G.R. No. 61689. June 20, 1988.

RURAL BANK OF BUHI, INC., and HONORABLE JUDGE

CARLOS R. BUENVIAJE, petitioners, vs. HONORABLE
COURT OF APPEALS, CENTRAL BANK OF THE
PHILIPPINES and CONSOLACION ODRA, respondents.
Manuel B. Tomacruz and Rustico Pasilavan for petitioners.
I.B. Regalado, Jr. and Pacifico T. Torres for respondents.
DECISION
PARAS, J p:
This is a petition for review on certiorari with preliminary
mandatory injunction seeking the reversal of the orders of the Court
of Appeals dated March 19, 1982 and March 24, 1982 and its
decision) * (HATOL) promulgated on June 17, 1982 in CA-G.R.
No. 13944 entitled "Banko Central ng Pilipinas at Consolacion
Odra Laban Kina Rural Bank of Buhi (Camarines Sur), Inc." and
praying for a restraining order or a preliminary mandatory
injunction to restrain respondents from enforcing aforesaid orders
and decision of the respondent Court, and to give due course to the
petitioners' complaint in IR-428, pending before Hon. Judge Carlos
R. Buenviaje of Branch VII, CFI, Camarines Sur.
The decretal portion of the appealed decision reads:
"DAHIL DITO, ang utos ng pinasasagot sa Hukom noong ika-9 ng
Marso, 1982, ay isinasangi. Kapalit nito, isang utos and ipinalabas
na nag-uutos sa pinasasagot sa Hukom na itigil ang anumang
pagpapatuloy o pagdidinig kaugnay sa usaping IR-428 na
pinawawalang saysay din ng Hukumang ito.
SIYANG IPINAG-UUTOS."
The antecedent facts of the case are as follows:
The petitioner Rural Bank of Buhi, Inc. (hereinafter referred to as
Buhi) is a juridical entity existing under the laws of the Philippines.
Buhi is a rural bank that started its operations only on December
26, 1975 (Rollo, p. 86)
In 1980, an examination of the books and affairs of Buhi was
ordered conducted by the Rural Banks and Savings and Loan
Association (DRBSLA), Central Bank of the Philippines, which by
law, has charge of the supervision and examination of rural banks
and savings and loan associations in the Philippines. However, said
petitioner refused to be examined and as a result thereof, financial
assistance was suspended.
On January 10, 1980, a general examination of the bank's affairs
and operations was conducted and there were found by DRBSLA
represented by herein respondent Consolacion V. Odra, Director of
DRBSLA, among others, massive irregularities in its operations
consisting of loans to unknown and fictitious borrowers, where the
sum of P1,704,782.00 was past due and another sum of
P1,130,000.00 was also past due in favor of the Central Bank
(Rollo, p. 86). The promissory notes evidencing these loans were
rediscounted with the Central Bank for cash. As a result thereof,
the bank became insolvent and prejudiced its depositors and
creditors.
Respondent, Consolacion V. Odra, submitted a report
recommending to the Monetary Board of the Central Bank the
placing of Buhi under receivership in accordance with Section 29
of Republic Act No. 265, as amended, the designation of the
Director, DRBSLA, as receiver thereof. On March 28, 1980, the
Monetary Board, finding the report to be true, adopted Resolution
No. 583 placing Buhi, petitioner herein, under receivership and
designated respondent, Consolacion V. Odra, as Receiver, pursuant
to the provisions of Section 29 of Republic Act No. 265 as
amended (Rollo, p. 111).
In a letter dated April 8, 1980, respondent Consolacion V. Odra, as
receiver, implemented and carried out said Monetary Board
Resolution No. 583 by authorizing deputies of the receiver to take
control, possession and charge of Buhi, its assets and liabilities
(Rollo, p. 109).
Imelda del Rosario, Manager of herein petitioner Buhi, filed a
petition for injunction with Restraining Order dated April 23, 1980,
docketed as Special Proceedings IR-428 against respondent
Consolacion V. Odra and DRBSLA deputies in the Court of First
Instance of Camarines Sur, Branch VII, Iriga City, entitled Rural
Bank of Buhi vs. Central Bank, which assailed the action of herein
respondent Odra in recommending the receivership over Buhi as a
violation of the provisions of Sections 28 and 29 of Republic Act
No. 265 as amended, and Section 10 of Republic Act No. 720 (The
Rural Banks Act) and as being ultra vires and done with grave
abuse of discretion and in excess of jurisdiction (Rollo, p. 120).
Respondents filed their motion to dismiss dated May 27, 1980
alleging that the petition did not allege a cause of action and is not
sufficient in form and substance and that it was filed in violation of
Section 29, Republic Act No. 265 as amended by Presidential
Decree No. 1007 (Rollo, p. 36).
Petitioners, through their counsel, filed an opposition to the motion
to dismiss dated June 17, 1980 averring that the petition alleged a
valid cause of action and that respondents have violated the due
process clause of the Constitution (Rollo, p. 49).
Later, respondents filed a reply to the opposition dated July 1,
1980, claiming that the petition is not proper; that Imelda del
Rosario is not the proper representative of the bank; that the
petition failed to state a cause of action; and, that the provisions of
Section 29 of Republic Act No. 265 had been faithfully observed
(Rollo, p. 57).
On August 22, 1980, the Central Bank Monetary Board issued a
Resolution No. 1514 ordering the liquidation of the Rural Bank of
Buhi (Rollo, p. 108).
On September 1, 1981, the Office of the Solicitor General, in
accordance with Republic Act No. 265, Section 29, filed in the
same Court of First Instance of Camarines Sur, Branch VII, a
petition for Assistance in the Liquidation of Buhi, which petition
was docketed as SP-IR-553, pursuant to the Monetary Board
Resolution No. 1514 (Rollo, pp. 89; 264).
Meanwhile, respondent Central Bank filed on September 15, 1981,
in Civil Case No. IR-428 a Supplemental Motion To Dismiss on
the ground that the receivership of Buhi, in view of the issuance of
the Monetary Board Resolution No. 1514 had completely become
moot and academic (Rollo, p. 68) and the fact that Case SP-IR-553
for the liquidation of Buhi was already pending with the same
Court (Rollo, p. 69).
On October 16, 1981, petitioners herein filed their amended
complaint in Civil Case No. IR-428 alleging that the issuance of
Monetary Board Resolution No. 583 was plainly arbitrary and in
bad faith under aforequoted Section 29 of Republic Act No. 265 as
amended, among others (Rollo, p. 28). On the same day, petitioner
herein filed a rejoinder to its opposition to the motion to dismiss
(Rollo, p. 145).
On March 9, 1982, herein petitioner Judge Buenviaje, issued an
order denying the respondents' motion to dismiss, supplemental
motion to dismiss and granting a temporary restraining order
enjoining respondents from further managing and administering
the Rural Bank of Buhi and to deliver the possession and control
thereof to the petitioner Bank under the same conditions and with
the same financial status as when the same was taken over by
herein respondents (defendants) on April 16, 1980 and further
enjoining petitioner to post a bond in the amount of three hundred
thousand pesos (P300,000.00) (Rollo, p. 72).
The dispositive portion of said decision reads:
"WHEREFORE, premises considered, the motion to dismiss and
supplemental motion to dismiss, in the light of petitioners'
opposition, for want of sufficient merit is denied. Respondents are
hereby directed to file their answer within ten (10) days from
receipt of a copy of this order." (Rollo, p. 4).
On March 11, 1982, petitioner Buhi through counsel, conformably
with the above-mentioned order, filed a Motion to Admit Bond in
the amount of P300,220.00 (Rollo, pp. 78-80).
On March 15, 1982, herein petitioner Judge issued the order
admitting the bond of P300,220.00 filed by the petitioner, and
directing the respondents to surrender the possession of the Rural
Bank of Buhi, together with all its equipments, accessories, etc. to
the petitioners (Rollo, p. 6).
Consequently, on March 16, 1982, herein petitioner Judge issued
the writ of execution directing the Acting Provincial Sheriff of
Camarines Sur to implement the Court's order of March 9, 1982
(Rollo, p. 268). Complying with the said order of the Court, the
Deputy Provincial Sheriff went to the Buhi premises to implement
the writ of execution but the vault of the petitioner bank was locked
and no inventory was made, as evidenced by the Sheriffs Report
(Rollo, pp. 83-84). Thus, the petitioner herein filed with the Court
an "Urgent Ex-Parte Motion to Allow Sheriff Calope to Force
Open Bank Vault" on the same day (Rollo, p. 268). Accordingly,
on March 17, 1982, herein petitioner Judge granted the aforesaid
Ex-Parte Motion to Force Open the Bank Vault (Rollo, p. 269).
On March 18, 1982, counsel for petitioner filed another "Urgent
Ex-Parte Motion to Order Manager of City Trust to Allow
Petitioner to Withdraw Rural Bank Deposits" while a separate
"Urgent Ex-Parte Motion to Order Manager of Metrobank to
Release Deposits of Petitioners" was filed on the same date. The
motion was granted by the Court in an order directing the Manager
of Metro Bank-Naga City (Rollo, p. 269) to comply as prayed for.
In view thereof, herein respondents filed in the Court of Appeals a
petition for certiorari and prohibition with preliminary injunction
docketed as CA-G.R. No. 13944 against herein petitioners, seeking
to set aside the restraining order and reiterating therein that
petitioner Buhi's complaint in the lower court be dismissed (Rollo,
p. 270).
On March 19, 1982, the Court of Appeals issued a Resolution
(KAPASIYAHAN) in tagalog, restraining the Hon. Judge Carlos
R. Buenviaje, from enforcing his order of March 9, 1982 and
suspending further proceedings in Sp. Proc. No. IR-428 pending
before him while giving the Central Bank counsel, Atty. Ricardo
Quintos, authority to carry out personally said orders and directing
the "Punong Kawani" of the Court of Appeals to send telegrams to
the Office of the President and the Supreme Court (Rollo, p. 168).
Herein petitioners did not comply with the Court of Appeals' order
of March 19, 1982, but filed instead on March 21, 1982 a motion
for reconsideration of said order of the Court of Appeals, claiming
that the lower court's order of March 9, 1982 referred only to the
denial of therein respondents' motion to dismiss and supplemental
motion to dismiss and that the return of Buhi to the petitioners was
already an accomplished fact. The motion was denied by the
respondent court in a resolution dated June 1, 1982 (Rollo, p. 301).
In view of petitioners' refusal to obey the Court of Appeals' Order
of March 19, 1982, herein respondents filed with the Court of
Appeals a Motion to Cite Petitioners in Contempt, dated April 22,
1982 [Rollo, p. 174).
The Court of Appeals issued on May 24, 1982 an order requiring
herein petitioner Rural Bank of Buhi, Inc., through its then Acting
Manager, Imelda del Rosario and herein petitioner Judge Carlos
Buenviaje, as well as Manuel Genova and Rodolfo Sosa, to show
cause within ten (10) days from notice why they should not be held
in contempt of court, and further directing the Ministry of National
Defense or its representative to cause the return of possession and
management of the Rural Bank to the respondents Central Bank
and Consolacion Odra (Rollo, p. 180).
On June 9, 1982, petitioners filed their objection to respondents'
motion for contempt dated June 5, 1982 claiming that the
properties, subject of the order, had already been returned to the
herein petitioners who are the lawful owners thereof and that the
returning could no longer be undone (Rollo, p. 181).
Later, petitioners filed another motion dated June 17, 1982 for the
reconsideration of the resolution of June 1, 1982 of the Court of
Appeals alleging that the same contravened and departed from the
rulings of the Supreme Court that consummated acts or acts already
done could no longer be the subject of mandatory injunction and
that the respondent Court of Appeals had no jurisdiction to issue
the order unless it was in aid of its appellate jurisdiction, claiming
that the case (CA-G.R. No. 13944) did not come to it on appeal
(Rollo, p. 302).
As aforestated, on June 17, 1982, respondent Court of Appeals
rendered its decision (HATOL) setting aside the lower court's
restraining order dated March 9, 1982 and ordering the dismissal
of herein petitioners' amended complaint in Civil Case No. IR-428
(Rollo, p. 186).
On July 9, 1982, petitioners (respondents in CA-G.R. No. 13944)
filed a Motion for Reconsideration of the Decision dated June 17,
1982 insofar as the complaint with the lower court (Civil Case No.
IR-428 was ordered dismissed (Rollo, p. 305).
On August 23, 1982, the respondent Court of Appeals issued its
Resolution denying for lack of merit, herein petitioners' motion for
reconsideration of the resolution issued by the respondent Court of
Appeals on June 1, 1982 and set on August 31, 1982 the hearing of
the motion to cite the respondents in CA-G.R. No. SP-13944
(herein petitioner) for contempt (Rollo, p. 193).
At said hearing, counsel for Rural Bank of Buhi agreed and
promised in open court to restore and return to the Central Bank
the possession and control of the Bank within three (3) days from
August 31, 1982.
However on September 3, 1982, Rosalia Guevara, Manager
thereof, vigorously and adamantly refused to surrender the
premises unless she received a written order from the Court.
In a subsequent hearing of the contempt incident, the Court of
Appeals issued its Order dated October 13, 1982, but Rosalia
Guevara still refused to obey, whereupon she was placed under
arrest and the Court of Appeals ordered her to be detained until she
decided to obey the Court's Order (Rollo, pp. 273-274).
Earlier, on September 14, 1982 petitioners had filed this petition
even while a motion for reconsideration of the decision of June 17,
1982 was still pending consideration in the Court of Appeals.
In the resolution of October 20, 1982, the Second Division of this
Court without giving due course to the petition required
respondents to COMMENT (Rollo, p. 225).
Counsel for respondents manifested (Rollo, p. 226) that they could
not file the required comment because they were not given a copy
of the petition. Meanwhile, they filed an urgent motion dated
October 28, 1982 with the Court of Appeals to place the bank
through its representatives in possession of the Rural Bank of Buhi
(Camarines Sur), Inc. (Rollo, p. 237).
On December 9, 1982, petitioners filed a Supplemental Petition
with urgent motion for the issuance of a restraining order dated
December 2, 1982 praying that the restraining order be issued
against respondent court (Rollo, p. 229).
In the resolution of December 15, 1982, the Court resolved to
require petitioners to furnish the respondents with a copy of the
petition and to require the respondents to comment on both the
original and the supplemental petitions (Rollo, p. 243).
In a resolution of February 21, 1983, the Court NOTED Rosalia V.
Guevara's letter dated February 4, 1983 (Rollo, p. 252) addressed
to Hon. Chief Justice Enrique M. Fernando, requesting that she be
allowed to file a petition for the issuance of a writ of habeas corpus
(Rollo, p. 256).
At the hearing of the said petition on February 23, 1983 where the
counsel of both parties appeared, this Court noted the Return of the
Writ of Habeas Corpus as well as the release of petitioner Rosalia
V. Guevara from detention by the National Bureau of
Investigation. After hearing aforesaid counsel and petitioner
herself, and it appearing that the latter had resigned since January
18, 1983 as Manager of the Rural Bank of Buhi, Inc. and that the
Central Bank might avail of more than adequate legal measures to
take over the management, possession and control of the said bank
(and not through contempt proceedings and detention and
confinement of petitioner), with Assistant Solicitor General Andin
manifesting that respondents were not insisting on the continued
detention of petitioner, the Court Resolved to SET the petitioner at
liberty and to consider the contempt incident closed (Rollo, p. 339).
On April 11, 1983, respondents filed their comment on the original
and supplemental petitions.
Meanwhile, the Court of Appeals, acting on respondents' urgent
motion filed on October 28, 1982 ordered on April 13, 1983 the
return to the petitioners (herein respondents) or their duly
authorized representatives of the possession, management and
control of subject Rural Bank (Rollo, p. 319), together with its
properties.
On April 28, 1983, petitioner filed an urgent motion: (1) to give
due course to the petition and (2) for immediate issuance of a
Restraining Order against the respondent court to prevent it from
enforcing its aforesaid resolution dated April 13, 1983 and from
further proceeding in AC-G.R. No. 13944-SP (Rollo, p. 315).
On May 16, 1983, this Court resolved to deny the petition for lack
of merit (Rollo, p. 321). On July 25, 1983, petitioners filed their
verified Motion for Reconsideration (Rollo, p. 337) praying that
the HATOL dated June 17, 1982 of the Court of Appeals be set
aside as nulland void and that Special Proceedings No. IR-428 of
CFI-Camarines Sur, Iriga City, Branch VII, be ordered remanded
to the RTC of Camarines Sur, Iriga City, for further proceedings.
LLpr
A Motion for Early Resolution was filed by herein petitioners on
March 12, 1984 (Rollo, p. 348).
Petitioners raised the following legal issues in their motion for
reconsideration:
I. UNDER SEC. 29, R.A. 265, AS AMENDED, MAY THE
MONETARY BOARD (MB) OF THE CENTRAL BANK (CB)
PLACE A RURAL BANK UNDER RECEIVERSHIP WITHOUT
PRIOR NOTICE TO SAID RURAL BANK TO ENABLE IT TO
BE HEARD ON THE GROUND RELIED UPON FOR SUCH
RECEIVERSHIP?
II. UNDER THE SAME SECTION OF SAID LAW, WHERE
THE MONETARY BOARD (MB) OF THE CENTRAL BANK
(CB) HAS PLACED A RURAL BANK UNDER
RECEIVERSHIP, IS SUCH ACTION OF THE MONETARY
BOARD (MB) SUBJECT TO JUDICIAL REVIEW? IF SO,
WHICH COURT MAY EXERCISE SUCH POWER AND WHEN
MAY IT EXERCISE THE SAME?
III. UNDER THE SAID SECTION OF THE LAW, SUPPOSE A
CIVIL CASE IS INSTITUTED SEEKING ANNULMENT OF
THE RECEIVERSHIP ON THE GROUND OF
ARBITRARINESS AND BAD FAITH ON THE PART OF THE
MONETARY BOARD (MB), MAY SUCH CASE BE
DISMISSED BY THE IAC (THEN CA) ON THE GROUND OF
INSUFFICIENCY OF EVIDENCE EVEN IF THE TRIAL
COURT HAS NOT HAD A CHANCE YET TO RECEIVE
EVIDENCE AND THE PARTIES HAVE NOT YET
PRESENTED EVIDENCE EITHER IN THE TRIAL COURT OR
IN SAID APPELLATE COURT? (Rollo, pp. 330-331).
I. Petitioner Rural Bank's position is to the effect that due process
was not observed by the Monetary Board before said bank was
placed under receivership. Said Rural Bank claimed that it was not
given the chance to deny and disprove such claim of insolvency
and/or any other ground which the Monetary Board used in
justification of its action.
Relative thereto, the provision of Republic Act No. 265 on the
proceedings upon insolvency reads:
"SEC. 29. Proceedings upon insolvency. Whenever, upon
examination by the head of the appropriate supervising and
examining department or his examiners or agents into the condition
of any banking institution, it shall be disclosed that the condition
of the same is one of insolvency, or that its continuance in business
would involve probable loss to its depositors or creditors, it shall
be the duty of the department head concerned forthwith, in writing,
to inform the Monetary Board of the facts, and the Board may,
upon finding the statements of the department head to be true,
forbid the institution to do business in the Philippines and shall
designate an official of the Central Bank, or a person of recognized
competence in banking, as receiver to immediately take charge of
its assets and liabilities, as expeditiously as possible collect and
gather all the assets and administer the same for the benefit of its
creditors, exercising all the powers necessary for these purposes
including, but not limited to, bringing suits and foreclosing
mortgages in the name of the banking institution.
"The Monetary Board shall thereupon determine within sixty days
whether the institution may be recognized or otherwise placed in
such a condition so that it may be permitted to resume business
with safety to its depositors and creditors and the general public
and shall prescribe the conditions under which such redemption of
business shall take place as the time for fulfillment of such
conditions. In such case, the expenses and fees in the collection and
administration of the assets of the institution shall be determined
by the Board and shall be paid to the Central Bank out of the assets
of such banking institution.
"If the Monetary Board shall determine and confirm within the said
period that the banking institution is insolvent or cannot resume
business with safety to its depositors, creditors and the general
public, it shall, if the public interest requires, order its liquidation,
indicate the manner of its liquidation and approve a liquidation
plan. The Central Bank shall, by the Solicitor General, file a
petition in the Court of First Instance reciting the proceedings
which have been taken and praying the assistance of the court in
the liquidation of the banking institution. The Court shall have
jurisdiction in the same proceedings to adjudicate disputed claims
against the bank and enforce individual liabilities of the
stockholders and do all that is necessary to preserve the assets of
the banking institution and to implement the liquidation plan
approved by the Monetary Board. The Monetary Board shall
designate an official of the Central Bank or a person of recognized
competence in banking, as liquidator who shall take over the
functions of the receiver previously appointed by the Monetary
Board under this Section. The liquidator shall, with all convenient
speed, convert the assets of the banking institution to money or sell,
assign or otherwise dispose of the same to creditors and other
parties for the purpose of paying the debts of such bank and he may,
in the name of the banking institution, institute such actions as may
be necessary in the appropriate court to collect and recover
accounts and assets of the banking institution.
"The provisions of any law to the contrary notwithstanding the
actions of the Monetary Board under this Section and the second
paragraph of Section 34 of this Act shall be final and executory,
and can be set aside by the court only if there is convincing proof
that the action is plainly arbitrary and made in bad faith. No
restraining order or injunction shall be issued by the court enjoining
the Central Bank from implementing its actions under this Section
and the second paragraph of Section 34 of this Act, unless there is
convincing proof that the action of the Monetary Board is plainly
arbitrary and made in bad faith and the petitioner or plaintiff files
with the clerk or judge of the court in which the action is pending
a bond executed in favor of the Central Bank, in an amount to be
fixed by the court. The restraining order or injunction shall be
refused or, if granted, shall be dissolved upon filing by the Central
Bank of a bond, which shall be in the form of cash or Central Bank
cashier's check, in an amount twice the amount of the bond of the
petitioner, or plaintiff conditioned that it will pay the damages
which the petitioner or plaintiff may suffer by the refusal or the
dissolution of the injunction. The provisions of Rule 58 of the New
Rules of Court insofar as they are applicable and not inconsistent
with the provisions of this Section shall govern the issuance and
dissolution of the restraining order or injunction contemplated in
this Section.
"Insolvency, under this Act, shall be understood to mean the
inability of a banking institution to pay its liabilities as they fall due
in the usual and ordinary course of business: Provided, however,
that this shall not include the inability to pay of an otherwise non-
insolvent bank caused by extraordinary demands induced by
financial panic commonly evidenced by a run on the banks in the
banking community.
"The appointment of a conservator under Section 28-A of this Act
or the appointment of receiver under this Section shall be vested
exclusively with the Monetary Board, the provision of any law,
general or special, to the contrary notwithstanding."
It will be observed from the foregoing provision of law, that there
is no requirement whether express or implied, that a hearing be first
conducted before a banking institution may be placed under
receivership. On the contrary, the law is explicit as to the
conditions prerequisite to the action of the Monetary Board to
forbid the institution to do business in the Philippines and to
appoint a receiver to immediately take charge of the bank's assets
and liabilities. They are: (a) an examination made by the examining
department of the Central Bank; (b) report by said department to
the Monetary Board; and (c) prima facie showing that the bank is
in a condition of insolvency or so situated that its continuance in
business would involve probable loss to its depositors or creditors.
Supportive of this theory is the ruling of this Court, which
established the authority of the Central Bank under the foregoing
circumstances, which reads: prLL
"As will be noted, whenever it shall appear prima facie that a
banking institution is in 'a condition of insolvency' or so situated
'that its continuance in business would involved probable loss to its
depositors or creditors,' the Monetary Board has authority:
First, to forbid the institution to do business and appoint a receiver
therefor; and
Second, to determine, within 60 days, whether or not:
1) the institution may be reorganized and rehabilitated to such an
extent as to be permitted to resume business with safety to
depositors, creditors and the general public; or
2) it is indeed insolvent or cannot resume business with safety to
depositors, creditors and the general public, and public interest
requires that it be liquidated.
In this latter case (i.e., the bank can no longer resume business with
safety to depositors, creditors and the public, etc.) its liquidation
will be ordered and a liquidator appointed by the Monetary Board.
The Central Bank shall thereafter file a petition in the Regional
Trial Court praying for the Court's assistance in the liquidation of
the bank." . . . (Salud vs. Central Bank, 143 SCRA 590 1986).
Petitioner further argues, that there is also that constitutional
guarantee that no property shall be taken without due process of
law, so that Section 29, R.A. 265, as amended, could not have
intended to disregard and do away with such constitutional
requirement when it conferred upon the Monetary Board the power
to place Rural Banks under receivership (Rollo, p. 333).
The contention is without merit. It has long been established and
recognized in this jurisdiction that the closure and liquidation of a
bank may be considered as an exercise of police power. Such
exercise may, however, be subject to judicial inquiry and could be
set aside if found to be capricious, discriminatory, whimsical,
arbitrary, unjust or a denial of the due process and equal protection
clauses of the Constitution (Central Bank vs. Court of Appeals, 106
SCRA 155 1981).
The evident implication of the law, therefore, is that the
appointment of a receiver may be made by the Monetary Board
without notice and hearing but its action is subject to judicial
inquiry to insure the protection of the banking institution. Stated
otherwise, due process does not necessarily require a prior hearing;
a hearing or an opportunity to be heard may be subsequent to the
closure. One can just imagine the dire consequences of a prior
hearing: bank runs would be the order of the day, resulting in panic
and hysteria. In the process, fortunes may be wiped out, and
disillusionment will run the gamut of the entire banking
community.
In Mendiola vs. Court of Appeals, (106 SCRA 130), the Supreme
Court held: cdphil
"The pivotal issue raised by petitioner is whether or not the
appointment of a receiver by the Court of First Instance on January
14, 1969 was in order.
Respondent Court correctly stated that the appointment of a
receiver pendente lite is a matter principally addressed to and
resting largely on the sound discretion of the court to which the
application is made. This Tribunal has so held in a number of cases.
However, receivership being admittedly a harsh remedy, it should
be granted with extreme caution. Sound reasons for receivership
must appear of record, and there should be a clear showing of a
necessity therefor. Before granting the remedy, the court is advised
to consider the consequence or effects thereof in order to avoid
irreparable injustice or injury to others who are entitled to as much
consideration as those seeking it.
...
This is not to say that a hearing is an indispensable requirement for
the appointment of a receiver. As petitioner correctly contends in
his first assignment of error, courts may appoint receivers without
prior presentation of evidence and solely on the basis of the
averments of the pleadings. Rule 59 of the Revised Rules of Court
allows the appointment of a receiver upon an ex parte application."
There is no question that the action of the Monetary Board in this
regard may be subject to judicial review. Thus, it has been held that
the courts may interfere with the Central Bank's exercise of
discretion in determining whether or not a distressed bank shall be
supported or liquidated. Discretion has its limits and has never been
held to include arbitrariness, discrimination or bad faith (Ramos vs.
Central Bank of the Philippines, 41 SCRA 567 1971).
It has likewise been held that resolutions of the Monetary Board
under Section 29 of the Central Bank Act, such as: forbidding bank
institutions to do business on account of a "condition of
insolvency" or because its continuance in business would involve
probable loss to depositors or creditors; or appointing a receiver to
take charge of the bank's assets and liabilities, or determining
whether the bank may be rehabilitated or should be liquidated and
appointing a liquidator for that purpose, are under the law "final
and executory" and may be set aside only on one ground, that is "if
there is convincing proof that the action is plainly arbitrary and
made in bad faith" (Salud vs. Central Bank, supra).
There is no dispute that under the above-quoted Section 29 of the
Central Bank Act, the Regional Trial Court has jurisdiction to
adjudicate the question of whether or not the action of the
Monetary Board directing the dissolution of the subject Rural Bank
is attended by arbitrariness and bad faith. Such position has been
sustained by this Court in Salud vs. Central Bank of the Philippines
(supra).
In the same case, the Court ruled further that a banking institution's
claim that a resolution of the Monetary Board under Section 29 of
the Central Bank Act should be set aside as plainly arbitrary and
made in bad faith, may be asserted as an affirmative defense
(Sections 1 and 4b, Rule 6, Rules of Court) or a counterclaim
(Section 6, Rule 6, Section 2, Rule 72 of the Rules of Court) in the
proceedings for assistance in liquidation or as a cause of action in
a separate and distinct action where the latter was filed ahead of the
petition for assistance in liquidation (ibid; Central Bank vs. Court
of Appeals, 106 SCRA 143 1981). LexLib
III. It will be noted that in the issuance of the Order of the Court of
First Instance of Camarines Sur, Branch VII, Iriga City, dated
March 9, 1982 (Rollo, pp. 72-77), there was no trial on the merits.
Based on the pleadings filed, the Court merely acted on the Central
Bank's Motion to Dismiss and Supplemental Motion to Dismiss,
denying both for lack of sufficient merit. Evidently, the trial court
merely acted on an incident and has not as yet inquired, as
mandated by Section 29 of the Central Bank Act, into the merits of
the claim that the Monetary Board's action is plainly arbitrary and
made in bad faith. It has not appreciated certain facts which would
render the remedy of liquidation proper and rehabilitation
improper, involving as it does an examination of the probative
value of the evidence presented by the parties properly belonging
to the trial court and not properly cognizable on appeal (Central
Bank vs. Court of Appeals, supra, p. 156).
Still further, without a hearing held for both parties to substantiate
their allegations in their respective pleadings, there is lacking that
"convincing proof" prerequisite to justify the temporary restraining
order (mandatory injunction) issued by the trial court in its Order
of March 9, 1982.
PREMISES CONSIDERED, the decision of the Court of Appeals
is MODIFIED; We hereby order the remand of this case to the
Regional Trial Court for further proceedings, but We LIFT the
temporary restraining order issued by the trial court in its Order
dated March 9, 1982.
SO ORDERED.