporation; (As amended by
R.A. 9302, 12 August 2004, R.A. 9576, 1 June 2009)

xxx.‰ [Underlining supplied]
Section 9(b-1) of the PDIC Charter further provides that

the PDIC Board shall have the power to:
POWERS AND RESPONSIBILITIES AND PROHIBITIONS

SECTION 9. xxx
(b) The Board of Directors shall appoint examiners who shall
have power, on behalf of the Corporation to examine any insured
bank. Each such examiner shall have the power to make a thorough
examination of all the affairs of the bank and in doing so, he shall
have the power to administer oaths, to examine and take and
preserve the testimony of any of the officers and agents thereof,
and, to compel the presentation of books, documents, papers, or
records necessary in his judgment to ascertain the facts relative to
the condition of the bank; and shall make a full and detailed report
of the condition of the bank to the Corporation. The Board of
Directors in like manner shall appoint claim agents who shall have
the power to
348

investigate and examine all claims for insured deposits and

transferred deposits. Each claim agent shall have the power to
administer oaths and to examine under oath and take and preserve
testimony of any person relating to such claim. (As amended by E.O.
890, 08 April 1983; R.A. 7400, 13 April 1992)
(b-1) The investigators appointed by the Board of Directors shall
have the power on behalf of the Corporation to conduct
investigations on frauds, irregularities and anomalies committed in
banks, based on reports of examination conducted by the
Corporation and Bangko Sentral ng Pilipinas or complaints from
depositors or from other government agency. Each such investigator
shall have the power to administer oaths, and to examine and take
and preserve the testimony of any person relating to the subject of
investigation. (As added by R.A. 9302, 12 August 2004)
xxx.‰ [Underscoring supplied]
As stated above, the charter empowers the PDIC to

conduct an investigation of a bank and to appoint
examiners who shall have the power to examine any
insured bank. Such investigators are authorized to conduct
investigations on frauds, irregularities and anomalies
committed in banks, based on an examination conducted by
the PDIC and the BSP or on complaints from depositors or
from other government agencies.
The distinction between the power to investigate and the
power to examine is emphasized by the existence of two
separate sets of rules governing the procedure in the
conduct of investigation and examination. Regulatory
Issuance (RI) No. 2005-02 or the PDIC Rules on Fact-
Finding Investigation of Fraud, Irregularities and
Anomalies Committed in Banks covers the procedural
requirements of the exercise of the PDICÊs power of
investigation. On the other hand, RI No. 2009-05 sets forth
the guidelines for the conduct of the power of examination.
The definitions provided under the two aforementioned
regulatory issuances elucidate on the distinction between
the power of examination and the power of investigation.
349
VOL. 640, JANUARY 24, 2011 349

Section 2 of RI No. 2005-02 states that its coverage shall

be applicable to „all fact-finding investigations on fraud,
irregularities and/or anomalies committed in banks that
are conducted by PDIC based on: [a] complaints from
depositors or other government agencies; and/or [b] final
reports of examinations of banks conducted by the Bangko
Sentral ng Pilipinas and/or PDIC.‰
The same issuance states that the Final Report of
Examination72 is one of the three pre-requisites to the
conduct of an investigation, in addition to the authorization
of the PDIC Board73
_______________
72 The „Final Report of Examination‰ is defined under Section 2, Rule

3 of RI No. 2005-02 as follows:
„SECTION 2. Final Report of Examination.
A Final Report of Examination shall refer to the document approved
by the PDIC Board or the Monetary Board containing a written
statement/narration of the findings and/or recommendations resulting
from an examination of a bank.
A Final Report of Examination of examiners of PDIC and/or BSP shall
contain the following:
If possible, full name(s) and address(es) of the bank and/or its
directors, officers, employees or agents or such description as would
identify who appear to be responsible for the commission of fraud,
irregularities and/or anomalies; and
A narration of the relevant and material facts which shows the
fraudulent, irregular or anomalous acts or omissions allegedly committed
in a bank.
In addition to the foregoing, copies of relevant documents, if available,
should accompany the Final Report of Examination.‰
73 Section 1, Rule 3 of RI No. 2005-02 states:
„SECTION 1. Authorization by the PDIC Board.
In all cases, a fact-finding investigation shall be conducted only upon
authorization by the PDIC Board acting on the recommendation
contained in a Final Report of Examination or based on any adverse
finding stated therein, and/or a complaint from a depositor or
government agency.
The Board shall likewise authorize the filing of criminal, civil, and/or
administrative charges, if warranted. For this purpose, said
350

and a complaint.74 Juxtaposing this provision with Section
_______________
authority is delegated to the President and Chief Executive Officer or the

General Counsel in accordance with existing PDIC policies.‰
74 Section 3, Rule 3 of RI No. 2005-02 provides for the definition of a
complaint as follows:
„SECTION 3. Complaint.
A complaint is a verified statement from a depositor alleging the
commission or omission of certain acts which constitute fraud,
irregularity or anomaly in a bank. The complaint shall follow the form
attached hereto as Annex „A‰ and/or contain the following:
Full name and address of the complainant;
Full name and address of the bank and/or the names or sufficient
description that will identify the directors, officers, employees and/or
agents thereof who appear to be responsible for the commission of fraud,
irregularities and/or anomalies;
A narration of the relevant and material facts which shows the
fraudulent, irregular or anomalous act or acts allegedly committed in a
bank;
A statement that the complainant has not commenced any action or
filed any claim involving the same issues with BSP or any court, tribunal
or quasi-judicial agency and, to the best of his/her knowledge, no such
other action or claim is pending therein; or a full disclosure of the status
of an action or claim involving the same issues filed with BSP or any
court, tribunal or quasi-judicial agency;
An undertaking that if the complainant should thereafter learn that a
similar action or claim has been filed or is pending, he/she shall report
the fact within five (5) days therefrom to PDIC;
If the incident complained of involves the deposit account of the
complainant with the subject bank, a statement authorizing PDIC to look
into the desposit account of the complainant for purposes of the
investigation; and
Documents and/or affidavits, if any, supporting the allegations in the
complaint.
In the absence of any one of the aforementioned requirements other
than paragraph [g], the complaint may be dismissed.
A report from a government agency of fraud/irregularity/anomaly
allegedly committed in a bank that is furnished PDIC,
351
VOL. 640, JANUARY 24, 2011 351

9(b-1) of the PDIC Charter, since an examination is

explicitly made the basis of a fact-finding examination,
then clearly examination and investigation are two

different proceedings. It would obviously defy logic to make
the result of an „investigation‰ the basis of the same
proceeding. Thus, RI No. 2005-02 defines an „investigation‰
as a „fact-finding examination, study or inquiry for
determining whether the allegations in a complaint or
findings in a final report of examination may properly be
the subject of an administrative, criminal or civil action.‰75
The Banks cite the dictionary definitions of
„examination‰ and „investigation‰ to justify their
conclusion that these terms refer to one and the same
proceeding. It is tempting to use these two terms
interchangeably, which practice may be perfectly justified
in a purely literary sense. Indeed, a reading of the PDIC
Charter shows that the two terms have been used
interchangeably at some point. However, based on the
provisions aforecited, the intention of the laws is clearly to
differentiate between the process of investigation and that
of examination.
In 2009, to clarify procedural matters, PDIC released RI
No. 2009-05 or the Rules and Regulations on Examination
of Banks. Section 2 thereof differentiated between the two
types of examination as follows:
„Section 2. Types of Examination
a. Regular Examination·An examination conducted
independently or jointly with the BSP. It requires the prior approval
of the PDIC Board of Directors and the Monetary Board (MB). It
may be conducted only after an interval of at least twelve (12)
months from the closing date of the last Regular Examination.
b. Special Examination·An examination conducted at any time
in coordination with the BSP, by an affirmative vote of a major-
_______________
accompanied by a written request for the conduct of an investigation, is

considered a valid complaint under these Rules.‰
75 Sec. 3(I), PDIC Regulatory Issuance No. 2005-02.
352

ity of all the members of the PDIC Board of Directors, without need
of prior MB approval, if there is a threatened or impending bank
closure as determined by the PDIC Board of Directors.‰
[Underscoring supplied]
Section 3 of RI No. 2009-05 provides for the general

scope of the PDIC examination:
„Section 3. Scope of Examination
The examination shall include, but need not be limited to, the
following:
a. Determination of the bankÊs solvency and liquidity
position;
b. Evaluation of asset quality as well as determination of
sufficiency of valuation reserves on loans and other risk
assets;
c. Review of all aspects of bank operations;
d. Assessment of risk management system, including the
evaluation of the effectiveness of the bank managementÊs
oversight functions, policies, procedures, internal control and
audit;
e. Appraisal of overall management of the bank;
f. Review of compliance with applicable banking laws, and
rules and regulations, including PDIC issuances;
g. Follow-through of specific exceptions/ violations noted
during a previous examination; and
h. Any other activity relevant to the above.‰
Rule 2, Section 1 of PDIC RI No. 2005-02 or the PDIC

Rules on Fact-Finding Investigation of Fraud, Irregularities
and Anomalies Committed in Banks provides for the scope
of fact-finding investigations as follows:
„SECTION 1. Scope of the Investigation.
353
VOL. 640, JANUARY 24, 2011 353

Fact-finding Investigations shall be limited to the particular

acts or omissions subject of a complaint or a Final Report of
Examination.‰
From the above-cited provisions, it is clear that the

process of examination covers a wider scope than that of
investigation.
Examination involves an evaluation of the current
status of a bank and determines its compliance with the set
standards regarding solvency, liquidity, asset valuation,
operations, systems, management, and compliance with
banking laws, rules and regulations.
Investigation, on the other hand, is conducted based on
specific findings of certain acts or omissions which are
subject of a complaint or a Final Report of Examination.
Clearly, investigation does not involve a general
evaluation of the status of a bank. An investigation zeroes
in on specific acts and omissions uncovered via an
examination, or which are cited in a complaint.
An examination entails a review of essentially all the
functions and facets of a bank and its operation. It
necessitates poring through voluminous documents, and
requires a detailed evaluation thereof. Such a process then
involves an intrusion into a bankÊs records.
In contrast, although it also involves a detailed
evaluation, an investigation centers on specific acts of
omissions and, thus, requires a less invasive assessment.
The practical justification for not requiring the
Monetary Board approval to conduct an investigation of
banks is the administrative hurdles and paperwork it
entails, and the correspondent time to complete those
additional steps or requirements. As in other types of
investigation, time is always of essence, and it is prudent to
expedite the proceedings if an accurate conclusion is to be
arrived at, as an investigation is only as precise as the
evidence on which it is based. The promptness with which
such evidence is gathered is always of utmost importance
because evidence, documentary evidence
354

in particular, is remarkably fungible. A PDIC investigation

is conducted to „determine[e] whether the allegations in a
complaint or findings in a final report of examination may
properly be the subject of an administrative, criminal or
civil action.‰76 In other words, an investigation is based on
reports of examination and an examination is conducted
with prior Monetary Board approval. Therefore, it would be
unnecessary to secure a separate approval for the conduct
of an investigation. Such would merely prolong the process
and provide unscrupulous individuals the opportunity to
cover their tracks.
Indeed, while in a literary sense, the two terms may be
used interchangeably, under the PDIC Charter,
examination and investigation refer to two different
processes. To reiterate, an examination of banks requires
the prior consent of the Monetary Board, whereas an
investigation based on an examination report, does not.
WHEREFORE, the petition is GRANTED. The Decision
and Resolution of the Court of Appeals in CA-G.R. CEB SP.
No. 01550, dated September 18, 2006 and January 25, 2007
are REVERSED and SET ASIDE.
SO ORDERED.
Carpio (Chairperson), Nachura, Peralta and Abad, JJ.,

concur.
Petition granted, judgment and resolution reversed and

set aside.
Note.·The banking system is an indispensable

institution in the modern world. It plays a vital role in the
economic life of every civilized nation. (Philippine National
Bank vs. Velasco, 564 SCRA 512 [2008])
··o0o··
_______________
76 Sec. 3(l), PDIC Regulatory Issuance No. 2005-02.
© Copyright 2022 Central Book Supply, Inc. All rights reserved.

PDIC vs. vs. Philippine Countryside Rural Bank, Inc.

Uploaded by

Copyright:

Available Formats

PDIC vs. vs. Philippine Countryside Rural Bank, Inc.

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

PDIC vs. vs. Philippine Countryside Rural Bank, Inc.

Uploaded by

Copyright:

Available Formats

SUPREME COURT REPORTS ANNOTATED VOLUME 640 1/19/22, 9:01 PM

Note.·The Deed of Donation which is one of mortis

G.R. No. 176438. January 24, 2011.*

PHILIPPINE DEPOSIT INSURANCE CORPORATION

Remedial Law; Actions; Forum Shopping; Definition of Forum

Court because it trifles with and abuses court processes, degrades

VOL. 640, JANUARY 24, 2011 323

Philippine Deposit Insurance Corporation (PDIC) vs. Philippine

administration of justice, and congests court dockets. A willful and

TRO, preliminary injunction and final injunction is another matter

324 SUPREME COURT REPORTS ANNOTATED

Philippine Deposit Insurance Corporation (PDIC) vs. Philippine

insurer of deposits in all banks entitled to the benefits of insurance

a complaint or a Final Report of Examination. Clearly, investigation

PETITION for review on certiorari of the decision and

VOL. 640, JANUARY 24, 2011 325

The facts are stated in the opinion of the Court.

„WHEREFORE, in view of all the foregoing premises, the

In a resolution dated January 25, 2007, the CA-Cebu

On March 9, 2005, the Board of Directors of the PDIC

1 Rollo, p. 107. Penned by Justice Pampio A. Abarintos with Justice

326 SUPREME COURT REPORTS ANNOTATED

the conduct of an investigation, in accordance with

resolution, Resolution No. 2005-05-056,4 approving the

VOL. 640, JANUARY 24, 2011 327

On June 15, 2005, PDIC issued similar notices of

Examinations of the BSP as of June 30, 2004, disclosed,

328 SUPREME COURT REPORTS ANNOTATED

On June 16 and 17, 2005, Atty. Victoria G. Noel (Atty.

differentiated from the examination powers accorded to

16 Id., at pp. 134-135.

VOL. 640, JANUARY 24, 2011 329

On June 28, 2005, PRBI and BEAI again received letters

requests, PDIC was requested to refrain from proceeding

330 SUPREME COURT REPORTS ANNOTATED

Later, the Banks withdrew their application for a

„What remained for the petitioners to do was to litigate over the

VOL. 640, JANUARY 24, 2011 331

Philippine Deposit Insurance Corporation (PDIC) vs. Philippine

Thereafter, on March 14, 2006, the Banks filed their

„Considering the allegations, issues and arguments adduced in

34 Id., at pp. 430-431.

332 SUPREME COURT REPORTS ANNOTATED

tainted with grave abuse of discretion. Moreover, the petition failed

On September 18, 2006, after both parties had

„[A]fter undergoing a series of amendments, the controlling law

„examination to find out what is wrong.‰

VOL. 640, JANUARY 24, 2011 33

In the case of Anti-Graft League of the Philippines, Inc. vs. Hon.

PDIC can proceed with its investigations on petitioners-banks.‰43

PDIC moved for reconsideration but it was denied in a

41 188 Phil. 55, 58; 99 SCRA 644, 648 (1980).

334 SUPREME COURT REPORTS ANNOTATED

THAT PRIOR APPROVAL OF THE MONETARY BOARD OF THE

The CourtÊs Ruling

I – Whether respondent banks vio-

VOL. 640, JANUARY 24, 2011 335

II – Whether the pronouncement of

„Forum shopping is defined as an act of a party, against whom an