Banco Filipino v.

Monetary Board

Facts:
• 9 Consolidated Cases:
1. Gr. No. 68878 - Granting Writ of Possession against Celestine Pahimuntung.
2. Gr. No. 77255-68 - Foreclosure of properties of Top Management Programs Corp. and
Pilar Development Corp. (Loan)
3. Gr. No.78766 - Foreclosure of properties of El Grande Devt. Corp. (Credit
Accommodation)
4. Gr. No.81303 - Confession of judgement for Pilar Dev’t Corp. (Loan)
5. Gr. No. 81304 - BF Homes files for restoration of financing facilities of BF.
6. Gr. No. 90473 - Foreclosure of properties of El Grande Devt. Corp. (Loan)
ALL CASES ABOVE CONTENDS THAT BF HAS NO MORE POWER TO FORECLOSE, RESIST OR
DEFEND SUITS INSTITUTED AGAINST IT.
7. Gr. No.70054 - Validity of Receivership and Liquidation of BF.
8. Gr. No.78767 - Validity of Receivership and Liquidation of BF.
9. Gr. No.78894 - Validity of Receivership and Liquidation of BF.

MAIN CASE:

• July 9, 1964 - Banco Filipino(BF) commenced operations.

• June 29, 1984 - Emergency Advance and P3B credit line given to BF and placed under conservatorship
• August 10, 1984 - BF placed under conservatorship by Gilberto Tedoro, which resulted to Teodoro
Report -> Insolvent, BF must be put into receivership.
• January 23, 1985 - Tiaoqui Report (CB officer) recommended receivership on BF as well.
• January 25, 1985 - Order of Closure of BF.
1. Forbid BF to do Business
2. Designate Valenzuela as Receiver and Aurellano as Deputy
3. Terminate Conservatorship over BF
• March 19, 1985 - Valenzuela Report - recommends BF to Liquidated.
• January 20, 1988 - Judge Cosico Report - Upheld closure and liquidation.
• January 28, 1991 - Santiago Report during the trial, recommends otherwise.
1. Teodoro and Tiaoqui reports not substantial for closure / liquidation.
2. BF’s closure is null and void.
3. BF should be allowed to reopen.
• June 18, 1991 - Oral Arguments in light of conflicting reports and thereafter submitted for decision.

Issues:
1. Whether or not the receiver/ liquidator has the authority to prosecute, defend suits and to
foreclose mortgages in behalf of the bank while the issue on the validity of the receivership and
liquidation is still pending.
2. Whether or not the Closure and Liquidation of Banco Filipino is valid?
Held:
1. Yes, the receiver/ liquidator has the authority to prosecute, defend suits and to foreclose mortgages in
behalf of the bank while the issue on the validity of the receivership and liquidation is still pending.

Section 29 of the Central Bank Act, provides that when a bank is forbidden to do business in the
Philippines and placed under receivership, the person designated as receiver shall immediately take
charge of the bank's assets and liabilities, as expeditiously as possible, collect and gather all the assets and
administer the same for the benefit of its creditors, and represent the bank personally or through
counsel as he may retain in all actions or proceedings for or against the institution, exercising all the
powers necessary for these purposes including, but not limited to, bringing and foreclosing mortgages in
the name of the bank. If the Monetary Board shall later determine and confirm that banking institution is
insolvent or cannot resume business safety to depositors, creditors and the general public, it shall, public
interest requires, order its liquidation and appoint a liquidator who shall take over and continue the
functions of receiver previously appointed by Monetary Board. The liquidator for may, in the name of the
bank and with the assistance counsel as he may retain, institute such actions as may necessary in the
appropriate court to collect and recover a counts and assets of such institution or defend any action ft
against the institution.

2. No. The closure and liquidation of BF is invalid. 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:

1. 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;

2. 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;

3. the department head concerned shall inform the Monetary Board in writing, of the facts;

4. the Monetary Board shall find the statements of the department head to be true.

Tiaoqui based his report on an incomplete examination of petitioner bank and outrightly concluded
therein that the latter's financial status was one of insolvency or illiquidity.

It is evident from the foregoing circumstances that the examination contemplated in Sec. 29 of the CB
Act as a mandatory requirement was not completely and fully complied with. Despite the existence of
the partial list of findings in the examination of the bank, there were still highly significant items to be
weighed and determined such as the matter of valuation reserves, before these can be considered in the
financial condition of the bank. It would be a drastic move to conclude prematurely that a bank is
insolvent if the basis for such conclusion is lacking and insufficient, especially if doubt exists as to
whether such bases or findings faithfully represent the real financial status of the bank.

The conclusion arrived at by the Board cannot be given weight and finality as the report itself admits the
inadequacy of its basis to support its conclusion.