Case Summary (G.R. No. 76118)
Petitioners
– Central Bank of the Philippines, represented by the Monetary Board
– Ramon V. Tiaoqui, appointed receiver of Triumph Savings Bank
Respondents
– Court of Appeals (as quasi-party in review)
– Triumph Savings Bank (TSB), through its former officers
Key Dates
– May 31, 1985: MB issues Resolution No. 596 closing TSB, appointing Tiaoqui as receiver
– June 3, 1985: Receiver takes charge of TSB assets
– June 11, 1985: TSB files complaint in RTC QC challenging MB resolution; TRO issued
– July 19, 1985: RTC grants motion to quash TRO, denies injunction
– November 11, 1985: RTC orders restoration of TSB management subject to CB comptrollership
– September 26, 1986: Court of Appeals affirms RTC orders
– March 30, 1993: Supreme Court promulgates decision
Applicable Law
– Section 29, Republic Act No. 265 (as amended): grants MB exclusive power to close insolvent banks without prior hearing but allows judicial review for arbitrariness or bad faith within ten days
– 1987 Constitution, Article XII, Section 20: grants Central Bank supervisory authority over banking institutions
– Executive Order No. 289 (1987): restricts capacity to sue for annulment of MB resolutions to record stockholders holding majority capital
Antecedent Facts
Examination reports by the CB’s Supervision and Examination Sector concluded TSB was insolvent and posed probable loss to depositors. MB Resolution No. 596 closed TSB, prohibited further business, and placed it under receivership. TSB challenged the resolution in the Regional Trial Court (RTC), seeking annulment and injunctive relief, alleging denial of due process under Sec. 29.
Trial Court Proceedings
The RTC initially issued a temporary restraining order (TRO) against implementation of the MB resolution. Upon motion by CB and receiver, the TRO was quashed for failure to post bond and show arbitrary or bad-faith action. Subsequently, TSB sought restoration of its private management; the court denied CB’s motion to dismiss for failure to state a cause of action and ordered restoration under CB comptrollership.
Court of Appeals Ruling
The Court of Appeals upheld the RTC orders, ruling that (1) lack of prior notice and hearing could be construed as allegations of arbitrariness and bad faith warranting judicial review; (2) TSB had capacity to sue despite its insolvency; and (3) restoration of management mirrored prior Supreme Court precedent (Banco Filipino) subject to CB supervision.
Issues on Appeal
- Whether absence of prior notice and hearing before MB closure constitutes arbitrariness and bad faith sufficient to annul a receivership resolution
- Whether TSB’s former officers retained capacity to sue after closure and receivership
- Whether restoration of private management was proper under the circumstances
Due Process and Administrative Closure
Under Sec. 29, the MB may summarily close an insolvent bank without prior hearing (“close now, hear later”) to prevent asset dissipation, bank runs, and prejudice to depositors and creditors. Judicial review is provided by filing an appropriate action within ten days after receivership. The Supreme Court reaffirmed that procedural due process does not compel prior hearing in such police-power measures when subsequent judicial scrutiny is available.
Power and Policy Considerations
The banking business, being affected with public interest and involving fiduciary relationships with depositors, justifies swift administrative action under police power. The summary closure mechanism prevents panic withdrawals and preserves remaining assets. Prior hearing could frustrate regulatory objectives, allowing insiders to dissipate resources or destroy evidence of mismanagement.
Capacity to Sue
Prior to Executive Order No. 289 (effective July 1987), any party in interest could challenge an MB receivership resolution. The instant complaint was filed in June
...continue readingCase Syllabus (G.R. No. 76118)
Procedural History
- Petitioners filed a Rule 45 petition before the Supreme Court on 15 October 1986 to set aside the Court of Appeals decision in CA G.R. SP No. 07867 (26 September 1986).
- The Court of Appeals had affirmed the RTC of Quezon City’s 11 November 1985 orders denying the Central Bank’s motion to dismiss Civil Case No. Q-45139 and directing restoration of Triumph Savings Bank (TSB) management.
- RTC Civil Case No. Q-45139 (filed 11 June 1985) sought annulment of Monetary Board Resolution No. 596 and injunctive relief.
Antecedent Facts
- Supervision and Examination Sector reports indicated TSB’s insolvency and probable loss to depositors and creditors.
- On 31 May 1985, the Monetary Board issued Resolution No. 596:
- Ordered closure of TSB and prohibition from doing business.
- Placed TSB under receivership.
- Appointed Ramon V. Tiaoqui as receiver (assumed office 3 June 1985).
- 11 June 1985: TSB filed a complaint in RTC to annul Resolution 596, challenged Sec. 29 of R.A. 265 for allegedly denying due process.
- 1 July 1985: RTC granted a temporary restraining order against resolution implementation;
- 19 July 1985: RTC quashed the TRO and denied the injunction application.
- 25 July 1985: TSB filed a Rule 65 petition for certiorari in the Supreme Court (G.R. No. 71465);
- Central Bank and receiver moved to dismiss for failure to state a cause of action and lack of capacity to sue.
- 11 November 1985: RTC denied motions to dismiss and ordered restoration of TSB’s private management under CB