Koruga V Arcenas 590 Scra 49

7/4/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 590
G.R. No. 168332. June 19, 2009.*
ANA MARIA A. KORUGA, petitioner, vs.

TEODORO O. ARCENAS, JR., ALBERT C.
AGUIRRE, CESAR S. PAGUIO, FRANCISCO
A. RIVERA, and THE HONORABLE COURT
OF APPEALS, THIRD DIVISION,
respondents.
G.R. No. 169053. June 19, 2009.*
TEODORO O. ARCENAS, JR., ALBERT C.

AGUIRRE, CESAR S. PAGUIO, and
FRANCISCO A. RIVERA, petitioners, vs. HON.
SIXTO MARELLA, JR., Presiding Judge,
Branch 138, Regional Trial Court of Makati
City, and ANA MARIA A. KORUGA,
respondents.
Banks and Banking; General Banking Law of

2000 (R.A. No. 8971); New Central Bank Act; Bangko
Sentral ng Pilipinas (BSP); Jurisdiction; The law
vests in the Bangko Sentral ng Pilipinas (BSP) the
supervision over operations and activities of banks.—
The law vests in the BSP the supervision over
operations and activities of banks. The New Central
Bank Act provides: Section 25. Supervision and
Examination.—The Bangko Sentral shall have
supervision over, and conduct periodic or special
examinations of, banking institutions and quasi
http://central.com.ph/sfsreader/session/000001646339f3c04b9b827c003600fb002c009e/t/?o=False 1/37
banks, including their subsidiaries and affiliates

engaged in allied activities.
Same; Same; Same; Same; Same; Allegations
regarding the questionable loans are not ordinary
intracorporate matters; rather, they involve banking
activities which are, by law, regulated and
supervised by the Bangko Sentral ng Pilipinas (BSP).
—Koruga alleges that “the dispute in the trial court
involves the manner with which the Directors’ (sic)
have handled the Bank’s affairs, specifically the
fraudulent loans and dacion en pago authorized by
the Directors in favor of several dummy corporations
known to have close ties and are indirectly
controlled by the Directors.” Her allegations, then,
call for the examination of the allegedly questionable
loans. Whether these loans are covered by the
prohibition on selfdealing is a matter for the BSP to
determine. These are not ordinary
_______________
* THIRD DIVISION.
50
50 SUPREME COURT REPORTS ANNOTATED

Koruga vs. Arcenas, Jr.
intracorporate matters; rather, they involve

banking activities which are, by law, regulated and
supervised by the BSP.
Same; Same; Same; Same; Same; The authority to
determine whether a bank is conducting business in
an unsafe or unsound manner is also vested in the
Monetary Board.—The authority to determine
whether a bank is conducting business in an unsafe
or unsound manner is also vested in the Monetary
Board.
Same; Same; Same; Same; Same; Receivership;

The appointment of a receiver under Section 30 shall
be vested exclusively with the Monetary Board.—
Crystal clear in Section 30 is the provision that says
the “appointment of a receiver under this section
shall be vested exclusively with the Monetary
Board.” The term “exclusively” connotes that only
the Monetary Board can resolve the issue of whether
a bank is to be placed under receivership and, upon
an affirmative finding, it also has authority to
appoint a receiver. This is further affirmed by the
fact that the law allows the Monetary Board to take
action “summarily and without need for prior
hearing.”
Same; Same; Same; Same; Same; Same; There is
no doubt that the Regional Trial Court (RTC) has no
jurisdiction to hear and decide a suit that seeks to
place Banco Filipino under receivership.—There is
no doubt that the RTC has no jurisdiction to hear
and decide a suit that seeks to place Banco Filipino
under receivership.
Same; Same; Same; Same; Same; Same; 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.—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.
SPECIAL CIVIL ACTION in the Supreme

Court. Certiorari and PETITION for review
on certiorari of a decision of the Court of
Appeals.
The facts are stated in the opinion of the

Court.
51
VOL. 590, JUNE 19, 2009 51


Bernas Law Office for Ana Maria A.
Koruga.
Filemon L. Fernandez and Francisco A.
Rivera for Teodoro O. Arcenas, Jr.
Abelardo L. Aportadera, Jr. for Dr.
Conrado P. Banzo and Gen. Ramon E.
Montano.
Morales, Rojas & RisosVidal for Orlando
O. Samson and Jovito N. Hernandez.
NACHURA, J.:
Before this Court are two petitions that
originated from a Complaint filed by Ana
Maria A. Koruga (Koruga) before the Regional
Trial Court (RTC) of Makati City against the
Board of Directors of Banco Filipino and the
Members of the Monetary Board of the Bangko
Sentral ng Pilipinas (BSP) for violation of the
Corporation Code, for inspection of records of a
corporation by a stockholder, for receivership,
and for the creation of a management
committee.
G.R. No. 168332
The first is a Petit6ion for Certiorari u6nder
Rule 65 of the Rules of Court, docketed as G.R.
No. 168332, praying for the annulment of the
Court of Appeals (CA) Resolution1 in CAG.R.
SP No. 88422 dated April 18, 2005 granting the
prayer for a Writ of Preliminary Injunction of
therein petitioners Teodoro O. Arcenas, Jr.,

Albert C. Aguirre, Cesar S. Paguio, and
Francisco A. Rivera (Arcenas, et al.).
Koruga is a minority stockholder of Banco
Filipino Savings and Mortgage Bank. On
August 20, 2003, she filed a complaint before
the Makati RTC which was raffled to Branch
138, presided over by Judge Sixto Marella, Jr.2
Koruga’s complaint alleged:
_______________
1 Rollo (G.R. No. 168332), pp. 4849.

2 Now a Justice of the Court of Appeals.
52
52 SUPREME COURT REPORTS

ANNOTATED
“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, thus:
(a) For engaging in unsafe, unsound, and
fraudulent banking practices that have
jeopardized the welfare of the Bank, its
shareholders, who includes among others, the
Petitioner, and depositors. (sic)
(b) For granting and approving loans and/or
“loaned” sums of money to six (6) “dummy”
borrower corporations (“Borrower
Corporations”) which, at the time of loan
approval, had no financial capacity to justify
the loans. (sic)
(c) For approving and accepting a dacion en

pago, or payment of loans with property instead
of cash, resulting to a diminished future
cumulative interest income by the Bank and a
decline in its liquidity position. (sic)
(d) For knowingly giving “favorable
treatment” to the Borrower Corporations in
which some or most of them have interests, i.e.
interlocking directors/officers thereof,
interlocking ownerships. (sic)
(e) For employing their respective offices
and functions as the Bank’s officers and
directors, or omitting to perform their functions
and duties, with negligence, unfaithfulness or
abuse of confidence of fiduciary duty,
misappropriated or misapplied or ratified by
inaction the misappropriation or
misappropriations, of (sic) almost P1.6 Billion
Pesos (sic) constituting the Bank’s funds placed
under their trust and administration, by
unlawfully releasing loans to the Borrower
Corporations or refusing or failing to impugn
these, knowing before the loans were released
or thereafter that the Bank’s cash resources
would be dissipated thereby, to the prejudice of
the Petitioner, other Banco Filipino depositors,
and the public.
10.2 Right of a stockholder to inspect the
records of a corporation (including financial
statements) under Sections 74 and 75 of the Code, as
implemented by the Interim Rules;
(a) Unlawful refusal to allow the Petitioner
from inspecting or otherwise accessing the
corporate records of the bank despite repeated
demand in writing, where she is a stockholder.
(sic)
53
VOL. 590, JUNE 19, 2009 53


10.3 Receivership and Creation of a
Management Committee pursuant to:
(a) Rule 59 of the 1997 Rules of Civil
Procedure (“Rules”);
(b) Section 5.2 of R.A. No. 8799;
(c) Rule 1, Section 1(a)(1) of the Interim
Rules;
(d) Rule 1, Section 1(a)(2) of the Interim
Rules;
(e) Rule 7 of the Interim Rules;
(f) Rule 9 of the Interim Rules; and
(g) The General Banking Law of 2000 and
the New Central Bank Act.”3
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 on the
following grounds: (a) lack of jurisdiction over
the subject matter;
(b) lack of jurisdiction over the persons of the
defendants;
(c) forumshopping; and (d) for being a
nuisance/harassment suit. They then moved
that the trial court rule on their affirmative
defenses, dismiss the intracorporate case, and
set the case for preliminary hearing.
In an Order dated October 18, 2004, the trial
court denied the Manifestation and Motion,
ruling thus:
“The result of the procedure sought by defendants

Arcenas, et al. (sic) is for the Court to conduct a
preliminary hearing on the affirmative defenses
raised by them in their Answer. This [is] proscribed

by the Interim Rules of Procedure on Intracorporate
(sic) Controversies because when a preliminary
hearing is conducted it is “as if a Motion to Dismiss
was filed” (Rule 16, Section 6, 1997 Rules of Civil
Procedure). A Motion to Dismiss is a prohibited
pleading under the Interim Rules, for which reason,
no favorable consideration can be given to the
Manifestation and Motion of defendants, Arcenas, et
al.
_______________
3 Rollo (G.R. No. 168332), pp. 79.
54

The Court finds no merit to (sic) the claim

that the instant case is a nuisance or
harassment suit.
WHEREFORE, the Court defers resolution of
the affirmative defenses raised by the
defendants Arcenas, et al.”4
Arcenas, et al. moved for reconsideration5

but, on January 18, 2005, the RTC denied the
motion.6 This prompted Arcenas, et al. to file
before the CA a Petition for Certiorari and
Prohibition under Rule 65 of the Rules of Court
with a prayer for the issuance of a writ of
preliminary injunction and a temporary
retraining order (TRO).7
On February 9, 2005, the CA issued a 60
day TRO enjoining Judge Marella from
conducting further proceedings in the case.8
On February 22, 2005, the RTC issued a

Notice of Pretrial9 setting the case for pretrial
on June 2 and 9, 2005. Arcenas, et al. filed a
Manifestation and Motion10 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 in the amount of FIVE
HUNDRED THOUSAND (P500,000.00) PESOS.
SO ORDERED.”11
_______________
4 CA Rollo, p. 48.
5 Id., at pp. 5260.
6 Id., at p. 50.
7 Id., at pp. 247.
8 Id., at pp. 9597.
9 Rollo (G.R. No. 168332), p. 196.
10 Id., at pp. 197198.
11 Id., at p. 49.
55
VOL. 590, JUNE 19, 2009 55

Dissatisfied, Koruga filed this 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, either in the April 18,
2005 Resolution itself or in the records of the
case. She prayed that this Court restrain the
CA from implementing the writ of preliminary
injunction and, after due proceedings, make the
injunction against the assailed CA Resolution
permanent.12
In their Comment, Arcenas, et al. raised
several procedural and substantive issues.
They alleged that the Verification and
Certification against ForumShopping attached
to the Petition was not executed in the manner
prescribed by Philippine law since, as admitted
by Koruga’s counsel himself, the same was only
a facsimile.
They also averred that Koruga had admitted
in the Petition that she never asked for
reconsideration of the CA’s April 18, 2005
Resolution, contending that the Petition did not
raise pure questions of law as to constitute an
exception to the requirement of filing a Motion
for Reconsideration before a Petition for
Certiorari is filed.
They, likewise, alleged that the Petition may
have already been rendered moot and academic
by the July 20, 2005 CA Decision,13 which
denied their Petition, and held that the RTC
did not commit grave abuse of discretion in
issuing the assailed orders, and thus ordered
the RTC to proceed with the trial of the case.
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
_______________
12 Id., at p. 40.
13 Penned by Associate Justice Eugenio S. Labitoria,
with Associate Justices Eliezer R. delos Santos and Arturo
D. Brion (now a member of this Court), concurring; id., at
pp. 259277.
56

ANNOTATED
P50,000.00 bond. Koruga filed a motion to lift

the TRO, which this Court denied on July 5,
2006.
On the other hand, respondents Dr. Conrado
P. Banzon and Gen. Ramon Montaño also filed
their Comment on Koruga’s Petition, raising
substantially the same arguments as Arcenas,
et al.
G.R. No. 169053
G.R. No. 169053 is a Petition for Review on
Certiorari under Rule 45 of the Rules of Court,
with prayer for the issuance of a TRO and a
writ of preliminary injunction filed by Arcenas,
et al.
In their Petition, Arcenas, et al. asked the
Court to set aside the Decision14 dated July 20,
2005 of the CA in CAG.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. It added that the Supreme Court
frowns upon resort to remedial measures

against interlocutory orders.
Arcenas, et al. anchored their prayer on the
following grounds: that, in their Answer before
the RTC, they had raised the issue of failure of
the court to acquire jurisdiction over them due
to improper service of summons; that the
Koruga action is a nuisance or harassment
suit; that there is another case involving the
same parties for the same cause pending before
the Monetary Board of the BSP, and this
constituted forumshopping; and that
jurisdiction over the subject matter of the case
is vested by law in the BSP.15
Arcenas, et al. assign the following errors:
_______________
14 Rollo (G.R. No. 169053), pp. 5876.

15 Id., at pp. 89.
57
VOL. 590, JUNE 19, 2009 57

I. THE COURT OF APPEALS, IN “FINDING

NO GRAVE ABUSE OF DISCRETION
COMMITTED BY PUBLIC RESPONDENT
REGIONAL TRIAL COURT OF MAKATI, BRANCH
138, IN ISSUING THE ASSAILED ORDERS,”
FAILED TO CONSIDER AND MERELY GLOSSED
OVER THE MORE TRANSCENDENT ISSUES OF
THE LACK OF JURISDICTION ON THE PART OF
SAID PUBLIC RESPONDENT OVER THE
SUBJECT MATTER OF THE CASE BEFORE IT,
LITIS PENDENTIA AND FORUM SHOPPING,

AND THE CASE BELOW BEING A NUISANCE OR
HARASSMENT SUIT, EITHER ONE AND ALL OF
WHICH GOES/GO TO RENDER THE ISSUANCE
BY PUBLIC RESPONDENT OF THE ASSAILED
ORDERS A GRAVE ABUSE OF DISCRETION.
II. THE FINDING OF THE COURT OF
APPEALS OF “NO GRAVE ABUSE OF
DISCRETION COMMITTED BY PUBLIC
RESPONDENT REGIONAL TRIAL COURT OF
MAKATI, BRANCH 138, IN ISSUING THE
ASSAILED ORDERS,” IS NOT IN ACCORD WITH
LAW OR WITH THE APPLICABLE DECISIONS
OF THIS HONORABLE COURT.16
Meanwhile, in a Manifestation and Motion

filed on August 31, 2005, Koruga prayed for,
among others, the consolidation of her Petition
with the Petition for Review on Certiorari
under Rule 45 filed by Arcenas, et al., docketed
as G.R. No. 169053. The motion was granted by
this Court in a Resolution dated September 26,
2005.
Our Ruling
Initially, we will discuss the procedural

issue.
Arcenas, et al. argue that Koruga’s petition
should be dismissed for its defective
Verification and Certification Against Forum
Shopping, since only a facsimile of the same
was attached to the Petition. They also claim
that the Verification and Certification Against
ForumShopping, allegedly executed in Seattle,
Washington, was not authenticated in the
_______________
16 Id., at pp. 1718.

58

ANNOTATED
manner prescribed by Philippine law and not

certified by the Philippine Consulate in the
United States.
This contention deserves scant
consideration.
On the last page of the Petition in G.R. No.
168332, Koruga’s counsel executed an
Undertaking, which reads as follows:
“In view of that fact that the Petitioner is

currently in the United States, undersigned counsel
is attaching a facsimile copy of the Verification and
Certification Against ForumShopping duly signed
by the Petitioner and notarized by Stephanie N.
Goggin, a Notary Public for the Sate (sic) of
Washington. Upon arrival of the original copy of the
Verification and Certification as certified by the
Office of the Philippine Consul, the undersigned
counsel shall immediately provide duplicate copies
thereof to the Honorable Court.”17
Thus, in a Compliance18 filed with the Court

on September 5, 2005, petitioner submitted the
original copy of the duly notarized and
authenticated Verification and Certification
Against ForumShopping she had executed.19
This Court noted and considered the
Compliance satisfactory in its Resolution dated
November 16, 2005. There is, therefore, no
need to further belabor this issue.
We now discuss the substantive issues in
this case.
First, we resolve the prayer to nullify the

CA’s April 18, 2005 Resolution.
We hold that the Petition in G.R. No. 168332
has become moot and academic. The writ of
preliminary injunction being questioned had
effectively been dissolved by the CA’s July 20,
2005 Decision. The dispositive portion of the
Decision reads in part:
_______________
17 Rollo (G.R. No. 168332), p. 44.

18 Id., at pp. 286288.
19 Id., at pp. 290292.
59
VOL. 590, JUNE 19, 2009 59

“The case is REMANDED to the court a quo for

further proceedings and to resolve with deliberate
dispatch the intracorporate controversies and
determine whether there was actually a valid service
of summons. If, after hearing, such service is found
to have been improper, then new summons should be
served forthwith.”20
Accordingly, there is no necessity to restrain

the implementation of the writ of preliminary
injunction issued by the CA on April 18, 2005,
since it no longer exists.
However, this Court finds that the CA erred
in upholding the jurisdiction of, and remanding
the case to, the RTC.
The resolution of these petitions rests
mainly on the determination of one
fundamental issue: Which body has jurisdiction

over the Koruga Complaint, the RTC or the
BSP?
We hold that it is the BSP that has
jurisdiction over the case.
A reexamination of the Complaint is in
order.
Koruga’s Complaint charged defendants
with violation of Sections 31 to 34 of the
Corporation Code, prohibiting selfdealing and
conflict of interest of directors and officers;
invoked her right to inspect the corporation’s
records under Sections 74 and 75 of the
Corporation Code; and prayed for Receivership
and Creation of a Management Committee,
pursuant to Rule 59 of the Rules of Civil
Procedure, the Securities Regulation Code, the
Interim Rules of Procedure Governing Intra
Corporate Controversies, the General Banking
Law of 2000, and the New Central Bank Act.
She accused the directors and officers of Banco
Filipino of engaging in unsafe, unsound, and
fraudulent banking practices, more
particularly, acts that violate the prohibition on
selfdealing.
It is clear that the acts complained of
pertain to the conduct of Banco Filipino’s
banking business. A bank, as defined in the
General Banking Law,21 refers to an entity
engaged in
_______________
20 Rollo (G.R. No. 169053), p. 75.

21 Republic Act (R.A.) No. 8791.
60

ANNOTATED
the lending of funds obtained in the form of

deposits.22 The banking business is properly
subject to reasonable regulation under the
police power of the state because of its nature
and relation to the fiscal affairs of the people
and the revenues of the state. Banks are
affected with public interest because they
receive funds from the general public in the
form of deposits. It is the Government’s
responsibility to see to it that the financial
interests of those who deal with banks and
banking institutions, as depositors or
otherwise, are protected. In this country, that
task is delegated to the BSP, which pursuant to
its Charter, is authorized to administer the
monetary, banking, and credit system of the
Philippines. It is further authorized to take the
necessary steps against any banking
institution if its continued operation would
cause prejudice to its depositors, creditors and
the general public as well.23
The law vests in the BSP the supervision
over operations and activities of banks. The
New Central Bank Act provides:
“Section 25. Supervision and Examination.—

The Bangko Sentral shall have supervision over, and
conduct periodic or special examinations of, banking
institutions and quasibanks, including their
subsidiaries and affiliates engaged in allied
activities.”24
Specifically, the BSP’s supervisory and

regulatory powers include:

4.1 The issuance of rules of conduct or the

establishment of standards of operation for
uniform application to all institutions or
functions covered, taking into consideration the
distinctive character of the operations of
institutions and the substantive similarities of
specific functions to which such rules, modes or
standards are to be applied;
_______________
22 R.A. No. 8791, Sec. 3 (3.1).

23 Central Bank of the Philippines v. Court of Appeals,
G.R. No. 88353, May 8, 1992, 208 SCRA 652, 684685.
24 R.A. No. 7653.
61
VOL. 590, JUNE 19, 2009 61

4.2 The conduct of examination to determine

compliance with laws and regulations if
the circumstances so warrant as
determined by the Monetary Board;
4.3 Overseeing to ascertain that laws and
Regulations are complied with;
4.4 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: Provided, That the
deficiencies/irregularities found by or discovered
by an audit shall be immediately addressed;
4.5 Inquiring into the solvency and liquidity
of the institution (2D); or
4.6 Enforcing prompt corrective action.25
Koruga alleges that “the dispute in the trial

court involves the manner with which the
Directors’ (sic) have handled the Bank’s affairs,
specifically the fraudulent loans and dacion en
pago authorized by the Directors in favor of
several dummy corporations known to have
close ties and are indirectly controlled by the
Directors.”26 Her allegations, then, call for the
examination of the allegedly questionable
loans. Whether these loans are covered by the
prohibition on selfdealing is a matter for the
BSP to determine. These are not ordinary
intracorporate matters; rather, they involve
banking activities which are, by law, regulated
and supervised by the BSP. As the Court has
previously held:
“It is wellsettled in both law and jurisprudence

that the Central Monetary Authority, through the
Monetary Board, is vested with exclusive authority
to assess, evaluate and determine the condition of
any bank, and finding such condition to be one of
insolvency, or that its continuance in business would
involve a probable
_______________
25 R.A. No. 8791, Sec. 4. (Emphasis supplied.)

26 Memorandum, Rollo (G.R. No. 169053), p. 717.
62

loss to its depositors or creditors, forbid bank or non

bank financial institution to do business in the
Philippines; and shall designate an official of the
BSP or other competent person as receiver to
immediately take charge of its assets and

liabilities.”27
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.—No director or
officer of any bank shall, directly or indirectly, for
himself or as the representative or agent of others,
borrow from such bank nor shall he become a
guarantor, indorser or surety for loans from such
bank to others, or in any manner be an obligor or
incur any contractual liability to the bank except
with the written approval of the majority of all the
directors of the bank, excluding the director
concerned: Provided, That such written approval
shall not be required for loans, other credit
accommodations and advances granted to officers
under a fringe benefit plan approved by the Bangko
Sentral. The required approval shall be entered
upon the records of the bank and a copy of such
entry shall be transmitted forthwith to the
appropriate supervising and examining department
of the Bangko Sentral.
Dealings of a bank with any of its directors,
officers or stockholders and their related interests
shall be upon terms not less favorable to the bank
than those offered to others.
After due notice to the board of directors of the
bank, the office of any bank director or officer who
violates the provisions of this Section may be
declared vacant and the director or officer shall be
subject to the penal provisions of the New Central
Bank Act.
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. However, the outstanding loans,
credit accommodations
_______________
27 Miranda v. Philippine Deposit Insurance Corporation, G.R.

No. 169334, September 8, 2006, 501 SCRA 288, 298.
63
VOL. 590, JUNE 19, 2009 63

and guarantees which a bank may extend to each of

its stockholders, directors, or officers and their
related interests, shall be limited to an amount
equivalent to their respective unencumbered
deposits and book value of their paidin capital
contribution in the bank: Provided, however, That
loans, credit accommodations and guarantees
secured by assets considered as nonrisk by the
Monetary Board shall be excluded from such limit:
Provided, further, That loans, credit accommodations
and advances to officers in the form of fringe benefits
granted in accordance with rules as may be
prescribed by the Monetary Board shall not be
subject to the individual limit.
The Monetary Board shall define the term
“related interests.”
The limit on loans, credit accommodations and
guarantees prescribed herein shall not apply to
loans, credit accommodations and guarantees
extended by a cooperative bank to its cooperative

shareholders.”28
Furthermore, the authority to determine

whether a bank is conducting business in an
unsafe or unsound manner is also vested in the
Monetary Board. The General Banking Law of
2000 provides:
“SECTION 56. Conducting Business in an

Unsafe or Unsound Manner.—In determining
whether a particular act or omission, which is not
otherwise prohibited by any law, rule or regulation
affecting banks, quasibanks or trust entities, may be
deemed as conducting business in an unsafe or
unsound manner for purposes of this Section, the
Monetary Board shall consider any of the following
circumstances:
56.1. The act or omission has resulted or may
result in material loss or damage, or
abnormal risk or danger to the safety,
stability, liquidity or solvency of the
institution;
56.2. The act or omission has resulted or may
result in material loss or damage or
abnormal risk to the institution's
depositors, creditors, investors,
stockholders or to the Bangko Sentral or to
the public in general;
_______________
28 Emphasis supplied.
64

ANNOTATED
56.3. The act or omission has caused any

undue injury, or has given any
unwarranted benefits, advantage or
preference to the bank or any party in the
discharge by the director or officer of his
duties and responsibilities through
manifest partiality, evident bad faith or
gross inexcusable negligence; or
56.4. The act or omission involves entering
into any contract or transaction manifestly
and grossly disadvantageous to the bank,
quasibank or trust entity, whether or not
the director or officer profited or will profit
thereby.
Whenever a bank, quasibank or trust entity
persists in conducting its business in an unsafe
or unsound manner, the Monetary Board may,
without prejudice to the administrative
sanctions provided in Section 37 of the New
Central Bank Act, take action under Section 30
of the same Act and/or immediately exclude the
erring bank from clearing, the provisions of law
to the contrary notwithstanding.”
Finally, the New Central Bank Act grants

the Monetary Board the power to impose
administrative sanctions on the erring bank:
“Section 37. Administrative Sanctions on

Banks and Quasibanks.—Without prejudice to the
criminal sanctions against the culpable persons
provided in Sections 34, 35, and 36 of this Act, the
Monetary Board may, at its discretion, impose
upon any bank or quasibank, their directors
and/or officers, for any willful violation of its
charter or bylaws, willful delay in the submission of
reports or publications thereof as required by law,
rules and regulations; any refusal to permit
examination into the affairs of the institution; any
willful making of a false or misleading statement to

the Board or the appropriate supervising and
examining department or its examiners; any willful
failure or refusal to comply with, or violation of, any
banking law or any order, instruction or regulation
issued by the Monetary Board, or any order,
instruction or ruling by the Governor; or any
commission of irregularities, and/or
conducting business in an unsafe or unsound
manner as may be determined by the Monetary
Board, the following administrative sanctions,
whenever applicable:
65
VOL. 590, JUNE 19, 2009 65


(a) fines in amounts as may be determined
by the Monetary Board to be appropriate, but in
no case to exceed Thirty thousand pesos
(P30,000) a day for each violation, taking into
consideration the attendant circumstances,
such as the nature and gravity of the violation
or irregularity and the size of the bank or quasi
bank;
(b) suspension of rediscounting privileges or
access to Bangko Sentral credit facilities;
(c) suspension of lending or foreign
exchange operations or authority to accept new
deposits or make new investments;
(d) suspension of interbank clearing
privileges; and/or
(e) revocation of quasibanking license.
Resignation or termination from office shall not
exempt such director or officer from administrative
or criminal sanctions.
The Monetary Board may, whenever warranted

by circumstances, preventively suspend any director
or officer of a bank or quasibank pending an
investigation: Provided, That should the case be not
finally decided by the Bangko Sentral within a
period of one hundred twenty (120) days after the
date of suspension, said director or officer shall be
reinstated in his position: Provided, further, That
when the delay in the disposition of the case is due
to the fault, negligence or petition of the director or
officer, the period of delay shall not be counted in
computing the period of suspension herein provided.
The above administrative sanctions need not be
applied in the order of their severity.
Whether or not there is an administrative
proceeding, if the institution and/or the directors
and/or officers concerned continue with or otherwise
persist in the commission of the indicated practice or
violation, the Monetary Board may issue an order
requiring the institution and/or the directors and/or
officers concerned to cease and desist from the
indicated practice or violation, and may further
order that immediate action be taken to correct the
conditions resulting from such practice or violation.
The cease and desist order shall be immediately
effective upon service on the respondents.
The respondents shall be afforded an opportunity
to defend their action in a hearing before the
Monetary Board or any commit
66

tee chaired by any Monetary Board member created

for the purpose, upon request made by the
respondents within five (5) days from their receipt of
the order. If no such hearing is requested within said
period, the order shall be final. If a hearing is

conducted, all issues shall be determined on the
basis of records, after which the Monetary Board
may either reconsider or make final its order.
The Governor is hereby authorized, at his
discretion, to impose upon banking institutions, for
any failure to comply with the requirements of law,
Monetary Board regulations and policies, and/or
instructions issued by the Monetary Board or by the
Governor, fines not in excess of Ten thousand pesos
(P10,000) a day for each violation, the imposition of
which shall be final and executory until reversed,
modified or lifted by the Monetary Board on
appeal.”29
Koruga also accused Arcenas, et al. of

violation of the Corporation Code’s provisions
on selfdealing and conflict of interest. She
invoked Section 31 of the Corporation Code,
which defines the liability of directors, trustees,
or officers of a corporation for, among others,
acquiring any personal or pecuniary interest in
conflict with their duty as directors or trustees,
and Section 32, which prescribes the conditions
under which a contract of the corporation with
one or more of its directors or trustees—the so
called “selfdealing directors”30—would be
valid. She also alleged that Banco Filipino’s
directors violated Sections 33 and 34 in
approving the loans of corporations with
interlocking ownerships, i.e., owned, directed,
or managed by close associates of Albert C.
Aguirre.
Sections 31 to 34 of the Corporation Code
provide:
“Section 31. Liability of directors, trustees or

officers.—Directors or trustees who wilfully and
knowingly vote for or assent to patently unlawful
acts of the corporation or who are guilty of gross

negligence or bad faith in directing the affairs of the
corporation or acquire any personal or pecuniary
interest in conflict with their duty
_______________
30 See Prime White Cement Corporation v. Honorable
Intermediate Appellate Court, et al., G.R. No. 68555, March 19,
1993, 220 SCRA 103.
67
VOL. 590, JUNE 19, 2009 67

as such directors or trustees shall be liable jointly

and severally for all damages resulting therefrom
suffered by the corporation, its stockholders or
members and other persons.
When a director, trustee or officer attempts to
acquire or acquires, in violation of his duty, any
interest adverse to the corporation in respect of any
matter which has been reposed in him in confidence,
as to which equity imposes a disability upon him to
deal in his own behalf, he shall be liable as a trustee
for the corporation and must account for the profits
which otherwise would have accrued to the
corporation.
Section 32. Dealings of directors, trustees or
officers with the corporation.—A contract of the
corporation with one or more of its directors or
trustees or officers is voidable, at the option of such
corporation, unless all the following conditions are
present:
1. That the presence of such director or trustee
in the board meeting in which the contract was
approved was not necessary to constitute a quorum

for such meeting;
2. That the vote of such director or trustee was
not necessary for the approval of the contract;
3. That the contract is fair and reasonable under
the circumstances; and
4. That in case of an officer, the contract has
been previously authorized by the board of directors.
Where any of the first two conditions set forth in
the preceding paragraph is absent, in the case of a
contract with a director or trustee, such contract
may be ratified by the vote of the stockholders
representing at least twothirds (2/3) of the
outstanding capital stock or of at least twothirds
(2/3) of the members in a meeting called for the
purpose: Provided, That full disclosure of the
adverse interest of the directors or trustees involved
is made at such meeting: Provided, however, That
the contract is fair and reasonable under the
circumstances.
Section 33. Contracts between corporations
with interlocking directors.—Except in cases of
fraud, and provided the contract is fair and
reasonable under the circumstances, a contract
between two or more corporations having
interlocking directors shall not be invalidated on
that ground alone: Provided, That if the interest of
the interlocking director in one corporation is
substantial and his interest in the other corporation
or corporations is merely nominal, he
68

shall be subject to the provisions of the preceding

section insofar as the latter corporation or
corporations are concerned.
Stockholdings exceeding twenty (20%) percent of

the outstanding capital stock shall be considered
substantial for purposes of interlocking directors.
Section 34. Disloyalty of a director.—Where a
director, by virtue of his office, acquires for himself a
business opportunity which should belong to the
corporation, thereby obtaining profits to the
prejudice of such corporation, he must account to the
latter for all such profits by refunding the same,
unless his act has been ratified by a vote of the
stockholders owning or representing at least two
thirds (2/3) of the outstanding capital stock. This
provision shall be applicable, notwithstanding the
fact that the director risked his own funds in the
venture.”
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.”31
Consequently, it is not the Interim Rules of

Procedure on IntraCorporate Controversies,32
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, viz.:
_______________
31 In Re: Petition for Assistance in the Liquidation of the

Rural Bank of Bokod (Benguet), Inc., PDIC v. Bureau of
Internal Revenue, G.R. No. 158261, December 18, 2006, 511
SCRA 123, 141, citing Laureano v. Court of Appeals, 381

Phil. 403, 411412; 324 SCRA 414, 421 (2000).
32 A.M. No. 01204SC dated April 1, 2001.
69
VOL. 590, JUNE 19, 2009 69

“Section 29. Appointment of Conservator.—

Whenever, on the basis of a report submitted by the
appropriate supervising or examining department,
the Monetary Board finds that a bank or a quasi
bank is in a state of continuing inability or
unwillingness to maintain a condition of liquidity
deemed adequate to protect the interest of depositors
and creditors, the Monetary Board may appoint a
conservator with such powers as the Monetary
Board shall deem necessary to take charge of the
assets, liabilities, and the management thereof,
reorganize the management, collect all monies and
debts due said institution, and exercise all powers
necessary to restore its viability. The conservator
shall report and be responsible to the Monetary
Board and shall have the power to overrule or revoke
the actions of the previous management and board of
directors of the bank or quasibank.
x x x x
The Monetary Board shall terminate the
conservatorship when it is satisfied that the
institution can continue to operate on its own and
the conservatorship is no longer necessary. The
conservatorship shall likewise be terminated should
the Monetary Board, on the basis of the report of the
conservator or of its own findings, determine that
the continuance in business of the institution would
involve probable loss to its depositors or creditors, in

which case the provisions of Section 30 shall apply.
Section 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 quasibank:
(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
70

the institution from doing business in the

Philippines and designate the Philippine
Deposit Insurance Corporation as receiver
of the banking institution.
x x x x
The 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
petition for certiorari may only be filed by the
stockholders of record representing the majority of
the capital stock within ten (10) days from receipt by
the board of directors of the institution of the order
directing receivership, liquidation or
conservatorship.
The designation of a conservator under Section 29
of this Act or the appointment of a receiver
under this section shall be vested exclusively
with the Monetary Board. Furthermore, the
designation of a conservator is not a precondition to
the designation of a receiver.”33
On the strength of these provisions, it is the

Monetary Board that exercises exclusive
jurisdiction over proceedings for receivership of
banks.
Crystal clear in Section 30 is the provision
that says the “appointment of a receiver under
this section shall be vested exclusively with the
Monetary Board.” The term “exclusively”
connotes that only the Monetary Board can
resolve the issue of whether a bank is to be
placed under receivership and, upon an
affirmative finding, it also has authority to
appoint a receiver. This is further affirmed by
the fact that the law allows the Monetary
Board to take action “summarily and without
need for prior hearing.”
And, as a clincher, the law explicitly
provides that “actions of the Monetary Board
taken under this section or under Section 29 of
this Act shall be final and executory, and may
_______________
71
VOL. 590, JUNE 19, 2009 71

not be restrained or set aside by the court

except on a petition for certiorari on the ground
that the action taken was in excess of
jurisdiction or with such grave abuse of
jurisdiction.”
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.
Koruga herself recognizes the BSP’s power
over the allegedly unlawful acts of Banco
Filipino’s directors. The records of this case
bear out that Koruga, through her legal
counsel, wrote the Monetary Board34 on April
21, 2003 to bring to its attention the acts she
had enumerated in her complaint before the
RTC. The letter reads in part:
“Banco Filipino and the current members of its

Board of Directors should be placed under
investigation for violations of banking laws, the
commission of irregularities, and for conducting
business in an unsafe or unsound manner. They
should likewise be placed under preventive
suspension by virtue of the powers granted to the
Monetary Board under Section 37 of the Central
Bank Act. These blatant violations of banking laws
should not go by without penalty. They have put
Banco Filipino, its depositors and stockholders, and
the entire banking system (sic) in jeopardy.
x x x x
We urge you to look into the matter in your
capacity as regulators. Our clients, a minority
stockholders, (sic) and many depositors of Banco
Filipino are prejudiced by a failure to regulate, and
taxpayers are prejudiced by accommodations
granted by the BSP to Banco Filipino.”35
In a letter dated May 6, 2003, BSP

Supervision and Examination Department III
Director Candon B. Guerrero referred Koruga’s
letter to Arcenas for comment.36 On June 6,
2003, Banco Filipino’s then Executive Vice
President and
_______________
34 Rollo (G.R. No. 169053), pp. 266272.

35 Id., at pp. 271272. (Citations omitted.)
36 Id., at p. 457.
72

ANNOTATED
Corporate Secretary Francisco A. Rivera

submitted the bank’s comments essentially
arguing that Koruga’s accusations lacked legal
and factual bases.37
On the other hand, the BSP, in its Answer
before the RTC, said that it had been looking
into Banco Filipino’s activities. An October
2002 Report of Examination (ROE) prepared by
the Supervision and Examination Department
(SED) noted certain dacion payments, outof
theordinary expenses, among other dealings.
On July 24, 2003, the Monetary Board passed
Resolution No. 1034 furnishing Banco Filipino

a copy of the ROE with instructions for the
bank to file its comment or explanation within
30 to 90 days under threat of being fined or of
being subjected to other remedial actions. The
ROE, the BSP said, covers substantially the
same matters raised in Koruga’s complaint. At
the time of the filing of Koruga’s complaint on
August 20, 2003, the period for Banco Filipino
to submit its explanation had not yet expired.38
Thus, 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
jurisdiction.
Finally, there is one other reason why
Koruga’s complaint before the RTC cannot
prosper. Given her own admission—and the
same is likewise supported by evidence—that
she is merely a minority stockholder of Banco
Filipino, she would not have the standing to
question the Monetary Board’s action. Section
30 of the New Central Bank Act provides:
“The petition for certiorari may only be filed by the

stockholders of record representing the majority of
the capital stock within ten (10) days from receipt by
the board of directors of the institution of the order
directing receivership, liquidation or
conservatorship.”
_______________
37 Id., at pp. 459462.

38 CA Rollo, p. 460.
73
VOL. 590, JUNE 19, 2009 73

All the foregoing discussion yields the

inevitable conclusion that the CA erred in
upholding the jurisdiction of, and remanding
the case to, the RTC. Given that the RTC does
not have jurisdiction over the subject matter of
the case, its refusal to dismiss the case on that
ground amounted to grave abuse of discretion.
WHEREFORE, the foregoing premises
considered, the Petition in G.R. No. 168332 is
DISMISSED, while the Petition in G.R. No.
169053 is GRANTED. The Decision of the
Court of Appeals dated July 20, 2005 in CA
G.R. SP No. 88422 is hereby SET ASIDE. The
Temporary Restraining Order issued by this
Court on March 13, 2006 is made
PERMANENT. Consequently, Civil Case No.
03985, pending before the Regional Trial
Court of Makati City, is DISMISSED.
SO ORDERED.
YnaresSantiago (Chairperson), Chico

Nazario, Velasco, Jr. and Peralta, JJ., concur.
Petition in G.R. No. 168332 dismissed, while

petition in G.R. No. 169053 granted, CA
decision in CAG.R. SP No. 88422 set aside.
Note.—Settled is the principle that a bank

is bound by the acts, or failure to act of its
receiver. (Larrobis, Jr. vs. Philippine Veterans
Bank, 440 SCRA 34 [2004])
——o0o——
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7/4/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 590

G.R. No. 168332. June 19, 2009.*

ANA MARIA A. KORUGA, petitioner, vs.

G.R. No. 169053. June 19, 2009.*

TEODORO O. ARCENAS, JR., ALBERT C.

Banks and Banking; General Banking Law of

banks, including their subsidiaries and affiliates

50 SUPREME COURT REPORTS ANNOTATED

intra­corporate matters; rather, they involve

Same; Same; Same; Same; Same; Receivership;

SPECIAL CIVIL ACTION in the Supreme

The facts are stated in the opinion of the

VOL. 590, JUNE 19, 2009 51

therein petitioners Teodoro O. Arcenas, Jr.,

1 Rollo (G.R. No. 168332), pp. 48­49.

52 SUPREME COURT REPORTS

“10.1 Violation of Sections 31 to 34 of the

(c) For approving and accepting a dacion en

VOL. 590, JUNE 19, 2009 53

On September 12, 2003, Arcenas, et al. filed

“The result of the procedure sought by defendants

raised by them in their Answer. This [is] proscribed

3 Rollo (G.R. No. 168332), pp. 7­9.

54 SUPREME COURT REPORTS ANNOTATED

The Court finds no merit to (sic) the claim

Arcenas, et al. moved for reconsideration5

On February 22, 2005, the RTC issued a

“(C)onsidering that the Temporary Restraining

VOL. 590, JUNE 19, 2009 55

Dissatisfied, Koruga filed this Petition for

course to Arcenas, et al.’s petition when it

56 SUPREME COURT REPORTS

P50,000.00 bond. Koruga filed a motion to lift

frowns upon resort to remedial measures

14 Rollo (G.R. No. 169053), pp. 58­76.

VOL. 590, JUNE 19, 2009 57

I. THE COURT OF APPEALS, IN “FINDING

LITIS PENDENTIA AND FORUM SHOPPING,

Meanwhile, in a Manifestation and Motion

Initially, we will discuss the procedural

16 Id., at pp. 17­18.

58 SUPREME COURT REPORTS

manner prescribed by Philippine law and not

“In view of that fact that the Petitioner is

Thus, in a Compliance18 filed with the Court

First, we resolve the prayer to nullify the

17 Rollo (G.R. No. 168332), p. 44.

VOL. 590, JUNE 19, 2009 59

“The case is REMANDED to the court a quo for

Accordingly, there is no necessity to restrain

fundamental issue: Which body has jurisdiction

20 Rollo (G.R. No. 169053), p. 75.

60 SUPREME COURT REPORTS

the lending of funds obtained in the form of

“Section 25. Supervision and Examination.—

Specifically, the BSP’s supervisory and

4.1 The issuance of rules of conduct or the

22 R.A. No. 8791, Sec. 3 (3.1).

VOL. 590, JUNE 19, 2009 61

intracorporate matters; rather, they involve

1 Rollo (G.R. No. 168332), pp. 4849.

3 Rollo (G.R. No. 168332), pp. 79.

14 Rollo (G.R. No. 169053), pp. 5876.

16 Id., at pp. 1718.

“It is wellsettled in both law and jurisprudence

loss to its depositors or creditors, forbid bank or non

34 Rollo (G.R. No. 169053), pp. 266272.

37 Id., at pp. 459462.

YnaresSantiago (Chairperson), Chico