I. DAMASO PEREZ and REPUBLIC BANK, etc. et al. v.

MONETARY BOARD, THE

SUPERINTENDENT OF BANKS, CENTRAL BANK OF THE PHILIPPINES and
SECRETARY OF JUSTICE et al. G.R. No. L-23307, 30 June 1967

1. May Central Bank and its officials be compelled, through mandamus, to prosecute
criminally violators of banking laws?

Answer:
As for the Secretary of Justice, while he may have the power to prosecute — through the
office of the Solicitor General — criminal cases, yet it is settled rule that mandamus will not
lie to compel a prosecuting officer to prosecute a criminal case in court.

Perez cannot seek by mandamus to compel respondents to prosecute criminally those alleged
violators of the banking laws. Although the Central Bank and its respondent officials may
have the duty under the Central Bank Act and the General Banking Act to cause the
prosecution of those alleged violators, yet there is nothing in said laws that imposes a clear,
specific duty on the former to do the actual prosecution of the latter. The Central Bank is a
government corporation created principally to administer the monetary and banking system
of the Republic, not a prosecution agency like the fiscal’s office. Being an artificial person,
The Central Bank is limited to its statutory powers and the nearest power to which
prosecution of violators of banking laws may be attributed is its power to sue and be sued.
But this corporate power of litigation evidently refers to civil cases only. Central Bank and its
officers have already done what they can by referring the matter to the special prosecutors of
the Department of Justice for prosecution and investigation. Moreover, it is a settled rule that
mandamus will not lie to compel a prosecuting officer, like the Secretary of Justice, to
prosecute a case in court.

II. ANA MARIA A. KORUGA v. TEODORO O. ARCENAS, JR., ALBERT C. AGUIRRE,

CESAR S. PAGUIO, FRANCISCO A. RIVERA and THE HONORABLE COURT OF
APPEALS, THIRD DIVISION G.R. Nos. 168332, 19 June 2009

2. Maria Koruga filed a complaint with the RTC accusing the directors and officers of
Banco Filipino of engaging in unsafe, unsound, and fraudulent banking practices, more
particularly, acts that violate the prohibition on self-dealing. Will this action prosper?
Explain.

Answer:

Yes. This case will prosper because 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, refers to an entity engaged in the lending of funds obtained in the form of deposits. 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.
The law vests in the BSP the supervision over operations and activities of banks. The
authority to determine whether a bank is conducting business in an unsafe or unsound
manner is also vested in the Monetary Board.
III. CENTRAL BANK OF THE PHILIPPINES and ACTING DIRECTOR ANTONIO T.
CASTRO, JR. OF THE DEPARTMENT OF COMMERCIAL AND SAVINGS BANK, in
his capacity as statutory receiver of Island Savings Bank v. THE HONORABLE COURT
OF APPEALS and SULPICIO M. TOLENTINO, G.R. No. L-45710, October 3, 1985

3. May a bank be compelled to pay the balance of the proceeds of a loan (action for specific
performance) after the Monetary Board of the Central Bank issued a resolution
prohibiting the bank from doing business? Relate your answer to the above-named case.

Answer:

No. Since the bank is now prohibited from doing business, specific performance cannot be
granted. Rescission is the only remedy for the Php 63,000.00 balance of the loan. The bank’s
asking for advance interest for the loan is improper considering that the total loan hasn’t been
released. A person can’t be charged interest for nonexistent debt. The alleged discovery by
the bank of overvaluation of the loan collateral is not an issue. The bank officials should have
been more responsible and the bank bears risk in case the collateral turned out to be
overvalued. Furthermore, this was not raised in the pleadings so this issue can’t be raised.
The bank was in default and Tolentino may choose bet specific performance or rescission w/
damages in either case.

The loan agreement implied reciprocal obligations. When one party is willing and ready to
perform, the other party not ready nor willing incurs in delay. When Tolentino executed real
estate mortgage, he signified willingness to pay. That time, the bank’s obligation to furnish
the P80K loan accrued. Now, the Central Bank resolution made it impossible for the bank to
furnish the P63K balance. The prohibition on the bank to make new loans is irrelevant
because it did not prohibit the bank fr releasing the balance of loans previously contracted.
Insolvency of debtor is not an excuse for non-fulfillment of obligation but is a breach of
contract.

IV. CENTRAL BANK OF THE PHILIPPINES and HON. JOSE B. FERNANDEZ v.

HON. COURT OF APPEALS, RTC JUDGE TEOFILO GUADIZ, JR., PRODUCERS
BANK OF THE PHILIPPINES and PRODUCERS PROPERTIES, INC.G.R. No. 88353
and G.R. No. 92943 May 8, 1992

4. Is there a need for a bank, that is placed under conservatorship, to seek approval or
authority from the conservator before it can file a case in court?

Answer:

No, PBP has been under conservatorship since 20 January 1984. Pursuant to Section 28-A of
the Central Bank Act, a conservator, once appointed, takes over the management of the bank
and assumes exclusive powers to oversee every aspect of the bank's operations and affairs.
Petitioners now maintain that this power includes the authority to determine "whether or not
to maintain suit in the bank's name."  The trial court overruled this contention stating that the
section alluded to "does not prohibit the Board of Directors of a bank to file suit to lift the
conservatorship over it, to question the validity of the conservator's fraudulent acts and
abuses and the arbitrary action of the conservator's principal the Monetary Board of the
Central Bank. The conservator cannot be expected to question his own continued existence
and acts. He cannot be expected to file suit to annul the action of his principal or a suit that
would point out the ill-motivation, the disastrous effects of the conservatorship and the
conservator's bank frauds and abuses as alleged in the complaint."
V. FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the
Philippines) and MERCURIO RIVERA v. COURT OF APPEALS, CARLOS EJERCITO,
in substitution of DEMETRIODEMETRIA, and JOSE JANOLO G.R. No. 115849,
January 24, 1996

5. Does the conservator’s power include the power to repudiate a contract of sale that has
been previously perfected? What may a conservator do if he/she wants to assail a
perfected contract? Relate answer to the above-named case.

Answer:

Under Section 28-A of Republic Act No. 265 (otherwise known as the Central Bank
Act) merely gives the conservator power to revoke contracts that are, under existing law,
deemed to be defective — i.e., void, voidable, unenforceable or rescissible. The contract in
this case is a calid one. Hence, he cannot simply repudiate valid obligations of the Bank. 

Furthermore, the conservator’s powers must be related to the "(preservation of) the assets of
the bank, (the reorganization of) the management thereof and (the restoration of) its
viability." Such powers cannot extend to the post-facto repudiation of perfected transactions,
otherwise they would infringe against the non-impairment clause of the Constitution. Hence,
the conservator must exercise his powers without violating the non-impairment clause in the
constitution. If the conservator in this case would revoke the valid contract between the Bank
and Demetria then such act of the conservator would consist as a violation of the non-
impairment clause in the Constitution. 

VI. CENTRAL BANK OF THE PHILIPPINES v. HONORABLE COURT OF APPEALS,

ISIDRO E. FERNANDEZ, and JESUS R. JAYME G.R. No. L-50031-32, July 27, 1981

6. May the action of the Monetary Board in ordering the closure and liquidation of an
insolvent bank be annulled by the court?

Answer:

No, the closure and liquidation of a bank may be considered an exercise of police power, the
validity of such exercise of police power is subject to judicial inquiry and could be set aside
if it is either capricious, discriminatory, whimsical, arbitrary, unjust, or a denial of due
process and equal protection clauses of the Constitution.

VII. SPOUSES ROMEO LIPANA and MILAGROS LIPANA v. DEVELOPMENT BANK

OF RIZAL G.R. No. 73884, September 24, 1987

7. Can a judge validly issue a stay of writ of execution of a judgment that has long been
final and executory? State the general rule and its exception and relate the same to the
case above-mentioned.
Answer:

Yes, In the instant case, the stay of the execution of judgment is warranted by the fact that
respondent bank was placed under receivership. To execute the judgment would unduly
deplete the assets of respondent bank to the obvious prejudice of other depositors and
creditors, since, as aptly stated in Central Bank of the Philippines vs. Morfe, after the
Monetary Board has declared that a bank is insolvent and has ordered it to cease operations,
the Board becomes the trustee of its assets for the equal benefit of all the creditors, including
depositors. The assets of the insolvent banking institution are held in trust for the equal
benefit of all creditors, and after its insolvency, one cannot obtain an advantage or a
preference over another by an attachment, execution or otherwise.

8. What is that doctrine laid down in the case of Central Bank of the Philippines vs. Morfe

Answer:

General Banking Act in Republic Act No. 337 states that

"Section 2. Only duly authorized persons and entities may engage in the lending of funds
obtained from the public through the receipt of deposits or the sale of bonds securities or
obligations of any kind, and all entities regularly conducting such operations shall be
considered as banking institutions and shall be subject to the provisions of this Act, of the
Central Bank Act, and of other pertinent laws. The terms "banking institution" and "bank," as
used in this Act, are synonymous and interchangeable and specifically include banks,
banking institutions, commercial banks, savings banks, mortgage banks, trust companies,
building and loan associations, branches and agencies in the Philippines of foreign banks,
hereinafter called Philippine branches, and all other corporations, companies, partnerships,
and associations performing banking functions in the Philippines.

"Persons and entities which receive deposits only occasionally shall not be considered as
banks, but such persons and entities shall be subject to regulations by the Monetary Board of
the Central Bank; nevertheless, in no case may the Central Bank authorize the drawing of
checks against deposits not maintained in banks, or branches or agencies thereof.

"The Monetary Board may similarly regulate the activities of persons and entities which act
as agents of banks."

"Section 6. No person, association or corporation not conducting the business of a

commercial banking corporation, trust corporation, savings and mortgage bank, or building
and loan association, as defined in this Act, shall advertise or hold itself out as being engaged
in the business of such bank, corporation or association, or use in connection with its
business title the word or words "bank," "banking," "banker," "building and loan
association," "trust company," or other words of similar import, or solicit or receive deposits
of money for deposit, disbursement, safekeeping, or otherwise, or transact in any manner the
business of any such bank, corporation or association, without having first complied with the
provisions of this Act in so far as it relates to commercial banking corporations, trust
corporations, savings and mortgage banks, or building and loan associations, as the case may
be. For any violation of the provisions of this section by a corporation, the officers and
directors thereof shall be jointly and severally liable. Any violation of the provisions of the
section shall be punished by a fine of five hundred pesos for each day during which such
violation is continued or repeated, and in default of the payment thereof, subsidiary
imprisonment as prescribed by law."
VIII. BANCO FILIPINO SAVINGS AND MORTGAGE BANK v. THE MONETARY
BOARD, CENTRAL BANK OF THE PHILIPPINES, JOSE B. FERNANDEZ, CARLOTA
P. VALENZUELA, ARNULFO B. AURELLANO and RAMON V. TIAOQUI G.R. No.
70054, December 11, 1991

9. Does the liquidator appointed by the Central Bank possess the authority to prosecute as
well as to defend suits, and to foreclose mortgages for and in behalf of the bank while the
issue on the validity of the receivership and liquidation of the latter is pending?

Answer:

Yes, Section 29 of the Republic Act Np. 265, as amended known as the Central Bank Act,
provides that when a bank is forbidden to do business in the Philippines and place under
receivership, the person designated as receiver shall immediately take charge of the bank’s
assets and liabilities, as expeditiously as possible, collect and gather all the assets and
administer the same for the benefit of its creditors and represent the bank personally or
through counsel as he may retain in all actions or proceedings for or against the institution,
exercising all the powers necessary for these purposes including, but not limited to, bringing
and foreclosing mortgages in the name of the bank. If the Monetary Board shall later
determine and confirm that banking institution is insolvent or cannot resume business safety
to depositors, creditors and the general public, it shall, if the public interest require, order its
liquidation and appoint a liquidator who shall take over and continue the functions of
receiver previously appointed by Monetary Board. The Liquidator may, in the name of the
bank and with the assistance counsel as he may retain, institute such actions as may
necessary in the appropriate court and recover a counts and assets of such institution or
defend any actions against the institution. Pendency of the Case did not diminish the powers
and authority of the designated liquidator to effectuate and carry on the administration of the
bank.

IX. BANGKO SENTRAL NG PILIPINAS MONETARY BOARD and CHUCHI

FONACIER v. HON. NINA G. ANTONIO-VALENZUELA, in her capacity as Regional
Trial Court Judge of Manila, Branch 28; RURAL BANK OF PARAÑAQUE, INC. et al.
G.R. No. 184778, October 2, 2009

10. Can the BSP legally order closure upon a bank even without notice and hearing?

Answer:

Yes, the law provides that the sanction of closure could be imposed upon a bank by the
BSP even without notice and hearing. This "close now, hear later" scheme is grounded on
practical and legal considerations to prevent unwarranted dissipation of the bank’s assets
and as a valid exercise of police power to protect the depositors, creditors, stockholders,
and the general public. The writ of preliminary injunction cannot, thus, prevent the MB
from taking action.

X. ABACUS REAL ESTATE DEVELOPMENT CENTER, INC., vs. THE MANILA

BANKING CORPORATION. G.R. No. 162270, April 06, 2005
10. Why did the Supreme Court declare that the contract entered into by Puyat (Manila
Bank’s acting president) is not binding upon Manila Bank?
Answer:

Because, Vicente G. Puyat, was no longer authorized to transact business in connection with
the bank’s assets and property. Clearly then, the “exclusive option to purchase” granted by
Vicente G. Puyat was and still is unenforceable against Manila Bank. Concededly, a contract
unenforceable for lack of authority by one of the parties may be ratified by the person in
whose name the contract was executed.  However, even assuming, in gratia argumenti, that
Atty. Renan Santos, Manila Bank’s receiver, approved the “exclusive option to purchase”
granted by Vicente G. Puyat, the same would still be of no force and effect.