Bangko Sentral vs. Valenzuela Case Digest G.R. No. 184778 October 2, 2009

Bangko Sentral vs. Valenzuela Case Digest 

GR 184778 ; October 2, 2009

DOCTRINE/S:

Remedial Law

a) Requisites for preliminary injunctive relief are:

(a) invasion of right sought to be protected is material and substantial;

(b) right of the complainant is clear and unmistakable; and

(c) urgent and paramount necessity for the writ to prevent serious damage.

As such, a writ of preliminary injunction may be issued only upon clear showing of an actual existing right to be protected during the pendency of the principal action. The twin requirements of a valid injunction are the existence of a right and its actual or threatened violations. Thus, to be entitled to an injunctive writ, the right to be protected and the violation against that right must be shown.

b) Writs of preliminary injunction cannot be issued against actions of the MB under Secs. 29 and 30 of RA 7653 

The issuance by the RTC of writs of preliminary injunction is an unwarranted interference with the powers of the Monetary Board (MB). Secs. 29 and 30 of RA 7653 refer to the appointment of a conservator or a receiver for a bank, which is a power of the MB for which they need the ROEs done by the supervising or examining department.

The actions of the MB under Secs. 29 and 30 of RA 7653 “may not be restrained or set aside by the court except on petition for certiorari on the ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction.” The writs of preliminary injunction order are precisely what cannot be done under the law by preventing the MB from taking action under either Sec. 29 or Sec. 30 of RA 7653.

c) Closure of the bank does not constitute as the third requirement for the issuance of the writ of preliminary injunction which is the “urgent and paramount necessity for the writ to prevent serious damage”

As to the third requirement, the respondent banks have shown no necessity for the writ of preliminary injunction to prevent serious damage. The serious damage contemplated by the trial court was the possibility of the imposition of sanctions upon respondent banks, even the sanction of closure.

Under the law, the sanction of closure could be imposed upon a bank by the BSP even without notice and hearing. The apparent lack of procedural due process would not result in the invalidity of action by the MB. This was the ruling in Central Bank of the Philippines v. Court of Appeals. This “close now, hear later” scheme is grounded on practical and legal considerations to prevent unwarranted dissipation of the bank’s assets and as a valid exercise of police power to protect the depositors, creditors, stockholders, and the general public. The writ of preliminary injunction cannot, thus, prevent the MB from taking action, by preventing the submission of the ROEs and worse, by preventing the MB from acting on such ROEs.

Banking Law

a) "Close now, hear later” Doctrine

- Under the law, the sanction of closure could be imposed upon a bank by the BSP even without notice and hearing. 

- This "close now, hear later" scheme is grounded on practical and legal considerations to prevent unwarranted dissipation of the bank’s assets and as a valid exercise of police power to protect the depositors, creditors, stockholders, and the general public.

b)” Close now, hear later” doctrine does not violate due process clause embedded in the constitution

- This doctrine is a valid exercise of polic power.

- The “close now, hear later” doctrine has already been justified as a measure for the protection of the public interest. Swift action is called for on the part of the BSP when it finds that a bank is in dire straits. Unless adequate and determined efforts are taken by the government against distressed and mismanaged banks, public faith in the banking system is certain to deteriorate to the prejudice of the national economy itself, not to mention the losses suffered by the bank depositors, creditors, and stockholders, who all deserve the protection of the government.

c) Remedy of the Bank in case of its closure by the MB:  Judicial Review

- Judicial review enters the picture only after the MB has taken action

– “Close now, hear later” doctrine 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.

FACTS:

Short version: SED of the BSP conducted examinations of the books of the respondent banks and it found that these banks had deficiencies in their capital. Respondent banks then filed before the RTC an action to nullify the ROE and issuance of restraining order contending that their right to due process was violated because they were not furnished with ROE. They further contend that the sanction of closure that the MB might impose upon the receipt of ROE will result in irreparable damage to them as well as to the public.

RTC ruled in favor of the respondent banks and this was affirmed by the CA.BSP then files this Petition for Review on Certiorari with Prayer for Issuance of a TRO/Writ of Preliminary Injunction questioning the Decision of CA. SC issued a restraining order on the RTC and CA decision. By reason of such restraining order, the SED was able to submit their Report on Examination to the Monetary Board. The MB then prohibited the respondent banks from transacting business and placed them under receivership with the PDIC, as the appointed receiver. Now the main petition is resolved by SC

Long version: The Supervision and Examination Department (SED) of the Bangko Sentral ng Pilipinas (BSP) conducted examinations of the books of the respondent banks and it found that these banks had deficiencies in their capital. These banks were then required to undertake the remedial measures but they failed to carry out such measures. The banks requested extension of time to comply with the remedial measures and noted that none of them had received the Report of Examination (ROE) which finalizes the audit findings.

Thereafter, respondent banks then filed before the RTC an action to nullify the ROE and issuance of restraining order contending that their right to due process was violated because they were not furnished with ROE. They further contend that the sanction of closure that the MB might impose upon the receipt of ROE will result in irreparable damage to them as well as to the public.

The RTC ruled in favor of the respondent banks and this was affirmed by the CA.BSP then files this Petition for Review on Certiorari under Rule 45 with Prayer for Issuance of a Temporary Restraining Order (TRO)/Writ of Preliminary Injunction, questioning the Decision of the CA which upheld RTC’s order in issuing writs of preliminary injunction.

SC issued a restraining order on the RTC and CA decision. By reason of such restraining order, the SED was able to submit their Report on Examination to the Monetary Board. The MB then prohibited the respondent banks from transacting business and placed them under receivership with the Philippine Deposit Insurance Corporation (PDIC) as the appointed receiver. Now the main petition is resolved by SC

ISSUE/S:

1) WON the writ of preliminary injunction may be issued in this case in favor of the respondent banks.

2) WON the respondent banks were entitled to the copy of the Report on Examination made by the BSP before its submission to the Monetary Board

3) WON due process has been violated by the falure of SED to send a copy of the ROE to the respondent banks.

HELD:

1) NO. The requisites for preliminary injunctive relief are: (a) the invasion of right sought to be protected is material and substantial; (b) the right of the complainant is clear and unmistakable; and (c) there is an urgent and paramount necessity for the writ to prevent serious damage. But these requirements are absent in thie present case.

As to the third requirement, the law provides that the sanction of closure could be imposed upon a bank by the BSP even without notice and hearing. This "close now, hear later" scheme is grounded on practical and legal considerations to prevent unwarranted dissipation of the bank’s assets and as a valid exercise of police power to protect the depositors, creditors, stockholders, and the general public. The writ of preliminary injunction cannot, thus, prevent the MB from taking action.

Furthermore, the issuance by the RTC of writs of preliminary injunction is an unwarranted interference with the powers of the MB. The actions of the MB under Secs. 29 and 30 of RA 7653 "may not be restrained or set aside by the court except on petition for certiorari on the ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction."

2) NO.There was no provision of law, no section in the procedures of the BSP that shows that the BSP is required to give copies of the Report on Examination to banks. Sec. 28 of RA 7653, or the New Central Bank Act, which governs examinations of banking institutions, provides that the Report on Examination shall besubmitted to the MB; the bank examined is not mentioned as a recipient of the Report on Examination.Therefore, the respondent banks cannot claim a violation of their right to due process if they are not providedwith copies of the such report.

3) NO. The respondent banks were already made aware of the contents of the ROE since the ROEs are based on the lists of findings/exceptions containing the deficiencies found by the SED examiners when they examined the books of the respondent bank. These lists of findings/exceptions were furnished to the officers or representatives of the respondent banks. Since the banks are already aware of the contents of the ROEs, they cannot say that fairness and transparency are not present. The ROEs would then be superfluities to the respondent banks if they were given copies.