Koruga vs. Arcenas Case Digest G.R. No. 168332 & 169053 June 19, 2009

Koruga vs. Arcenas Case Digest

G.R. No. 168332 & 169053 ; June 19, 2009

DOCTRINE/S:

Banking Laws

a) Law vests in the BSP the supervision over operations and activities of banks

Section 25 of the New Central Bank Act provides that “Bangko Sentral shall have supervision over, and conduct periodic or special examinations of, banking institutions and quasi-banks, including their subsidiaries and affiliates engaged in allied activities.”

BSP, which pursuant to its Charter, is authorized to administer the monetary, banking, and credit system of the Philippines. It is further authorized to take the necessary steps against any banking institution if its continued operation would cause prejudice to its depositors, creditors and the general public as well.

b) Meaning of Bank under General Banking Law

A bank refers to an entity engaged in the lending of funds obtained in the form of deposits.

c) Corporation Code vs New Central Bank Act

Corporation Code - general law applying to all types of corporations

New Central Bank Act - regulates specifically banks and other financial institutions, including the dissolution and liquidation thereof.

Conflict between Corporation Code and New Central Bank Act = New Central Bank Act prevails

Reason: Generalia specialibus non derogant -Statutory construction provides that if there is a conflict between a general and specific law, the specific law prevails. The New Central Bank is a specific law as opposed to the Corporation Code, which is a general law. Hence New Central Bank Act prevails.

d) Exclusive jurisdiction of the Monetary board over proceedings for receivership of banks.

Section 30 of the New Central Bank Act provides that the “appointment of a receiver under this section shall be vested exclusively with the Monetary Board.”  The term “exclusively” connotes that only the Monetary Board can resolve the issue of whether a bank is to be placed under receivership and, upon an affirmative finding, it also has authority to appoint a receiver.  This is further affirmed by the fact that the law allows the Monetary Board to take action “summarily and without need for prior hearing.”

Furthermore, the law explicitly provides that “actions of the Monetary Board taken under this section or under Section 29 of this Act shall be final and executory, and may not be restrained or set aside by the court except on a 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.”

FACTS:

Short version: Koruga, a minority stockholder of Banco Filipino, filed a complaint before the RTC against the defendant that pertained to the conduct of Banco Filipino's banking business. Arcenas filed their Answer raising, among others, the trial court's lack of jurisdiction to take cognizance of the case. They filed a Motion to Dismiss which was denied. Arcenas then prayed for an issuance of writ of preliminary injunction with the CA in order to prevent RTC from hearing the case. This was granted. Koruga then asks this Court to restrain the CA from implementing the writ of preliminary injunction. Meanwhile this Court granted the prayer for a TRO by Arcenas and enjoined the RTCfrom proceeding with the hearing of the case. Koruga filed a motion to lift the TRO which was denied.

In G.R. No. 169053, Arcenas asked the Court to set aside the Decision dated July 20, 2005 of the CA in CA-G.R. SP No. 88422, which denied their petition, having found no grave abuse of discretion on the part of the RTC. Arcenas anchored their prayer on the following grounds, among others, that jurisdiction over the subject matter of the case is vested by law in the BSP.

Long version: Koruga is a minority stockholder of Banco Filipino. She filed a complaint before the RTC charging defendants with violation of Sections 31 to 34 of the Corporation Code, prohibiting self-dealing and conflict of interest of directors and officers; invoked her right to inspect the corporation’s records under Sections 74 and 75 of the Corporation Code; and prayed for Receivership and Creation of a Management Committee, pursuant to Rule 59 of the Rules of Civil Procedure, the Securities Regulation Code, the Interim Rules of Procedure Governing Intra-Corporate Controversies, the General Banking Law of 2000, and the New Central Bank Act. She accused the directors and officers of Banco Filipino of engaging in unsafe, unsound, and fraudulent banking practices, more particularly, acts that violate the prohibition on self-dealing.

Arcenas, et al. filed their Answer raising, among others, the trial court's lack of jurisdiction to take cognizance of the case. They filed Motion to dismiss the case which the RTC denied. The subsequent Motion for Reconsideration was also denied. Arcenas, et al. filed before the CA a Petition for Certiorari and Prohibition under Rule 65 of the Rules of Court with a prayer for the issuance of a writ of preliminary injunction and a temporary retraining order (TRO). CA granted this and issued a 60-day TRO enjoining Judge Marella from conducting further proceedings in the case.

Dissatisfied, Koruga filed this Petition for Certiorari under Rule 65 of the Rules of Court.Koruga alleged that the CA effectively gave due course to Arcenas, et al.'s petition when it issued a writ of preliminary injunction without factual or legal basis. She prayed that this Court restrain the CA from implementing the writ of preliminary injunction. Meanwhile this Court issued a Resolution granting the prayer for a TRO and enjoining the RTC from proceeding with the hearing of the case. Koruga filed a motion to lift the TRO which was denied.

In G.R. No. 169053, Arcenas, et al. asked the Court to set aside the Decision dated July 20, 2005 of the CA in CA-G.R. SP No. 88422, which denied their petition, having found no grave abuse of discretion on the part RTC. Arcenas, et al. anchored their prayer on the following grounds, among others, that jurisdiction over the subject matter of the case is vested by law in the BSP.

ISSUE/S: Which body has jurisdiction over the Koruga Complaint, the RTC or the BSP?

HELD: BSP. The New Central Bank Act vests in the BSP the supervision over operations and activities of banks.  Specifically, the BSP's supervisory and regulatory powers under Section 25 of The New Banking Law include conduct of examination to determine compliance with laws and regulations if the circumstances so warrant as determined by the Monetary Board; overseeing to ascertain that laws and Regulations are complied with; regular investigation which shall not be oftener than once a year from the last date of examination to determine whether an institution is conducting its business on a safe or sound basis; and inquiring into the solvency and liquidity of the institution. In the instant case, the acts complained of by Koruga pertain to the conduct of Banco Filipino's banking business. Hence such complaint is under the jurisdiction of BSP.

Moreover, Section 56 of the General Banking Law of 2000 provides that the authority to determine whether a bank is conducting business in an unsafe or unsound manner is vested in the Monetary Board. The New Central Bank Act also grants the Monetary Board the power to impose administrative sanctions on the erring bank.

Koruga's invocation of the provisions of the Corporation Code is also misplaced since Sections 29 and 30 of the New Central Bank Act  provides that it it is the Monetary Board that exercises exclusive jurisdiction over proceedings for receivership of banks  The court's jurisdiction could only have been invoked after the Monetary Board had taken action on the matter and only 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.

Furthermore, Section 30 of the New Central Bank Act also provides that a petition for certiorari may only be filed by the stockholders of record representing the majority of the capital stock. Koruga. By her own admission, stated that she is merely minority stockholder of Banco Filipino.Hence she would not have the standing to question the Monetary Board’s action.