Case Digest (G.R. No. L-50031-32)
Facts:
Central Bank of the Philippines v. Honorable Court of Appeals, Isidro E. Fernandez, and Jesus R. Jayme, G.R. Nos. 50031-32, July 27, 1981, Supreme Court Second Division, Concepcion Jr., J., writing for the Court.The dispute arose from the financial distress and eventual liquidation proceedings of Provident Savings Bank (PROVIDENT). PROVIDENT was organized in 1963, began operations in December 1963, and grew to several extension offices. By end-1967 its paid-up capital reached P6.7 million. Respondents Isidro E. Fernandez and Jesus R. Jayme were majority/control stockholders (41% and 22% respectively). A substantial portion of PROVIDENT’s lending had been to insiders (directors, officers, stockholders), and the Central Bank had earlier cautioned against concentration of credits.
In September 1968 a bank run affected PROVIDENT; initial emergency loan requests to the Central Bank were denied, forcing PROVIDENT to borrow from other banks (notably Banco Filipino). After a temporary closure, the Central Bank extended emergency loans enabling PROVIDENT to reopen on September 16, 1968. The Central Bank, however, conditioned continued assistance on a change in management: Deputy Governor Amado Brinas pressed Fernandez and Jayme to relinquish control to representatives of the Iglesia Ni Kristo (INK)/Eagle Broadcasting Corporation (EAGLE). Under pressure, Fernandez and Jayme executed a Memorandum Agreement (December 6, 1968) and a Voting Trust Agreement; management passed to INK/EAGLE effective December 1, 1968, and the Central Bank thereafter extended further loans at reduced interest and allowed resumed lending.
Under INK/EAGLE management, however, PROVIDENT’s condition deteriorated: INK/EAGLE failed to honor commitments (did not convert deposits to equity, converted deposits into withdrawable “bills payable”), mismanaged the bank despite resident Central Bank examiners, assigned and mortgaged assets to EAGLE, and failed to comply with Monetary Board rehabilitation directives. The Central Bank rejected INK’s proposed rehabilitation plan (Monetary Board Res. No. 6, Jan. 7, 1972). Renewed withdrawals and worsened finances led the Monetary Board, invoking Section 29 of Republic Act No. 265, to adopt Resolution No. 1766 (Sept. 15, 1972) forbidding PROVIDENT from doing business, directing the Superintendent of Banks to take charge of its assets, and to proceed pursuant to Section 29.
On September 28, 1972, Fernandez and Jayme filed with the Court of First Instance (CFI) of Manila Sp. Proc. No. 88415 (petition for certiorari, prohibition and mandamus and/or specific performance, with preliminary injunction) to annul Monetary Board Resolution No. 1766, to restrain the Central Bank from liquidating PROVIDENT and to compel the Bank to reorganize and rehabilitate PROVIDENT as it had done in other cases (seeking damages as well). The Central Bank countered that PROVIDENT was insolvent and closure was proper under Sec. 29, RA 265. The Central Bank separately filed Sp. Proc. No. 89219 (Sept. 28, 1972) seeking court assistance and supervision in liquidation.
The two special proceedings were heard jointly. On February 20, 1974, the CFI granted the petitions in major part: it annulled and set aside Monetary Board Resolution No. 1766 (except it denied the writ of mandamus), ordered the Central Bank to desist from liquidating PROVIDENT and to specifically perform its obligation to reorganize and rehabilitate PROVIDENT (following precedents including the Overseas Bank of Manila impleme...(Pro-only)
Issues:
- Does Presidential Decree No. 1007 (amending Section 29 of Republic Act No. 265) — which made Monetary Board orders of closure and liquidation final and executory — apply to the Court of Appeals’ disposition and require dismissal of the petition absent convincing proof of arbitrariness or bad faith?
- Can the Central Bank be estopped by its prior representations and commitments to support and rehabilitate PROVIDENT (i.e., does promissory estoppel bar the Central Bank from liquidating the bank)?
- Did PROVIDENT’s prior extensions of substantial loans to insiders make liquidat...(Pro-only)
Ruling:
- (Pro-only)
Ratio:
- (Pro-only)
Doctrine:
- (Pro-only)