Facts:

The case involves Banco Filipino Savings and Mortgage Bank (Banco Filipino), which was placed under receivership and subsequently liquidation by the Monetary Board of the Central Bank of the Philippines on January 25, 1985. The bank had been authorized to operate under M.B. Resolution No. 223 on February 14, 1963, and commenced operations on July 9, 1964, with a significant number of depositors and branches. By July 31, 1984, the bank was reported to have a capital deficiency amounting to P334.956 million, primarily due to provisions for estimated losses on accounts classified as doubtful and loss. The Monetary Board, after reviewing reports from the Conservator and other officials, concluded that Banco Filipino was insolvent and could not continue operations without risking loss to its depositors and creditors. Consequently, the bank was placed under the receivership of Carlota Valenzuela, who was later designated as the liquidator.

Banco Filipino filed a complaint to ann...

Facts:

Consolidation of Cases

• Nine consolidated cases involving Banco Filipino Savings and Mortgage Bank’s closure and receivership were brought before the Court.
• The petitions span various issues including the authority of the liquidator to prosecute suits and foreclose mortgages, the validity of the bank’s receivership and liquidation, and whether the Central Bank can be sued for fulfilling financial commitments under Section 29 of the Central Bank Act.
• The cases are identified by G.R. Nos. 68878, 77255–58, 78766, 78767, 78894, 81303, 81304, 90473, and the main case, G.R. No. 70054.

Background and Timeline of Events

• Banco Filipino Savings and Mortgage Bank was initially authorized to operate through M.B. Resolution No. 223 (1963) and commenced operations in 1964, with a wide branch network and millions of depositors.
• In mid-1984, it received an approved emergency advance of P119.7 million and a P3 billion credit line from the Monetary Board, showing its active participation in the banking system.
• On July 23, 1984, the bank imposed a self‑imposed holiday, and on August 1, 1984, it reopened under the conservatorship of government-appointed officials.

Examination and Findings Leading to Receivership

• The Central Bank, through its examiners, conducted a financial examination as of July 31, 1984.
• The Teodoro Report (January 8, 1985) and the Tiaoqui Report (January 23, 1985) became central; the latter made a preliminary assessment of insolvency based on a partial list of findings and an incomplete discussion on valuation reserves.
• A conference on January 21, 1985 between the bank’s officers and the examiners attempted to clarify these preliminary findings, but critical issues—especially regarding the computation of valuation reserves—remained unresolved.
• Based on these reports, on January 25, 1985, the Monetary Board issued Resolution No. 75 ordering the closure of the bank and its placement under receivership.
• Subsequent actions included:
• Appointment of Carlota Valenzuela as Receiver and later as Liquidator; deputies Arnulfo Aurellano and Ramon Tiaoqui were also designated.
• Litigation involving foreclosure proceedings against borrowers such as Top Management Programs Corporation, Pilar Development Corporation, and El Grande Development Corporation, where petitioners alleged that foreclosure actions were taken while the fundamental issue of the bank’s closure was still pending resolution in G.R. No. 70054.

Court Procedures and Subsequent Hearings

• A temporary restraining order was issued in August 1985 to halt further acts of liquidation, though normal banking transactions were not entirely enjoined.
• Several referral hearings were conducted to determine whether there had been substantial administrative due process and proper evaluation of the bank’s financial condition.
• The Cosico Report (February 1988) and the Santiago Report (January 1991) provided conflicting assessments regarding the necessity and legality of the closure.
• Motions for reconsideration and petitions questioning:
• The authority of the liquidator to foreclose mortgages and litigate on behalf of the bank.
• Whether the bank, having been closed as a result of an alleged illusory insolvency, retained capacity to contest the closure.
• The validity of the procedures adopted pursuant to Section 29 of the Central Bank Act.
• Several motions for intervention were duly denied by the Court.

Issue:

Authority and Powers of the Liquidator

• Whether the appointed liquidator had the authority to prosecute, defend suits, and foreclose mortgages on behalf of Banco Filipino during the pendency of the validity proceedings.
• Whether actions taken by the liquidator through retained counsel were within the powers conferred by Section 29 of the Central Bank Act.

Validity of the Closure and Receivership

• Whether the closure of Banco Filipino Savings and Mortgage Bank by the Monetary Board on January 25, 1985, was valid.
• Whether the bank’s condition was sufficiently established as one of insolvency, or if its closure was premature and arbitrary.

Procedural and Evidentiary Requirements

• Whether the mandatory requirements under Section 29 of the Central Bank Act—such as a complete examination and adequate discussion of valuation reserves—were observed prior to ordering the bank’s closure.
• Whether the evidentiary basis for the conclusions on insolvency, including the use of partial examination findings and book value computations, met the standard of substantial evidence.

Remedial and Reorganization Measures

• Whether the Central Bank and Monetary Board could be compelled to reorganize and allow the bank to resume operations instead of being irreversibly liquidated.
• The appropriate measure to safeguard depositors, creditors, and the general public if the bank’s closure was not justifiably supported by the evidence.

Ruling:

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Ratio:

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Doctrine:

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