Title
Banco Filipino Savings and Mortgage Bank vs. Monetary Board
Case
G.R. No. 70054
Decision Date
Dec 11, 1991
Banco Filipino's closure by the Central Bank was ruled arbitrary; the bank was not insolvent. Liquidator's actions annulled; CB ordered to reorganize and reopen the bank.
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Case Digest (G.R. No. 70054)

Facts:

Background of the Cases

This case involves nine (9) consolidated cases concerning the legality of the closure and receivership of Banco Filipino Savings and Mortgage Bank (Banco Filipino) by the Monetary Board of the Central Bank of the Philippines (CB). The main issue revolves around whether the closure and liquidation of Banco Filipino were justified and whether the liquidator appointed by the CB had the authority to act on behalf of the bank while the validity of the receivership was still pending.

G.R. No. 68878

  • Respondent Celestina Pahimuntung filed a motion for reconsideration, arguing that Banco Filipino, which was placed under receivership on January 25, 1985, no longer had the legal personality to prosecute the case.

G.R. Nos. 77255-58

  • Petitioners Top Management Programs Corporation and Pilar Development Corporation obtained loans from Banco Filipino, secured by real estate mortgages. After Banco Filipino was placed under receivership and liquidation, the liquidator, Carlota Valenzuela, initiated foreclosure proceedings on the petitioners' properties. The petitioners challenged the authority of the liquidator to proceed with the foreclosure while the validity of the receivership was still pending in G.R. No. 70054.

G.R. No. 78766

  • Petitioner El Grande Development Corporation obtained a loan from Banco Filipino, secured by real estate mortgages. After Banco Filipino was placed under receivership and liquidation, the liquidator initiated foreclosure proceedings. El Grande challenged the authority of the liquidator to foreclose the properties, citing a temporary restraining order issued by the Supreme Court in G.R. No. 70054.

G.R. No. 81303

  • Petitioner Pilar Development Corporation filed a case against Banco Filipino, the CB, and Carlota Valenzuela for specific performance. The trial court expunged an answer filed by a law firm representing Banco Filipino, leading to a petition for certiorari and mandamus, which was dismissed by the Court of Appeals.

G.R. No. 81304

  • Petitioner BF Homes Incorporated filed a case to compel the CB to restore its financing facility with Banco Filipino. The trial court dismissed the case, and the Court of Appeals affirmed the dismissal.

G.R. No. 70054 (Main Case)

  • Banco Filipino challenged the validity of Monetary Board Resolution No. 75, which placed the bank under receivership and liquidation on January 25, 1985. The bank argued that the resolution was arbitrary and that it was not insolvent at the time of closure.

G.R. Nos. 78767, 78894, 90473

  • These cases involve similar issues regarding the authority of the liquidator and the validity of the closure and liquidation of Banco Filipino.

Issue:

  1. Whether the closure and liquidation of Banco Filipino by the Monetary Board were valid and justified.
  2. Whether the liquidator appointed by the CB had the authority to prosecute and defend suits, as well as to foreclose mortgages, while the validity of the receivership was still pending.
  3. Whether the CB can be sued to fulfill financial commitments of a closed bank under Section 29 of the Central Bank Act.

Ruling:

  1. Validity of Closure and Liquidation: The Supreme Court ruled that the closure and liquidation of Banco Filipino were arbitrary and committed with grave abuse of discretion. The Court found that the bank was not insolvent at the time of closure, and the CB failed to provide sufficient justification for the closure.
  2. Authority of the Liquidator: The Court held that the liquidator did not have the authority to act on behalf of Banco Filipino while the validity of the receivership was still pending. The Court annulled the actions taken by the liquidator, including the foreclosure of properties.
  3. CB's Liability: The Court ruled that the CB cannot be sued to fulfill financial commitments of a closed bank under Section 29 of the Central Bank Act.

Ratio:

  1. Insolvency Not Proven: The Court found that the CB's determination of insolvency was based on incorrect deductions of valuation reserves. Adjusting the figures showed that Banco Filipino's liabilities did not exceed its assets, and thus, the bank was not insolvent.
  2. Lack of Justification for Closure: The CB failed to show that Banco Filipino was engaged in unsafe or unsound banking practices that warranted closure. The Court noted that the CB had previously granted the bank a P3 billion credit line, indicating that the bank was solvent and could be rehabilitated.
  3. Liquidator's Authority: The Court held that the liquidator's authority was limited by the pending resolution of the validity of the receivership. The liquidator could not act on behalf of the bank while the issue was still unresolved.
  4. CB's Duty to Reorganize: The Court emphasized that the CB has a duty to reorganize or rehabilitate a closed bank if it can resume business with safety to its depositors, creditors, and the general public. The Court ordered the CB to reorganize Banco Filipino and allow it to resume business under the comptrollership of the CB.

Dissenting Opinion

Justice Melencio-Herrera dissented, arguing that even if Banco Filipino was not insolvent, its illiquidity and inability to meet depositors' withdrawals justified its closure. She emphasized that the matter of reopening or reorganizing the bank should be left to the Monetary Board and the CB, which had already infused significant capital into the bank.

Conclusion:

The Supreme Court annulled the closure and liquidation of Banco Filipino, ruling that the bank was not insolvent and that the CB acted with grave abuse of discretion. The Court ordered the CB to reorganize the bank and allow it to resume business under strict supervision.


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