1|Page

Earl Louie Masacayan – Banking Laws

Register of Deeds of Manila vs. China Banking Held: No. It should first comply with the requirements provided
for by law.
Facts: Panglinan and Chua, former employees of China
Banking, were charge of qualified theft. The former admitted
his civil liability and to satisfy such liability, He and his wife
executed a public instrument whereby he ceded and transfer to Perez vs. Monetary Board
the bank, a parcel of land in City of Manila. The registration was
Facts: Perez filed a writ of mandamus against the Monetary
denied because the transferee is an alien bank which is barred
Board to compel the latter to prosecute Roman and other
by the Constitution to ownership of real property in the
Republic bank officers for violations of General Banking Act.
Philippines.
The Monetary Board defended itself claiming that it was not
Issue: Whether or not alien-owned banks can acquire their specific duty to prosecute.
ownership land of the subject land by virtue of deed of transfer
Issue: Whether or not the Monetary Board has the duty to
to satisfy civil liability arising from criminal liability.
prosecute.
Held: No. Section 25 of Republic Act 337 allows a commercial
Held: No. It does not appear from the law that only the Central
bank to purchase and hold such real estate as shall be conveyed
Bank or its respondent officials can cause the prosecution of
to it in satisfaction of debts previously contracted in the course
alleged violations of banking laws. Said violations constitute a
of its dealings, We deem it quite clear and free from doubt that
public offense, the prosecution of which is a matter of public
the "debts" referred to in this provision are only those resulting
interest and hence, anyone can denounce such violations
from previous loans and other similar transactions made or
before the prosecuting authorities. Since Perez himself could
entered into by a commercial bank in the ordinary course of its
cause the filing of criminal complaints against those allegedly
business as such. Obviously, whatever "civil liability" — arising
involved in the anomalous loans, if any, then he has a plain,
from the criminal offense of qualified theft — was admitted in
adequate and speedy remedy in the ordinary course of law,
favor of appellant bank by its former employee, Alfonso
which makes mandamus against respondents improper.
Pangilinan, was not a debt resulting from a loan or a similar
transaction had between the two parties in the ordinary course
of banking business.
BDO vs. Mayuga

Facts: Bayuga and Zaballero executed a REM in favour of Acme

Republic vs. Security Credit (Now BDO) over Tolentino and Zaballeros’ land as a security for
a loan which purpose was for the acquisition of real estate
Facts: Security Credit was performing bank functions without
property in Tagaytay that was bought from Algue. Tolentino
the requisite certificate of authority from the Monetary Board
purchased a manager’s check. The bank claimed that the
of CB in soliciting and accepting deposit the public and lending
borrowers did not intend to pay the obligation to Algue which
out funds but in fact, Security credit’s article of incorporations
was a violation of Section 77 of RA 337 that made the bank
only authorize the former to engage primarily in financing
stopped payment of the manager’s check. With that,
agricultural, commercial and industrial projects and
Respondents filed an action for specific performance with the
secondarily, in buying and selling stocks and bonds of any
court granted but the bank appealed to CA and while pending
corporation, thereby constitutes ultravires in violation of the
appeal, the lower court issued a writ of execution of its
law. The Monetary Board of CB promulgated a resolution
judgement. CA affirmed the lower court decision.
declaring Security Credit as performing banking operations
without having complied with the requirements but inspite that Issue: Whether or not the Bank has the right to terminate the
that resolution, the corporation still performing banking loan and demand immediate payment.
activities, which had been constitute illegal banking operations.
Held: Yes. The bank has the right to terminate the loan and
Issue: Whether or not the corporation is allowed to engage in demand immediate payment if it finds that the borrower has
banking activities. not used the funds borrowed for the agreed purpose.
2|Page
Earl Louie Masacayan – Banking Laws
People vs. Jalandoni
Pacific Bank vs. Hart
Simex vs. CA
Facts: Simex, a private corporation engaged in exporting food
products to the United States, Canada and Middle East, was a
depositor of Traders Royal Bank and maintained a checking
account. The former made a 100,000 Peso deposit and
subsequently issued several checks was those were
dishonoured due to insufficient funds. That event made Simex’s
some local suppliers whom the dishonoured checks were issued
sent demand letters and warned Simex of criminal prosecution.
Other suppliers deferred Simex’s orders while others cancelled
the latter’s credit line. Simex complained to the bank and found
out that the 100,000 was not credited to the former’s account
because of the bank’s negligence.
Issue: Whether or not the bank is liable for damages.
Held. Yes. The depositor expects the bank to treat his account
with the utmost fidelity, whether such account consists only of
a few hundred pesos or of millions. The bank must record every
single transaction accurately, down to the last centavo, and as
promptly as possible. This has to be done if the account is to
reflect at any given time the amount of money the depositor
can dispose of as he sees fit, confident that the bank will deliver
it as and to whomever he directs. A blunder on the part of the
bank, such as the dishonor of a check without good reason, can
cause the depositor not a little embarrassment if not also
financial loss and perhaps even civil and criminal litigation.
Fidelity vs. Cenzon
Facts: Spouses Santiago are Fidelity’s depositor of 2 accounts
with an aggregate sum of 100,000 pesos. Unfortunately,
Fidelity acquired the status of insolvency and forbidden by the
monetary board to do business in the Philippines and also
instructed the superintendent of banks to take charge of
Fidelity’s assets. The Philippine Deposit Insurance paid the
Spouses 10,000 pesos. The monetary board then issued a
resolution directing Fidelity’s liquidation of affairs so the
Solicitor General filed a petition for assistance and supervision
before the CFI to assist Fidelity in the liquidation and in the
pendency of liquidation proceedings, the Spouses demanded
payment of remaining balance 90,000 pesos with interest.
Issue: Whether or not a bank disallowed by the Central Bank to
engage business in the Philippines is liable for the interest.
Held: No. It is settled jurisprudence that a banking institution
which has been declared insolvent and subsequently ordered
closed by the Central Bank of the Philippines cannot be held
liable to pay interest on bank deposits which accrued during
the period when the bank is actually closed and non-
operational.
Filipinas Mills vs. Dayrit
Sia vs. CA
Facts: Sia rented a safety deposit box of Security Bank to place
his stamp collection but those stamp collection were damaged
by flood the prompted Sia to file a case before the trial court
which favoured Sia. The CA reversed.
Issue: Whether or not the bank is liable for damages.
Held: Yes. The bank is liable for damages for its failure to notify
immediately to recover the stamps when the flood water
entered the room where those stamps were located and the
stipulation that the bank is not a depositary and not liable for
the contents of the safety deposit box is void for being contrary
to law and public policy.
PCIB vs. CA
Banas vs. Asia Pacific Finance
Facts: Banas executed a PN in favour of CG Dizon which was
endorsed to Asia Pacific and was secured by ChM over three
tractors. In compliance with the provisions of the PN, CG Dizon
made instalment payments on several occasions but defaulted
in the payment of the remaining instalments that prompted
Asia Pacific to send a demand letter to the former which was
unheeded triggering Asia Pacific to sue CG Dizon and its officer
Cenen Dizon. The ChM was forclosed but its proceeds are not
enough to cover the unpaid balance. Banas claimed that the PN
3|Page
Earl Louie Masacayan – Banking Laws
and the ChM were never intended to be legal but mere
subterfuge to conceal the loan with usurious interest.
Issue: Whether or not the transaction is null and void for
violating Banking Laws.
Held: No. The transaction between petitioners
and respondent was one involving not a loan but purchase
of receivables at a discount, well within the purview
of "investing, reinvesting or trading in securities" which an
investment company, like ASIA PACIFIC, is authorized to
perform and does not constitute a violation of the General
Banking Act. What is prohibited by law is for investment
companies to lend funds obtained from the public through
receipts of deposit, which is a function of banking
institutions. But here, the funds supposedly "lent" to
petitioners have not been shown to have been obtained from
the public by way of deposits, hence, the inapplicability of
banking laws.
Reyes vs. CA
th
Facts: PRCI sent four delegates to 20 ARC in Australia and with
that, the former applied for a foreign exchange deemed draft in
Australian dollars with FEB in favour of ARC secretariat to pay
the delegates’ registration fees. The application was denied at
first because FEB’s lack of any Australian Dollar account in any
bank in Sydney but PRCI’s chief cashier Reyes asked if there
could be a way for FEB to accommodate PRCI’s urgent need to
remit Australian dollars to Sydney. On response to that,
assistant cashier Yasis of a roundabout way of effecting the
requested demand. It was agreed that FEB would draw a
demand draft against WESTPAC Bank in Sydney payable to
Secretariat of ARC and WESTPAC Sydney would reimburse itself
from the US dollar account of FEB in WESTPAC New York.
Accordingly, FEB advised WESTPAC NY to honor the
reimbursement claim of the Sydney branch and debt to its
dollar account. Unfortunately, upon due presentment of ForEx
demand draft, the same was dishonoured because of the
improper decoding by the Sydney Branch and happened for the
second time.
Issue: Whether or not the bank should exercise extra ordinary
diligence in that case.
Held: No. The bank was not required to exert more effort than
the diligence of a good father in regard the sale and issuance of
the subject foreign exchange demand draft. The case at bar
does not involve the handling of petitioner’s deposit, if any,
with the respondent bank. Instead, the relationship involved
was that a buyer and seller, that is, between the respondent
bank as the seller of the subject foreign exchange draft, and
PRCI as the buyer of the same, with ARC Secretariat.
Consolidated Bank vs. CA
Facts: LC Diaz and Co. CPAs opened a saving account with Solid
Bank and in one incident, messenger Calapre was instructed to
deposit money on the said bank. Calapre left the passbook in
Solid bank because he had transaction to do in Allied Bank but
when Calapre returned, the passbook was said to be claimed by
other person. Personel of LC Diaz inquired with the Solod Bank
and gave the same answer. LC Diaz then after called and wrote
a formal latter to Solid bank to stop any transaction using the
lost passbook and on the same day, an unauthorized
withdrawal of 300,000 pesos was discovered. LC Diaz ordered
the bank to return the money.
Issue: Whether or not the bank is liable for the 300K.
Held: Yes. Solidbank is bound by the negligence of its
employees under the principle of command responsibility. The
bank must not only exercise high standards of integrity and
performance, but also, it must insure that it’s employees do
likewise because this is the only way to ensure that the bank
will comply with its fiduciary duty. However, the liability is
mitigated due to the contributory negligence of the depositor.
Citibank vs. Sps Cabamongan
BDO vs. JAPRL
Facts: BDO extended credit facilities to JAPRL and RFC and Jose
U. Arollado acted as JAPRL's sureties. Unfortunately, JAPRL
defaulted in the payment of four trust receipts soon after the
approval of its loan. BDO later learned from MRM Management
that JAPRL had altered and falsified its financial statements. It
allegedly bloated its sales revenues to post a big income from
operations for the concerned fiscal years to project itself as a
viable investment. The information alarmed petitioner and tried
to annul the credit accommodation. Citing relevant provisions
of the Trust Receipt Agreement it demanded immediate
payment of JAPRL's outstanding obligations.
4|Page
Earl Louie Masacayan – Banking Laws

Issue: Whether or not the bank has the right to annul the credit
accommodations and demand for its immediate payment.
Held: Yes. Should such statements prove to be false or incorrect
in any material detail, the bank may terminate any loan or
credit accommodation granted on the basis of said statements
and shall have the right to demand immediate repayment or
liquidation of the obligation.
PSB vs. Chowking
Held: Yes. In the case at bar, respondents-spouses were the
bank's depositors. The checks were drawn against respondents-
spouses' accounts. PNB, as the drawee bank, had the
responsibility to ascertain the regularity of the indorsements,
and the genuineness of the signatures on the checks before
accepting them for deposit. Lastly, PNB was obligated to pay
the checks in strict accordance with the instructions of the
drawers. Petitioner miserably failed to discharge this burden.

PNB vs. Rodriguez

Facts: PEMSLA regularly granted loans to its members. Spouses

Rodriguez would rediscount the postdated checks issued to
members whenever the association was short of funds. As was
customary, the spouses would replace the postdated checks
with their own checks issued in the name of the members. It
was PEMSLA’s policy not to approve applications for loans of
members with outstanding debts. To subvert this policy, some
PEMSLA officers devised a scheme to obtain additional loans
despite their outstanding loan accounts. They took out loans in
the names of unknowing members, without the knowledge or
consent of the latter. The PEMSLA checks issued for these loans
were then given to the spouses for rediscounting. The officers
carried this out by forging the indorsement of the named
payees in the checks. In return, the spouses issued their
personal checks (Rodriguez checks) in the name of the
members and delivered the checks to an officer of PEMSLA. The
PEMSLA checks, on the other hand, were deposited by the
spouses to their account. Meanwhile, the Rodriguez checks
were deposited directly by PEMSLA to its savings account
without any indorsement from the named payees. This was an
irregular procedure made possible through the facilitation of
Edmundo Palermo, Jr., treasurer of PEMSLA and bank teller in
the PNB Branch. It appears that this became the usual practice
for the parties. For the period November 1998 to February
1999, the spouses issued sixty nine (69) checks. These were
payable to forty seven (47) individual payees who were all
members of PEMSLA. Petitioner PNB eventually found out
about these fraudulent acts. To put a stop to this scheme, PNB
closed the current account of PEMSLA. As a result, the PEMSLA
checks deposited by the spouses were returned or dishonored
for the reason "Account Closed." The corresponding Rodriguez
checks, however, were deposited as usual to the PEMSLA
savings account. The amounts were duly debited from the
Rodriguez account. Thus, because the PEMSLA checks given as
payment were returned, spouses Rodriguez incurred losses
from the rediscounting transactions.

Issue: Whether or not the bank is liable.

5|Page
Earl Louie Masacayan – Banking Laws
Bank of America vs. ABC
Facts: BA-Finance entered into a transaction with Miller,
through the latter’s authorized representatives, BA-Finance
granted Miller a credit line facility through which the latter
could assign or discount its trade receivables with the former.
Miller’s Authorized representatives executed a Continuing
Suretyship Agreement with BA-Finance whereby they jointly
and severally guaranteed the full and prompt payment of any
and all indebtedness which Miller may incur with BA-Finance.
Miller assigned several trade receivables to BA-Finance by
executing Deeds of Assignment in favor of the latter. In
consideration of the assignment, BA-Finance issued four checks
payable to the "Order of Miller Offset Press, Inc." with the
notation "For Payee’s Account Only." The four checks were
deposited by Ching Uy Seng, then the corporate secretary of
Miller Associated Bank and that account is a joint bank account
under the names of Ching Uy Seng and Uy Chung Guan Seng.
Associated Bank stamped the checks with the notation "all
prior endorsements and/or lack of endorsements guaranteed,"
and sent them through clearing. Later, the drawee bank, Bank
of America, honored the checks and paid the proceeds to
Associated Bank as the collecting bank. Miller failed to deliver
to BA-Finance the proceeds of the assigned trade receivables.
Consequently, BA-Finance filed a Complaint against Miller for
collection which BA-Finance allegedly paid in consideration of
the assignment. Miller, Uy Kiat Chung, and Uy Chung Guan Seng
filed a Joint Answer with Cross-Claim against Ching Uy Seng,
wherein they denied that (1) they received the amount covered
by the four Bank of America checks, and (2) they authorized
their co-defendant Ching Uy Seng to transact business with BA-
Finance on behalf of Miller. Uy Kiat Chung and Uy Chung Guan
Seng also denied having signed the Continuing Suretyship
Agreement with BA-Finance. In view thereof, BA-Finance filed
an Amended Complaint impleading Bank of America as
additional defendant for allegedly allowing encashment and
collection of the checks by person or persons other than the
payee named thereon. Ching Uy Seng, on the other hand, did
not file his Answer to the complaint. Bank of America filed a
Third Party Complaint against Associated Bank. In its Answer to
the Third Party Complaint, Associated Bank admitted having
received the four checks for deposit in the joint account of
Ching Uy Seng and Uy Chung Guan Seng, but alleged that
Robert Ching, being one of the corporate officers of Miller, was
duly authorized to act for and on behalf of Miller.
Issue: Whether or not Bank of America is liable to pay BA-
Finance the amount of the four checks.
Held: No. The bank on which a check is drawn, known as the
drawee bank, is under strict liability, based on the contract
between the bank and its customer (drawer), to pay the check
only to the payee or the payee’s order. The drawer’s
instructions are reflected on the face and by the terms of the
check. When the drawee bank pays a person other than the
payee named on the check, it does not comply with the terms
of the check and violates its duty to charge the drawer’s
account only for properly payable items. Thus, SC ruled
in Philippine National Bank v. Rodriguez that a drawee should
charge to the drawer’s accounts only the payables authorized
by the latter; otherwise, the drawee will be violating the
instructions of the drawer and shall be liable for the amount
charged to the drawer’s account.
Ramos vs. CB
The Central Bank suspended OBM from clearing with the CB
and from lending operations due to the violation of banking
laws. The petitioners, who are the majority stockholders of
OBM, contend that the bank became financially distressed
because of that suspension. Later, the financial situation of the
OBM had cause mounting concern in the CB then Ramos and
the OBM management had a meeting with CB for the necessity
and urgency of the rehabilitation of the OBM through the
extension of necessary finance assistance. The CB governor
upon instructions of the MB informed Ramos that if his bank is
thrown out from clearing, he and the officers representing the
majority of the stockholders will have to sign with the PNB a
trusteeship agreement. In view of the OBM stockholders'
reluctance to execute the Voting Trust suggested, the
Monetary Board adopted Resolution No. 2015 requiring Ramos
to submit a listing of his properties and to mortgage or assign
the same to the CB to cover the overdraft balance therewith of
the OBM and the stockholders to subscribe to an appropriate
VTA so that the CB may be able to effect a complete
reorganization and/or transfer the management of the bank to
a nominee of the MB. Afterwards, the petitioners executed the
VTA and they also conveyed through mortgage to the CB all
their property holdings to secure the bank’s obligation to CB.
Then the new management took over the OBM. Later on, CB
announced that only 10 Million were available as emergency
loan to OBM requested the bank’s management to project how
it could help bail out the bank. The MB, as the superintendent
of bank recommended, ordered the latter to liquidate the
OBM. The petitioners seek to restrain the CB to enforce that
resolution.
Issue: Whether or not CB agreed to rehabilitate OBM.
6|Page
Earl Louie Masacayan – Banking Laws
Held: Yes. Even in the absence of contract, the record plainly
shows that the CB made express representations to petitioners
herein that it would support the OBM, and avoid its liquidation
if the petitioners would execute (a) the Voting Trust Agreement
turning over the management of OBM to the CB or its
nominees, and (b) mortgage or assign their properties to the
Central Bank to cover the overdraft balance of OBM. The
petitioners having complied with these conditions and parted
with value to the profit of the CB (which thus acquired
additional security for its own advances), the CB may not now
renege on its representations and liquidate the OBM, to the
detriment of its stockholders, depositors and other creditors,
under the rule of promissory estoppel.
Central Bank vs. CA and Fernandez
Facts: Fernandez and Jayme are the majority and controlling
stockholder of Provident that experienced a bank run because
of adverse publicity that some banks were unable to pay
deposit withdrawals that prompted the bank to request to CB
for emergency loans which MB denied that made Provident to
borrow from other banks. These loans were still not enough
and the bank was forced to close. But hereinafter, the CB
extended the emergency loans that enabled the bank to
reopen. However, the withdrawals did not stop and the
assistance given was insufficient. Fernandez and Jaime
appealed for continued assistance and the two were called for
a conference with the Governor and Deputy Governor and
were introduced to the representatives of INC which has a large
deposit with the bank and having a hard time of withdrawing
the same. The Governor told the two that unless they turn over
the management to INC, the CB would not give assistance the
bank anymore and so they reluctantly executed a MoA with
EBC (identified with INC). After the transfer to INC, the CB
released the additional loans to the bank. But however, the EBC
did not comply with its commitment to buy common shares of
stock and to convert its deposits into equity and instead, that
new management caused the conversion of the deposits of INC
into bills payable which were later on withdrawn. The new
management made a number of irregularities detrimental to
the bank making the condition of the bank to be worst so that
the MB decided to forbid the bank form doing business after
considering that the stockholders of INC/EBC group have not
come up with concrete and substantial proposals towards the
rehabilitation of the bank. The private respondents filed a
petition against CB and EBC seeking to annul the MB resolution
and to restrain CB from liquidating the bank and instead
ordered the CB to comply with its commitments to the bank
and reorganize the same. CB contends that they cannot be
estopped in view of a valid exercise of police power.
Issue: Whether or not the CB’s exercise of police power cannot
be subject to judicial review and be set aside.
Held: No. While the closure and liquidation of a bank may be
considered an exercise of Police Power, the validity of such
exercise of power is subject to judicial inquiry and could be set
aside if it is either capricious, discriminatory, whimsical,
arbitrary, unjust or a denial of the due process and equal
protection clause of the constitution.
Central Bank of the Philippines vs. CA
Salud vs. CB
Facts: CB filed a petition for the assistance in the liquidation of
Rural Bank of Muntinlupa, for the enforcement of the
resolutions of MB disallowing the bank to do business and
ordering its liquidation for the ground of insolvency. The bank
answered that its liquidation was premature and void since the
law mandates that before liquidation, it is the CB’s primordial
duty to reorganize the management and to restore its viability
and the actions of liquidation is arbitrary and in bad faith
because the bank is still capable of rehabilitation and consistent
with the prior actions of CB of similarly distressed banks. RTC
declared that the actions of MB are arbitrary and in bad faith,
hence, dismissed the petition of CB. CB filed with SC a petition
for certiorari and referred the case to IAC which declared that
while the Monetary Board had power to determine "whether a
rural bank's continuance in business would involve probable
loss to its clients or creditors, etc.," the matter of "whether or
not such findings by the Monetary Board is equipped with
abuse in its issuance is subject to judicial inquiry, however,
because the Region Trial Court "dismissed outright the petition
for assistance on the basis of respondents' opposition" without
a "hearing held for both parties to substantiate their allegations
in their respective pleadings, "it had exceeded its authority. IAC
remanded the case to RTC but upon MR, the petition for
certiorari is granted.
7|Page
Earl Louie Masacayan – Banking Laws
Issue: Whether or not resolution of the MB can be set aside for
being plainly arbitrary and made in bad faith and can be used as
an affirmative defence.
Held: Yes. Resolution of the MB forbidding the bank to do
business can be set aside for being plainly arbitrary and made in
bad faith and can be used as an affirmative defence of a
counter claim in the proceeding for the assistance in liquidation
that the CB has filed in the RTC.
Lipana vs. DBR
Facts: Spouses Lipana opened and maintained both time and
saving deposits with DBR. However, when some of the time
deposit certificates matured, the spouses were not able to cash
them but instead were issued a manager’s check which was
dishonoured upon presentment. Failure to meet the demand of
both deposits made the spouses file with the RTC a complaint
for collection for sum of money with damages along with writ
of preliminary attachment which was issued in favour of the
petitioners thereafter, the RTC ordered the bank to pay the
spouses. Meanwhile, pending appeal, the MB placed the bank
under receivership and the spouses filed a motion for execution
pending appeal which is granted but the bank filed a motion to
stay execution which is also granted.
Issue: Whether the judge could legally stay execution of
judgment that has already become final and executory.
Held: Yes. In the instant case, the stay of the execution of
judgment is warranted by the fact that respondent bank was
placed under receivership. To execute the judgment would
unduly deplete the assets of respondent bank to the obvious
prejudice of other depositors and creditors, since, after the MB
has declared that a bank is insolvent and has ordered it to
cease operations, the Board becomes the trustee of its assets
for the equal benefit of all the creditors, including depositors.
The assets of the insolvent banking institution are held in trust
for the equal benefit of all creditors, and after its insolvency,
one cannot obtain an advantage or a preference over another
by an attachment, execution or otherwise.
Overseas Bank vs. CA and NAWASA
Facts: NAWASA made two time deposits to OVERSEAS BANK.
One day, NAWASA wrote a letter saying that the first time
deposit has matured and intended to withdraw the same
immediately and to withdraw the second time deposit sixty
days afterwards which the bank both failed to remit. On the
later date, the bank payed the NAWASA interest on its time
deposit. After the maturity of the second time deposit was due,
NAWASA wrote again a letter giving the bank 5 days to comply
and warned that it would seek the intervention of the CB for
the protection of the latter’s interest but it was unheeded.
NAWASA filed an action to recover the deposits which was
favored and affirmed by CA. The bank used the suspension of
its banking operation as an excuse.
Issue: Whether or not the suspension is a defense for not
paying NAWASA.
Held: No. The claim that it had fallen into a "distressed financial
situation," cannot in any sense excuse it from its obligation to
the NAWASA, which had nothing whatever to do with the
Central Bank's actuations or the events leading to the bank's
distressed state. the suspension of operations could not
possibly excuse non-compliance with the obligations in
question which matured in before the bank’s closure.
Banco Filipino vs. CB
Facts: The case refers to nine consolidated cases concerning the
legality of the closure and receivership of Banco Filipino
pursuant to the order of the MB. In this case, the MB issued a
resolution finding the bank insolvent and unable to do business
without loss to its creditors and depositors and that placed the
bank under receivership and placed under liquidation later on.
Banco Filipino filed with the SC the instant petition to annul the
resolution of MB as made without or in excess of jurisdiction or
with grave abuse of discretion, to order the the CB to furnish
the petitioner with reports of examination which led to its
closure and afford Banco Filipino a hearing prior to any
resolution that may be issued under Section 29 of CB Act. The
corresponding report was made which recommended the
placing of the bank under receivership and its liquidation.
Issues: Whether or not the CB acted arbitrarily and in bad faith
in finding the bank insolvent and ordering its closure.
Held: Yes. Monetary Board are ordered to reorganize petitioner
Banco Filipino Savings and Mortgage Bank and allow the latter
to resume business in the Philippines under the comptrollership
of both the Central Bank and the Monetary Board and under
such conditions as may be prescribed by the latter in
8|Page
Earl Louie Masacayan – Banking Laws
connection with its reorganization until such time that
petitioner bank can continue in business with safety to its
creditors, depositors and the general public. There is no
question that under Section 29 of the Central Bank Act, the
following are the mandatory requirements to be complied with
before a bank found to be insolvent is ordered closed and
forbidden to do business in the Philippines: Firstly, an
examination shall be conducted by the head of the appropriate
supervising or examining department or his examiners or
agents into the condition of the bank; secondly, it shall be
disclosed in the examination that the condition of the bank is
one of insolvency, or that its continuance in business would
involve probable loss to its depositors or creditors; thirdly, the
department head concerned shall inform the Monetary Board
in writing, of the facts; and lastly, the Monetary Board shall find
the statements of the department head to be true.
Issue: Whether or not the liquidator appointed by the
respondent Central Bank has the authority to prosecute as well
as to defend suits, and to foreclose mortgages for and in behalf
of the bank while the issue on the validity of the receivership
and liquidation of the latter is pending resolution.
Held: Yes. Even if the bank is questioning the validity of its
closure, during the pendency of the case the liquidator can
continue prosecution suits for collection and foreclosure of
mortgages, as they are acts done in usual course of
administration of the bank.
CB vs. CA, Guadiz and Producers Bank
Facts: Petitioners claimed that during the regular examination
of PBP, CB examiners stumbled upon some highly questionable
loans which had extended by the PBP management to several
entities. During further examination, it was discovered that the
loans were fictitious because they don’t have collateral when
they were extended to certain interest related to PBP owners
themselves. Said loans were deemed to be anomalous and
these means that the entire paid-in capital of the bank was
utilized by PBP management to fund these unsecured loans.
Several blind items about a family-owned bank in Binondo
which granted fictitious loans to its stockholders appeared in
the major newspapers that prompted a bank-run in PBP which
resulted in continuous over-drawings on the bank’s demand
deposit account with the CB. The MB place afterwards PBP in
conservatorship. PBP submitted a rehabilitation plan to the CB
which proposed the transfer to PBP the three buildings owned
by PPI, its principal stockholder and the subsequent mortgage
of the said properties to CB as collateral for obligation of the
bank. The plan was not approved and the CBMB decided to
approve in principle what it considered a viable rehabilitation
program for PBP, with the condition imposed by CB. PBP then
filed a complaint against CB with the RTC contending that the
MB Resolutions were issued arbitrarily and with bad faith,
being part of the scheme to divest present stockholders of their
control of PBP and to award the same to the PDIC or its unkown
transferees. The RTC issued the TRO and denied CB’s motion to
dismiss; CB appealed to CA which was denied. In the interim,
Encarnacion, in her capacity as conservator instituted reforms
to make PSP more viable. A conservator, once appointed, takes
over the management of the bank and assumes exclusive
powers to oversee every aspect of the bank’s operation and
affairs.
Issue: Whether or not the conservatorship may be set aside int
hat case.
Held: No. The following requisites, therefore, must be present
before the order of conservatorship may be set aside by a
court: 1. The appropriate pleading must be filed by the
stockholders of record representing the majority of the capital
stock of the bank in the proper court; 2. Said pleading must be
filed within ten (10) days from receipt of notice by said majority
stockholders of the order placing the bank under
conservatorship; and 3. There must be convincing proof, after
hearing, that the action is plainly arbitrary and made in bad
faith. In the instant case, PBP was placed under conservatorship
on 20 January 1984. The original complaint in Civil Case No.
17692 was filed only on 27 August 1987, or three (3) years,
seven (7) months and seven (7) days later, long after the
expiration of the 10-day period deferred to above. It is also
beyond question that the complaint and the amended
complaint were not initiated by the stockholders of record
representing the majority of the capital stock. Accordingly, the
order placing PBP under conservatorship had long become final
and its validity could no longer be litigated upon before the trial
court. It was precisely an awareness of the futility of any action
to set aside the conservatorship which prompted PBP to limit
its action to a claim for damages and a prayer for an injunction
against the implementation of MB Resolution Nos. 649 and
751. However, to make it appear that it had a meritorious case
and a valid grievance against the Central Bank, it wandered
long into the past and narrated a sad story of persecution,
oppression and injustice since the inception of the
conservatorship –– obviously to gain the sympathy of the court,
which it eventually obtained.
First Philippine International Bank vs. CA
9|Page
Earl Louie Masacayan – Banking Laws

Facts: Demetria and Janolo wanted to buy six parcel of land
from FBI (Formerly PBP) and in pursuance thereof, Demetria
and Janola met with the manager of Property Management
Department (Rivera) of the bank and through the latter’s
advice, Demetria and Janolo made a formal purchase offer to
the bank via a letter. There is a series of exchange of
correspondence until no response was made by the bank and
instead a meeting was held between the plaintiffs and the bank
officials and two days after, Janolo sent the bank a letter
increasing the offered price to 5M. In the interim, the
conservator off the bank was replaced by Encarnacion, which
made Rivera to advise Demetria that the proposal to buy was
being studied in exchange of the replacement of
conservatorship. But what thereafter transpired was a series of
demands by the plaintiffs for compliance by the bank with what
they considered as a perfected contract of sale, which demands
were in one form or another refused by the bank.
Issue: Whether the conservator may revoke the perfected and
enforceable contract.
Held. No. While admittedly, the Central Bank law gives vast and
far-reaching powers to the conservator of a bank, it must be
pointed out that such powers must be related to the
“(preservation of) the assets of the bank, (the reorganization
of) the management thereof and (the restoration of) its
viability.” Such powers, enormous and extensive as they are,
cannot extend to the post-facto repudiation of perfected
transactions, otherwise they would infringe against the non-
impairment clause of the Constitution.
Issue: Whether or not the RTC has jurisdiction to hear the
petition for the surrender of the TCTs considering that there is
a liquidation court.
Held: No. All claims against the bank should be filed in the
liquidation court.
Manalo vs. CA
Facts: S. Villianueva Enterprises, represented by its president,
T.V. Vargas, obtained a loan from PAIC Savings and Mortgage
Bank and PAIC and executed a REM to secure the loan. S.
Villanueva defaulted on the payment the prompted the bank to
extrajudicially forclose the REM where PAIC is the highest
bidder. The CB, then, filed a petition with the RTC for assistance
in the liquidation of of PAIC. Vargas negotiated with PAIC for
the repurchase of the parcel of lands, but failed to reacquire
them because she cannot afford the repurchase price. Vargas
then filed for annulment of REM which was dismissed.
Meanwhile, PAIC filed a petition for the issuance of writ of
possession with the RTC for the subject property. During the
pendency of the case, Vargas sold the disputed land to
Armando Angsico. Vargas, still representing herself as the legal
owner, leased the property to Manalo. RTC issued the writ of
possession but Manalo assailed it issuance insisting that the
power to hear the same vest exclusively with the liquidation
court.
Issue: Whether or not the issuance of the writ of possession
should be filed eith the liquidation court.

Held: No. The rule that all claims against a bank under
Ong vs. CA
liquidation must be filed in the proceedings for its liquidation
Facts: Rural Bank of Olongapo mortgaged two parcels of land in does not apply to a petition for the issuance of writ of
favour of Ong to secure the payment of Omnibus Finance which possession for the foreclosed property filed by the bank. The
both entities are undergoing liquidation proceedings. That REM petition for the issuance of writ of possession is not in the
was extrajudicially forclose by Ong and RBO failed to redeem nature of a disputed claim against the bank. On the contrary, it
the property but Ong was not able to register the property in is an action instituted by the bank itself for the preservation of
his name due to the refusal of RBO to surrender the owner’s its asset and protection of its property.
copy of the Certificate of Title. With that, Ong filed with the RTC
a petition to surrender the TCTs but RBO opposed for the
ground that it is the liquidation court which has the exclusive
jurisdiction to take cognizance of the petitioner’s claim. Ong
countered it saying that he should be allowed to consolidate his
title considering that RBO failed to redeem said properties and
that the liquidation court has no jurisdiction over the subject
parcels of land since they are no longer assets of RBO.
10 | P a g e
Earl Louie Masacayan – Banking Laws
Rural Bank of Sta. Catalina vs. Land Bank
Facts: Land Bank and RBSC contracted into rediscounting
agreements wherein on different occasions the latter made
availments of the same. Unfortunately, RBSC failed to pay some
of the balance that led Land Bank to file a complaint against the
former. RCSC was served with a copy of the summons and the
compliant but the same failed to files its answer to that and
with that, upon motion of the Land Bank, RBSC was declared in
default. In spite of that, RBSC still failed to file a motion to set
aside the order of default and Land Bank, afterwards,
presented testimonial and documentary evidence. In the
interim, RBSC underwent liquidation proceedings PDIC was
designated as receiver moreover RBSC was prohibited from
doing business in the Philippines. RBSC still failed to file any
verified motion to set aside the order of default and unaware of
the action of the CB, RTC rendered judgement by default
against the Rural Bank. After that, the Rural Bank receive a copy
of the decision but it did not file a MR or Motion to Set Aside
the order of default. The Rural Bank appealed the decision but
it failed to assign error the order of default of the RTC and
contended that in accordance with the SC decision in Overseas
Bank vs. CA that since it was placed under receivership, and
prohibited from doing business in the Philippines, it should no
longer be held liable for interests and penalties on its account
to the respondent bank. RTC, affirm by CA, ruled in favour of
Land Bank.
Issue: Whether or not a party who had been declared in default
is entitled to relief from the judgment by default based on
evidence presented only in the appellate court, when such
order of default was not vacated by the trial court prior to the
appeal from the judgment of default was not raised therein,
much less resolved by the Court.
Ruling: No. The records show that the petitioner was served
with a copy of summons and the complaint, but failed to file its
answer thereto. It also failed to file a verified motion to set
aside the Order of default dated January 23, 1997 despite its
receipt of a copy thereof. We note that the trial court rendered
judgment only on April 7, 1998 or more than a year after the
issuance of the default order; yet, the petitioner failed to file
any verified motion to set aside the said order before the
rendition of the judgment of default. The PDIC was designated
by the Central Bank of the Philippines as receiver (conservator)
as early as January 14, 1998, and in the course of its
management of the petitioner bank’s affairs, it should have
known of the pendency of the case against the latter in the trial
court. Moreover, the petitioner, through the PDIC, received a
copy of the decision of the trial court on June 2, 1998, but did
not bother filing a motion for partial reconsideration, under
Rule 37 of the Rules of Court, appending thereto the orders of
the Monetary Board or a motion to set aside the order of
default. Instead, the petitioner appealed the decision, and
even failed to assign as an error the default order of the trial
court. The petitioner is, thus, barred from relying on the orders
of the Monetary Board of the Central Bank of the Philippines
placing its assets and affairs under receivership and ordering its
liquidation.
Miranda vs. PDIC
Facts: Petitioner Miranda was a depositor of Prime Savings
Bank and later on, she withdrew substantial amounts from her
account, but instead of cash she opted to be issued a crossed
cashier's check. She was thus issued a couple of cashier's check
and deposited the two checks into her account in another bank
on the same day, however, BSP suspended the clearing
privileges of Prime Savings Bank effective 2:00 p.m. of June 3,
1999. The two checks of petitioner were returned to her
unpaid. On June 4, 1999, Prime Savings Bank declared a bank
holiday. On January 7, 2000, the BSP placed Prime Savings Bank
under the receivership of the PDIC. Petitioner then filed a civil
action for sum of money in the RTC against Prime Savings Bank,
PDIC and the BSP and was granted. On appeal, CA revered the
RTC ruling.
Issue: Whether or not the two cashier's checks operate as an
assignment of funds in the hands of the petitioner and whether
the respondents are solidarily liable to the petitioner.
Ruling: No. The two cashier's checks issued by Prime Savings
Bank do not constitute an assignment of funds in the hands of
the petitioner as there were no funds to speak of in the first
place. the two cashier's checks issued by Prime Savings Bank do
not constitute an assignment of funds in the hands of the
petitioner as there were no funds to speak of in the first place.
The bank was financially insolvent for sometime, even before
the issuance of the checks. It is only Prime Savings Bank that is
liable to pay for the amount of the two cashier's checks.
Solidary liability cannot attach to the BSP, in its capacity as
government regulator of banks, and the PDIC as statutory
receiver under R.A. No. 7653, because they are the principal
government agencies mandated by law to determine the
financial viability of banks and quasi-banks, and facilitate
receivership and liquidation of closed financial institutions,
upon a factual determination of the latter's insolvency. In the
absence of fraud, the purchase of a cashier's check, like the
purchase of a draft on a correspondent bank, creates the
11 | P a g e
Earl Louie Masacayan – Banking Laws
relation of creditor and debtor, not that of principal and agent,
with the result that the purchaser or holder thereof is not
entitled to a preference over general creditors in the assets of
the bank issuing the check, when it fails before payment of the
check. However, in a situation involving the element of fraud,
where a cashier's check is purchased from a bank at a time
when it is insolvent, as its officers know or are bound to know
by the exercise of reasonable diligence, it has been held that
the purchase is entitled to a preference in the assets of the
bank on its liquidation before the check is paid.
Abacus vs. Manila Banking
Prior to 1984, the Manila Banking constructed on a parcel
of land a building and not long after, however, the bank met
financial difficulties that made it unable to finish construction
of the building. In 1987, the BSP ordered the closure of the
bank and placed it under receivership but the latter contested
its legality. Then the BSP, by virtue of a MB Resolution, ordered
the liquidation of Manila Bank and designated a Liquidator.
The liquidation, however, was held in abeyance pending the
outcome of the earlier suit filed by Manila Bank regarding the
legality of its closure. Consequently, the designation of the
Liquidator was amended by the BSP that of Statutory Receiver.
In the interim, Manila Bank’s then acting president Puyat in a
bid to save the bank’s investment, started scouting for possible
investors who could finance the completion of the building
earlier mentioned. Later on, a group of investors, Laureano
group, wrote Puyat offering to lease the building for ten years
and to advance the cost to complete the same, with the
advanced cost to be amortized and offset against rental
payments during the term of the lease. Also, the letter-offer
stated that in consideration of advancing the construction cost,
the group wanted to be given the “exclusive option to
purchase” the building and the lot on which it was constructed.
Since no disposition of assets could be made due to the
litigation concerning Manila Bank’s closure, an arrangement
was thought of whereby the property would first be leased to
Manila Equities Corporation, a wholly-owned subsidiary of
Manila Bank, with MEQCO thereafter subleasing the property
to the Laureano group. In a letter, Puyat accepted the Laureano
group’s offer and granted it an “exclusive option to purchase”
the lot and building, Later, the building was leased to MEQCO
for a period of ten years pursuant to a contract of lease bearing
that date. Later on, MEQCO subleased the property to Abacus,
a corporation formed by the Laureano group for the purpose,
under identical provisions as that of the lease contract between
Manila Bank and MEQCO. The Laureano group was, however,
unable to finish the building due to the economic crisis brought
about by the failed December 1989 coup attempt. On account
thereof, the Laureano group offered its rights in Abacus and its
“exclusive option to purchase” to Bitanga and would later
allege that because of the substantial amount involved, he first
had to talk with the Receiver Santos to discuss Abacus’ offer.
Bitanga further alleged that, over lunch, Atty. Santos then
verbally approved his entry into Abacus and his take-over of the
sublease and option to purchase. Later on, Laureano group
transferred and assigned to Bitanga all of its rights in Abacus
and the “exclusive option to purchase” the subject land and
building. Then Abacus sent a letter to Manila Bank informing
the latter of its desire to exercise its “exclusive option to
purchase” but Manila Bank refused to honor the same. Before
the RTC, Abacus filed a complaint for specific performance and
damages against Manila Bank and/or estate of Puyat.
Subsequently, Manila Bank, followed a month later by its co-
defendant Estate of Vicente G. Puyat, filed separate motions to
dismiss the complaint. In an Order, the RTC granted the motion
to dismiss filed by the Estate Puyat, but denied that of Manila
Bank and directed the latter to file its answer. RTC ruled in
favour of Abacus. CA reversed the RTC ruling.
Issue: Whether or not Abacus has acquired the right to
purchase the lot and building in question.
Ruling: No. Abacus insists that the option to purchase the
lot and building in question granted to it by the then acting
president of Manila Bank, was binding upon the latter. On the
other hand, Manila Banking has consistently maintained that
the late Puyat had no authority to act for and represent Manila
Bank, the latter having been placed under receivership by the
Central Bank at the time of the granting of the “exclusive
option to purchase.” There can be no quibbling that Manila
Bank was under receivership at the time the late Puyat granted
the “exclusive option to purchase” to the Laureano group of
investors. Owing to this defining reality, the appellate court
was correct in declaring that Puyat was without authority to
grant the exclusive option to purchase the lot and building in
question.
PDIC vs. BIR
A special examination of RBBI was conducted by the SES
Department III of what is now the BSP wherein various loan
irregularities were uncovered. In a letter the SES Department III
required the RBBI management to infuse fresh capital into the
bank, within 30 days from date of the advice, and to correct all
the exceptions noted. However, up to the termination of the
subsequent general examination conducted by the SES
Department III, no concrete action was taken by the RBBI
management. In view of the irregularities noted and the
insolvent condition of RBBI, the members of the RBBI Board of
Directors were called for a conference at the BSP and only one
RBBI Director attended the conference, and the examination
findings and related recommendations were discussed with
him. In a letter, the SES Department III warned the RBBI Board
of Directors that, unless substantial remedial measures are
12 | P a g e
Earl Louie Masacayan – Banking Laws
taken to rehabilitate the bank, it will recommend that the bank
be placed under receivership. In a subsequent letter, a copy of
which was sent to every member of the RBBI
BoDs via registered mail, the SES Department III reiterated its
warning that it would recommend the closure of the bank,
unless the needed fresh capital was immediately infused.
Despite these notices, the SES Department III received no word
from RBBI or from any of its Directors. The MB placed the Rural
Bank under receivership. The designated BSP liquidator of RBBI
filed with the RTC of a Petition for Assistance in the Liquidation
of RBBI, Subsequently, the MB transferred to PDIC the
receivership/liquidation of RBBI. PDIC then filed a Motion for
Approval of Project of Distribution of the assets of RBBI. During
a hearing, the BIR manifested that PDIC should secure a tax
clearance certificate from the appropriate BIR Regional Office,
pursuant to the Tax Code of 1997, before it could proceed with
the dissolution of RBBI. Also, the RTC issued one of the assailed
Orders, directing PDIC to comply with Tax Code within 30 days
from receipt of a copy of the said order. Pending compliance
therewith, the RTC held in abeyance the Motion for Approval of
Project of Distribution. Ten, the second assailed Order was
issued, in which the RTC, in resolving the MR filed by PDIC
denied.
Issue: Whether or not the procedure for involuntary dissolution
and liquidation of a corporation and that of a bank under
different laws may not be imposed on one another.
Held: Yes. It should be noted that there are substantial
differences in the procedure for involuntary dissolution and
liquidation of a corporation under the Corporation Code, and
that of a banking corporation under the New Central Bank Act,
so that the requirements in one cannot simply be imposed in
the other. Under the Corporation Code, the SEC may dissolve a
corporation, upon the filing of a verified complaint and after
proper notice and hearing, on grounds provided by existing
laws, rules, and regulations. Upon receipt by the corporation of
the order of suspension from the SEC, it is required to notify
and submit a copy of the said order, together with its final tax
return, to the BIR. The SEC is also required to furnish the BIR a
copy of its order of suspension. The BIR is supposed to issue
a tax clearance to the corporation within 30 days from receipt
of the foregoing documentary requirements. The SEC shall issue
the final order of dissolution only after the corporation has
submitted its tax clearance; or in case of involuntary
dissolution, the SEC may proceed with the dissolution after 30
days from receipt by the BIR of the documentary requirements
without a tax clearance having been issued. The corporation is
allowed to continue as a body corporate for three years after
its dissolution, for the purpose of prosecuting and defending
suits by or against it, to settle and close its affairs, and to
dispose of and convey its property and distribute its assets, but
not for the purpose of continuing its business. The corporation
may undertake its own liquidation, or at any time during the
said three years, it may convey all of its property to trustees for
the benefit of its stockholders, members, creditors, and other
persons in interest. In contrast, the Monetary Board
may summarily and without need for prior hearing, forbid the
banking corporation from doing business in the Philippines, for
causes enumerated in Section 30 of the New Central Bank Act;
and appoint the PDIC as receiver of the bank. PDIC
shall immediately gather and take charge of all the assets and
liabilities of the closed bank and administer the same for the
benefit of its creditors. The summary nature of the procedure
for the involuntary closure of a bank is especially stressed in
Section 30 of the New Central Bank Act, which explicitly states
that the actions of the Monetary Board under the said Section
or Section 29 shall be final and executory, and may not be
restrained or set aside by the court except on a Petition
for Certiorari filed by the stockholders of record of the bank
representing a majority of the capital stock. PDIC, as the
appointed receiver, shall file ex parte with the proper RTC, and
without requirement of prior notice or any other action,
a petition for assistance in the liquidation of the bank. The bank
is not given the option to undertake its own liquidation. The
alleged purpose of the BIR in requiring the liquidator PDIC to
secure a tax clearance is to enable it to determine the tax
liabilities of the closed bank. It raised the point that since the
PDIC, as receiver and liquidator, failed to file the final return of
RBBI for the year its operations were stopped, the BIR had no
way of determining whether the bank still had outstanding tax
liabilities. What the BIR should have requested from the RTC,
and what was within the discretion of the RTC to grant, is not
an order for PDIC, as liquidator of RBBI, to secure a tax
clearance; but, rather, for it to submit the final return of RBBI.
Rural Bank of San Miguel vs. MB
Facts: The RBSM was granted emergency loans on different
occasions. LBP advised RBSM that it will terminate the clearing
of RBSM’s checks in view of the latter’s frequent clearing losses
and continuing failure to replenish its Special Clearing Demand
Deposit with LBP. The BSP interceded with LBP not to terminate
the clearing arrangement of RBSM to protect the interests of
RBSM’s depositors and creditors. After a year, the LBP informed
the BSP of the termination of the clearing facility of RBSM in
view of the clearing problems of RBSM. Then, the MB approved
the release of P26.189 [million] which is the last tranche of
the P375 million emergency loan for the sole purpose of
servicing and meeting the withdrawals of its depositors. The
fund were not used to service withdrawals and remains
unaccounted for as admitted by RBSM’s Treasury Officer and
Officer-in-Charge of Treasury. Instead of servicing withdrawals
of depositors, RBSM paid Forcecollect Professional Solution,
Inc. and Surecollect Professional, Inc., entities which are owned
and controlled by Hilario P. Soriano and other RBSM officers.
13 | P a g e
Earl Louie Masacayan – Banking Laws

On January 4, 2000, RBSM declared a bank holiday. RBSM and

all of its 15 branches were closed from doing business. Alarmed
and disturbed by the unilateral declaration of bank holiday, BSP
wanted to examine the books and records of RBSM but
encountered problems. Meanwhile, RBSM’s designated
comptroller, Cabais, submitted to the Department of Rural
Banks, BSP, two sets of Comptrollership Report on her findings
on the financial condition and operations of the bank on two
different dates. Based on these comptrollership reports, the
director of the Department of Rural Banks Supervision and
Examination Sector made a report to the MB. The MB, after
evaluating and deliberating on the findings and
recommendation of the Department of Rural Banks Supervision
and Examination Sector, issued a Resolution and thereafter,
PDIC implemented the closure order and took over the
management of RBSM’s assets and affairs. In their
petition before the CA, RBSM claimed that respondents MB and
BSP committed grave abuse of discretion in issuing that
Resolution and it was dismissed. Pertinently, on the basis of
reports prepared by PDIC stating that RBSM could not resume
business with sufficient assurance of protecting the interest of
its depositors, creditors and the general public, the MB passed
a Resolution directing PDIC to proceed with the liquidation of
RBSM under Section 30 of RA 7653.

Issue: Whether or not the closure of bank is an exercise of

police power and can be subject to judicial inquiry even when
there is no grave abuse of discretion and the current and
complete examination of the bank is necessary.

Held: No. It is well-settled that the closure of a bank may be

considered as an exercise of police power. The action of the MB
on this matter is final and executory. Such exercise may
nonetheless be subject to judicial inquiry and can be set aside if
found to be in excess of jurisdiction or with such grave abuse of
discretion as to amount to lack or excess of jurisdiction. RA 265,
including Section 29 thereof, was expressly repealed by RA
7653 which took effect in 1993. Resolution No. 105 was issued
on January 21, 2000. Hence, petitioners’ reliance on Banco
Filipino which was decided under RA 265 was misplaced. In RA
7653, only a "report of the head of the supervising or
examining department" is necessary. It is an established rule in
statutory construction that where the words of a statute are
clear, plain and free from ambiguity, it must be given its literal
meaning and applied without attempted interpretation