SECOND DIVISION
|
GENERAL BANK AND TRUST COMPANY, Petitioner, - versus - CENTRAL
BANK OF THE PHILIPPINES and ARNULFO B. AURELLANO in his capacity as
Liquidator of General Bank and Trust Company, Respondents. |
G.R. No. 152551 Present: PUNO,
J., Chairperson SANDOVAL-GUTIERREZ, AZCUNA, and GARCIA, JJ.
Promulgated: |
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D E C I S I O N
GARCIA, J.:
Under consideration is this
petition for review under Rule 45 of the Rules of Court to nullify and set
aside the following issuances of the
Court of Appeals (CA) in CA-G.R. CV No.
39939, to wit:
1.
Decision dated December 6, 1999,[1] reversing the Decision dated
2.
Resolution dated
The material facts, as stated in the appealed CA decision are, as follows:
1. From P478,000 on P54.9
million on
2. A
verification of the accounts showed that the overdrawings of Genbank … were due
to the all-out financial support it extended to Filcapital Development
Corporation (a related interest of the Yujuico Family Group and the directors
and officers of Genbank) to meet maturing obligations. On P55.8 million, in violation of
existing CB regulations which was financed by overdrawings of P54.9
million from CB [
3. The matter of overdraft accommodations to Filcapital had been the subject of several memoranda and letters of the Department of Commercial and Savings Bank [DCSB] to Genbank, the same being in violation of Section 23, R.A. 337 … (maximum loan limit); of Section 83, R.A. 337, as amended (requiring written Board approval); and of Memorandum To All Banks dated November 15, 1976 (prohibiting Temporary Overdrawings) [Id.].
4. On P28.7 million and sold to
the [CB] government securities aggregating P49 million under a
repurchase agreement, in order to cover its overdraft with the [CB]. The return of the Filcapital checks to the
different collecting banks precipitated a run on the bank starting on December
16, 1976 which necessitated the release
by the [CB] Governor of an initial emergency advance of P16 million
[Id.].
5. In his
letter dated P20 million to be spread out to its branch offices. Since it was expected that the drawdowns on
deposits and deposit substitutes would continue which would necessitate further
[CB] advances, and considering that the collateral submitted was insufficient,
coupled with the need to give a new image to the bank, it was decided that as a
condition to further [CB] advances, the stockholders of Genbank owning at least
two-thirds (2/3) of the outstanding capital should execute irrevocable proxies
in favor of Land Bank [Id..].
As a measure calculated to restore the liquidity of and confidence in Genbank, Dr. Yujuico … informed the [CB] Governor of the agreement of the principal officers and stockholders and the approval by the Genbank Board of Directors with respect to the guidelines under which Land Bank … was invited to participate in the equity of the bank, some salient points of which were as follows: (a) Land Bank will acquire two-thirds interest in the bank; xxx [Id.; tsn, Dec. 7, 1990, pp. 41-42].
6. On P150 million and to ratify the action taken by the Governor on
December 20, 1976 in releasing an emergency advance of P165 million to
Genbank. It also designated Arnulfo B.
Aurellano, Assistant to the Governor, to act as Comptroller [
7. On P116 million …
which were not sufficiently collateralized by Genbank [
8. On P172.3 million … or 59.4% thereof was classified as
doubtful and P0.505 million as uncollectible. P158.1 million or 91.7% of DOSRI
accounts was unsecured while only 8% was secured [
9. At the said meeting, the Governor indicated that Genbank should immediately take the following [indispensable] steps: (a) clean [DOSRI] loans … should be collected or collateralized; (b) pending formal execution of the collateral instruments, the borrower must undertake to execute the required mortgage and other security instruments; and (c) before full collateralization, the affected director, officer or stockholder shall assume joint and several liability with the borrower (related interest) for the payment of the loan or credit accommodation. xxx [Id, Exh. H-7], xxx..
10. Since the compliance with the directives in his letter dated December 27, 1976 had been incomplete, the [CB] Governor stressed … to the Genbank Board of Directors that the undertaking to collateralize the loans concerned and the sureties are merely steps to be taken prior to the full collateralization of the accounts concerned, the more important thing being the actual collateralization which must be done immediately [Id., Exh. H-9].
11. As of
year-end 1976, emergency advances totalled P154.521 million …. In view of the continuous drawdowns, [CB]
advances reached P170.227 million on P150
million previously approved. The
Monetary Board in its Resolution No. 90 dated
12. On
At said meeting, Dr. Yujuico advised that the controlling
stockholders were negotiating for the sale of their stockholdings and requested
that he be retained as President to give him personality and leverage during
the negotiations, … [
13. In an office
Order No. 12 dated
a. Philippine Bank of Communications
b. Paramount Finance Corporation
c. Willy Co/Lucio Tan, et al.
d. Gotianun Group/Family Savings Bank
e. Morris Carpo Group
[
14. At various dates from January 26 to February 7, 1977, the Committee convoked meetings … with all the [interested] groups … primarily to advise them that the [CB] emergency advances must be amply protected and that the sellers’ group must submit the final results of their negotiations on or before February 10, 1977, the deadline set by the Governor and agreed to by Dr. Yujuico and his colleagues in the old Board of Genbank [Id.; Tsn., December 7, 1990, pp. 57-58].
15. By P272.465
million… [
In his report dated P22.328 million and P125.128 million, respectively. xxx
[
16. On
17. The Special Committee submitted its report on the
evaluation of the offers to buy Genbank shares indicating that the Lucio Tan
offer was the most advantageous insofar as the [CB] is concerned because it
offered the best collateral for the [CB] advances [
18. By P300.961 million …
which showed an increase of P28.496 million compared to
In the report of the [CB] Comptroller dated P5.124 million and P35.694
million, respectively. The loan portfolio of which 57% was in past due status
or in litigation, was reduced by P19.822 million.
It was also reported that from P6.918 million only, from P172.354 million to P165.436
million. Of this amount P127.494 million or 77% belonged to the Yujuico
group; …. Of the loans of the Yujuico group, P126.608 million or 99.3%
was unsecured or uncollateralized. Furthermore, of the Yujuico loans, 88.4% was
in past due status [
19. The Monetary Board, in its Resolution No. 502 dated
20. The Lucio Tan group and the sellers’ representatives
continued their negotiations on
21. On the matter of collateralization of the [DOSRI] loans …, the Governor on March 10, 1977 wrote individually nine (9) members of the Yujuico family calling attention to his … directive to collateralize their loans and requested them to give the matter their immediate and serious attention [Id.; Exh. H-25].
22. The sellers’
representatives, in a letter dated
In a letter dated
The Governor replied on March 22,1977 [Exh.H-29] advising that it is not the interest of the [CB] to accept a proposal which offers a security inferior to that offered by another interested buyer, ….
23. Central Bank
advances as of P305.918 million … [
24. On P20 per share.
The stockholders were advised by the Governor that public interest
required that the [CB] should not continuously extend further credit assistance
to Genbank and that a rehabilitation program instead be immediately implemented
[tsn,
a) firm commitment to purchase the controlling shares of Genbank by a private group or to undertake a merger with another bank, which is willing and capable to comply with all the conditions of the [CB] conveyed previously to representatives of the controlling stockholders and whose price is acceptable to sellers.
b) a written decision of the stockholders owning at least two-thirds (2/3) of the outstanding shares to reduce the par value and a commitment of the Land Bank or a private group to put up the additional equity and a commitment to comply with the conditions prescribed by the [CB].
25. As there was
no compliance with either of said requirements, and finding the report of
Director [Antonio Castro], Department of Commercial and Savings Banks [DCSB]
that Genbank was insolvent within the meaning of Section 29 of R.A. 265
(Central Bank Act), as amended, and that Genbank’s continuance in business
would involve losses to its depositors and creditors … - to be true, the Monetary
Board adopted Resolution No. 675 on
March 25, 1977 [Exh. I-1] forbidding Genbank to do business in the
In a letter dated
26. On
As of the said deadline, the only bid received was that of the Lucio Tan group. It advised that it was prepared to acquire the assets and assumed all the liabilities of Genbank subject to the terms and conditions enumerated in the letter [Exh. E-2; Exh. E-2-a].
27. Pursuant to
the Memorandum of the Director, [DCSB], dated
“As of March 24, 1977, the Bank’s liquid assets of P28
million, together with collections from its loan portfolio, will not be enough
to meet expected further withdrawal of deposits and deposit substitutes of
P235.4 million. The Bank’s operation may be expected to result into losses of
at least P2.9 million per month and these loans will dissipate the Bank’s
remaining capital accounts of P10.9 million. The Bank therefore may
not be permitted to resume business with safety to its depositors, creditors,
and the general public”
and recommending certain actions, the
Monetary Board adopted Resolution No.
677 on
28. In his
letters dated
29. On
(a)
payment by Allied Bank to the Liquidator of an initial
amount of P500,000.00;
(b) xxx;
(c) payment to the [CB] of its emergency advances to Genbank in the amount of P310 million within a period of two (2) years from date of opening for business of Allied Bank, with 12% interest per annum;
(d) no deferment in the payment by Allied Bank of deposits and deposit substitutes in Genbank; and
(e) xxx money market placements by the Lucio Tan – Willy Co group in an amount not less than P100 million which placements shall remain with Allied Bank from the opening and commencement of operations until normalization of operations as determined by the [CB], so that during said period, Allied Bank shall have fresh funds of at least P200 million to meet any withdrawal contingencies.
30. Acting on the
letter dated
1.
To authorize the Allied Banking Corporation (ABC) to
increase its paid-up capital from P100 million to P200 million, …;
2. To approve the deletion of Paragraph H, Page 5 of the [MOA] dated May 9, 1977 which requires the Lucio Tan and Willy Co group to make money market placements in ABC …; and
3. xxx.
31. Pursuant to
the recommendation of Arnulfo B. Aurellano … the Monetary Board, in its
Resolution No. 1245 dated
1. To dispense with the requirement that Allied Bank and Lucio Tan group submit a standby irrevocable letter of credit to secure the emergency advances assumed by Allied Bank, subject to the following conditions:
xxx xxx xxx
2. To extend from two (2) years to five years the period of payment of the balance of the emergency advances assumed by Allied Bank, to be paid in twenty (20) equal quarterly installments beginning October 15, 1977, with interest at twelve percent (12%) per annum and said balance to be secured by the mortgages mentioned above.
32. Allied Bank
was able to comply with all the conditions laid down in Resolution No. 1245. It paid to the [CB] P100 million of the
total emergency advances on
On April 1, 1977, [CB and Arnulfo B. Aurellano, as Genbank Liquadator] initiated Sp. Proc. No. 107812 before the then Court of First Instance (CFI) of Manila, Branch IV, pursuant to Section 29, RA 265, as amended.
On
About a couple of years later, appellee Genbank joined the
intervention …. Said intervention was approved by the Court a quo in its
Order dated
Subsequently, [CB et al., as petitioners before the CFI),
instead of presenting evidence to support their petition in Sp. Proc. No.
107892, questioned the court a quo’s jurisdiction to determine the
validity of the liquidation of Genbank before this Court [CA], by way of a
Petition for Certiorari and Prohibition with Preliminary Injunction and Restraining
Order docketed as CA G.R. SP No. 03180. However, said petition became moot and
academic when the court a quo
rendered a Decision dated April 24, 1984, a day before it was served a copy of
the [TRO] dated April 24, 1984, and when [CB et al.] appealed said decision to
this Court [CA] [which] disposed of said appeal in favor of appellees-[intervenors]. However, upon [CB’s] motion for
reconsideration, the Court [CA] reconsidered said decision in its Resolution
dated
On
WHEREFORE, judgment is hereby rendered against the Petitioners [CB et al.] and in favor of Intervenors as follows:
First: That the closure of Genbank under
Monetary Board Resolution No. 675,
Second: That Petitioner [CB] is hereby ordered and directed to restore the license and authorization of Genbank to operate and conduct business as a commercial bank and trust corporation and to restore Genbank’s banking network of Head Office, 23 branches and 1 extension office.
Third: That Petitioner [CB] is hereby ordered and
directed to pay Intervenor Genbank the amount of P103,984,477.55
representing Genbank’s capital account which was the excess of Genbank’s assets
over this liabilities as shown in the Consolidated Statement of Condition of
Genbank as of March 25, 1977 (Petitioners’ Exh. I-26-A) plus damages by way of
unrealized earnings at 5% interest per annum of said amount of P103,984,477.55
starting from May 7, 1982 … until fully paid; and
Fourth: That Petitioner [CB] is likewise ordered and directed to pay Intervenor Genbank costs of the suit in accordance with the Rules of Court.
SO ORDERED.
Therefrom, herein respondents CB and the Liquidator-designate
appealed to the CA where their recourse was docketed as CA G.R. CV No. 39939.
On
1.
It ruled that Petitioner Bank was
insolvent thus paving the way for its closure and eventual liquidation.
2.
It ruled that the property rights of
Petitioner Bank was not trampled upon despite the fact that respondent Central
Bank maliciously and arbitrarily and in bad faith ordered its closure on March
25, 1977 and its liquidation and bidding three (3) days later on March 28, 1977
which is tantamount to denial of due process and equal protection clause of the
Constitution.
3.
It failed to apply Sec. 29 of R.A. 265
which laid down the procedure to be followed for insolvency cases of banking
institutions.
The petition has no
merit.
The three (3) assigned errors ultimately boil down to the issue of whether or not respondent CB violated any existing procedural or substantive law when its Monetary Board (MB) issued Resolution No. 675 dated March 25, 1977 ordering the closure of Genbank, and eventually MB Resolution No. 677 dated March 29, 1977, adopting the Lucio Tan Group’s bid as liquidation plan of petitioner Genbank, or otherwise committed grave abuse of discretion which will justify reversal of the assailed MB resolutions.
At the outset, it bears to stress that the underlying governing law, Republic Act (RA) 265[5], underwent several amendments. Among the amendatory laws are Presidential Decree (PD) Nos. 1007 and 1937 which took effect in September 1976 and June 1984, respectively.
Petitioner
Genbank claims that it was not insolvent when Resolution No. 675 was issued on P599,743,639.00, while its total liabilities only
amounted to P586,640,450.00, thus having surplus assets over liabilities
in the amount of P13,103,189.00. Plodding
on, it insists that the definition of insolvency in Section 29 of RA 265, as
amended by PD 1937, should have been made the tipping factor for determining on whether or not the declaration
made by respondent CB, acting through the Monetary Board, that petitioner
Genbank is insolvent constitutes grave abuse of discretion. In support of its
contention of not being insolvent during the period material, petitioner
Genbank cites Central Bank of the Philippines vs. Court of Appeals[6]
and Banco Filipino Savings & Mortgage
Bank vs. The Monetary Board[7].
Respondent CB,
however, retorted that the above-cited cases do not apply, albeit, there, the
Court struck down as null and void the closure of what CB then considered as
insolvent banks, referring to Banco Filipino Savings & Mortgage Bank and Triumph
Savings Bank, despite their respective total assets being more than their total
liabilities. As respondent CB argued, the closure of Banco Filipino and Triumph
Savings Bank on
Unlike the cases referred to above, however, Genbank was ordered closed by the CB on March 25, 1977, when “insolvency” was defined under Section 29 of RA 265, as amended on September 22, 1976 by PD 1007, where and when the insolvency concept carried a slightly different but contextually significant connotation. As thus then defined, insolvency was understood to mean as “the inability of a banking institution to pay its liabilities as they fall due in the ordinary course of business.” Respondent CB found Genbank undoubtedly incapable to generate liquid funds by itself in order to meet drawdowns on its deposits and deposit substitutes and to pay for other maturing obligations, as well as advances from the Central Bank. Respondent CB, therefore, concluded that Genbank was insolvent under the obtaining definition of said term, with the CA eventually sustaining the posture of respondent CB.
After a review of all the arguments of the parties in the light of the laws and jurisprudence applicable thereto, this Court finds no reversible error committed by the Court of Appeals when it sustained the validity of the MB resolutions resolving the issue of insolvency against petitioner Genbank.
It cannot be overemphasized that Resolution No. 675 prohibiting Genbank to do business in the Philippines and designating Arnulfo B. Aurellano as receiver was issued in March 1977, when the definition of the term “insolvency” under the last paragraph of Section 29, of RA 265, as amended by PD No. 1007, was as follows:
Sec. 29. Proceedings
upon insolvency. – x x x.
x
x x x x x x x x
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 bank in the banking community.
(Emphasis supplied.)
And by the terms of the same Section 29 of RA 265, as
amended by PD No. 1007, Resolution No. 675 is deemed final and executory, to
wit:
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 of court 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. xxx.. (Emphasis supplied.)
The burden thus rests upon
petitioner Genbank to prove the mala fides of the Monetary Board in
issuing Resolution No. 675. The present
petition cites no concrete proof to convincingly show that the pertinent
findings and recommendation of Antonio Castro, then Director of CB’s DCSB
whence Resolution No. 675 emanated were factually infirm. The Castro report stated thus:
Summary
Comments
1.
As of P33.5 million only.
On the other hand, total deposit and deposit substitutes which had to be
paid amounted to P269.563 million.
Total advances from the CB amounted to P300.961 million, of which
P252.365 million (unsecured overdrawing) is payable on demand. Considering the poor quality of the Bank’s
loan portfolio, the bank cannot expect to generate enough funds out of these loans
to meet payment of said obligations. In
view hereof, the bank is insolvent within the meaning of Sec. 29, R.A. 265, as
amended.
2.
As
of P14.1
million only which amount would be eaten up completely within a period of less
than five (5) months considering the average monthly operating loss of P2.868
million. In view of this, the Bank’s
continuance in business would involve losses to its depositors and creditors.
Recommendation
In view of the foregoing, it is
recommended that in accordance with the provisions of Sec. 29, R.A. 265, as
amended, the General Bank and Trust Co. be forbidden to do business in the
Philippines considering that it is insolvent and its continued operation would
involve probable loss to its depositors and creditors and that a receiver be
designated to take charge immediately of the Bank’s assets and liabilities.
Instead of directly controverting
the factual basis of the MB resolutions, petitioner Genbank would simply insist
on owning more realizable assets than liabilities and ergo essentially solvent per the definition of “insolvency” under the PD
1937 amendment which, to stress, took
effect only in 1984. To a redundant
point, the PD 1937 amendment defines “insolvency” as follows:
Insolvency, under this
Act shall be understood to mean that the realizable assets of a bank or a
non-bank financial intermediary performing quasi-banking functions as
determined by the Central Bank are insufficient to meet its liabilities.
Petitioner’s recourse of
insisting on the meaning of insolvency other than the current definition
thereof is, at the minimum, a recognition, plain and simple, that under the
applicable definition of the term “insolvency” under the last paragraph of
Section 29, of RA 265, as amended in 1976 by PD No. 1007, the Monetary Board
could not have erred in ruling that petitioner Genbank was indeed insolvent,
justifying its closure under the same Section 29, of RA 265, as amended. Petitioner Genbank cannot plausibly be
allowed to adopt a statutory definition of “insolvency” which was not set forth
in the law when Resolution No. 675 was issued.
The Monetary Board’s action could not have run counter to a legal provision
inexistent at the time when it issued the resolution in question.
Perhaps realizing the flaw in its
argument, petitioner Genbank now cites the definition of insolvency under PD
No. 1007 but this time faulting the CA for allegedly truncating the same by glossing
over the
proviso portion which contextually excluded from the coverage of the term
“insolvency” “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 bank in the banking
community.” While conceding
that it was then not in a position to generate funds by itself in order to meet
drawdowns on its deposits and deposit substitutes and to pay for other maturing
obligations, as well as its advances from the Central Bank, petitioner Genbank nonetheless
argues that it did not fall within the concept of insolvency contemplated in the
amendatory PD No. 1007 since what it was then experiencing was a liquidity
problem attributed to a bank run.
The Court is still unconvinced.
The aforementioned proviso thus relied
upon by petitioner Genbank excludes from the definition of insolvency, “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 bank in the banking community.”
As it were, the applicability of that proviso presupposes that the
struggling bank, Genbank in this case, should, in the first place be “an
otherwise non-insolvent bank” and the existence of a bank run is the
sole and exclusive cause of its inability to pay its obligations. In other words, the existence of a bank run
is not, without more, a saving grace for
any bank, absolutely preventing the CB or the Monetary Board from ordering its
closure due to insolvency. If the bank
is not “non-insolvent” in contemplation of the definition under Section 29 of RA 265, as amended by PD No.
1007, because it cannot pay its liabilities as they fall due in the ordinary
course of business, the presence or absence of a bank run is of no
determinative moment on the issue of the justifiability of an order of closure.
The CB had, as it were, ample basis other
than the bank run to consider petitioner Genbank insolvent. Upon the issuance of an order of closure,
which by express provision of law is final and executory, the burden of proving
non-insolvency is upon the bank which challenges the validity of such closure.
For sure, this issue of whether or
not petitioner Genbank’s inability to pay may be solely and exclusively
attributable to the bank run necessarily requires passing upon and evaluating the evidence presented during the trial. It should be made perfectly clear, however, that
the Court’s jurisdiction in appellate proceedings under Rule 45 of the Rules of Court is, as a
rule, limited to reviewing only errors
of law, it not being a trier of facts. And it is a settled doctrine that findings of fact of the CA are basically binding and not be disturbed except for very
compelling reasons, such as when: (1) the conclusion is a finding grounded
entirely on speculation, surmise and conjecture; (2) the inference made is
manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment
is based on a misapprehension of facts; (5) the findings of
fact of the CA are contrary to those of the
trial court; (6) said findings of fact
are conclusions without citation of specific evidence on which they are based;
(7) the findings of fact
of the CA are premised on the supposed absence of evidence and contradicted by the evidence on record.[8] The
Court finds no cogent reason to take exception from the general rule.
Even then, a review of the
pleadings on record shows no signs that the CA erred in not finding that the
Monetary Board violated any substantial or procedural law when it issued the
two assailed resolutions. Moreover, the
CA cannot also be faulted in sustaining the MB resolutions, or, to be precise,
in not finding arbitrariness and capriciousness in the closure of petitioner
bank. For, as the CA aptly explained:
1.
Even
before the Genbank President requested for emergency advances, the [CB] gave P16
million on P272.467 million
in P302.095,746.28
on
2.
Aside
from the emergency advances given to Genbank, the [CB] encouraged and assisted
the controlling stockholders in negotiating with various groups that could put
in new funds to help restore Genbank to full health. This indicates the [CB] earnest desire to
find a solution to Genbank’s difficulties.
3.
Aside
from the [CB] and Genbank, there is a third party involved
here. This is one vital aspect that
distinguishes this case from all other liquidation cases handled by the [CB]
[tsn.,
Now, as regards the supposed denial of its right to due
process, petitioner Genbank relies on the following chain of events:
1.
x x x the Governor together with other Central
Bank officials and Genbank directors, had a meeting with Messrs.
Clarencio Yujuico, [et al.], stockholders of Genbank who, according to the
Corporate Secretary, represented stockholders owning at least two-thirds (2/3)
of the outstanding shares. They were
given copies of the aide-memoire for the meeting (Exh. H-30) which outlined
developments regarding Genbank particularly the [DOSRI]loans …, the
negotiations for the sale of Genbank shares, (the Lucio Tan Group was willing
to comply with all the conditions of the [CB] for the approval of the sale but
could not meet the price of the selling group; the Paramount Finance Group
could not comply with all the [CB] conditions prescribed … to secure [CB]
advances and the interest of Genbank creditors and depositors, but this group
and the selling group could agree on the price), and the valuation reserves and
resulting net worth of the bank after valuation reserve was less than P20
per share. The stockholders were advised
by the Governor that public interest required that the [CB] should not
continuously extend further credit assistance to Genbank and that a
rehabilitation program instead be immediately implemented [tsn,
a) firm commitment to purchase the controlling shares of Genbank by a private group or to undertake a merger with another bank, which is willing and capable to comply with all the conditions of the [CB] conveyed previously to representatives of the controlling stockholders and whose price is acceptable to sellers
b)
a written decision of the stockholders owning at least
two-thirds (2/3) of the outstanding shares to reduce the par value and a
commitment of the Land Bank or a private group to put up the additional equity
and a commitment to comply with the conditions prescribed by the [CB].
2.
As there was no compliance with either of said
requirements, and finding the report of the Director, Department of Commercial
and Savings Banks that Genbank was insolvent within the meaning of Section 29
of R.A. 265 (Central Bank Act), as amended, and that Genbank’s continuance in
business would involve losses to its depositors and creditors (as recited in
his Memorandum dated March 24, 1977, Exh. D), - to be true, the Monetary Board adopted Resolution
No. 675 on
xxx xxx xxx.
3.
On
5.
As of the said deadline [
Pursuant to the Memorandum of the Director, Department
of Commercial and Savings Banks, dated
“As of March 24, 1977, the Bank’s liquid assets of P28
million, together with collections from its loan portfolio, will not be enough
to meet expected further withdrawal of deposits and deposit substitute of P235.4
million. The Bank’s operation may be expected to result into losses of at least
P2.9 million per month and these loans will dissipate the Bank’s remaining
capital accounts of P10.9 million. The Bank therefore may not be
permitted to resume business with safety to its depositors, creditors, and the
general public”
and recommending certain actions,
the Monetary Board adopted Resolution No. 677 on
In his letters dated
In short, petitioner Genbank would
claim that in a span of just two (2) days from the time it called a meeting
with the board of directors of Genbank on March 23, 1977, or on March 25, 1977,
the Monetary Board issued the resolution finding petitioner Genbank insolvent
and prohibiting it from further conducting business; and only another four (4)
days thereafter, or on March 29, 1977, it ordered its liquidation, thereby
denying sufficient time for petitioner Genbank to comply with its directives.
We are not persuaded.
It must be stressed that petitioner Genbank’s
financial predicament did not crop up overnight, nor is it a product of a single financial indiscretion,
so to speak. The root of its problem and
eventual downfall is traceable to unsound banking practices employed by
management. Mentioned in this regard may be made of the all-out financial support given to Filcapital
Development Corporation (a related interest of the Yujuico Family Group and
directors and officers of Genbank) and the standing practice of extending DOSRI
loans which, at one point, reached a peak of P172.3 million or 26% of
the total loan portfolio of P666.78 million. Of the final figure, 59.4%
thereof was classified as doubtful and P0.505 million as uncollectible. And
91.7% of such DOSRI accounts were unsecured leaving only 8% thereof secured.
All these unsound practices occurred way
before their resulting crippling effects became manifest sometime in December
1976, further leading the bank to resort to other unsound banking practices, like
incurring daily overdrafts. These problems, as earlier narrated in the assailed
CA decision, were taken up by the then CB Governor with the Board of Directors
of Genbank in a meeting held on
Finally, as to petitioner
Genbank’s lament about the Monetary Board acting, under the
premises, in bad faith or committing
grave abuse of discretion in approving the liquidation plan of the Lucio Tan
Group, suffice it to restate what the CA wrote in this regard:
Indeed, that the Genbank, Now Allied Bank, was able to resume normal banking operations immediately on June 2, 1977, thereafter meeting all the demands for deposit withdrawals and paying off all CB emergency advances to Genbank (Exh. K, L, and P), is a strong indication that the Central Bank performed its duty to maintain public confidence in the banking system, x x x.
Absent, in sum, of compelling
proof to becloud the bona fides of the decision of the Central Bank to close and order the
liquidation of Genbank pursuant to Monetary Board Resolution Nos. 675 and 677, the Court, as
the CA before it, loathes to interfere with what basically is the
exercise by the Central Bank of its mandate as administrator of the banking system.
WHEREFORE, the petition is hereby DISMISSED for lack of merit, with costs
against petitioner.
SO ORDERED.
CANCIO C. GARCIA
Associate
Justice
WE CONCUR:
REYNATO
S. PUNO
Associate Justice
Chairperson
|
ANGELINA
SANDOVAL-GUTIERREZ Associate Justice |
RENATO
C. CORONA Associate Justice |
ADOLFO
S. AZCUNA
Associate Justice
A
T T E S T A T I O N
I
attest that the conclusions in the above decision were reached in consultation
before the case was assigned to the writer of the opinion of the Court’s
Division.
REYNATO
S. PUNO
Associate Justice
Chairperson, Second Division
C
E R T I F I C A T I O N
Pursuant
to Article VIII, Section 13 of the Constitution, and the Division Chairperson's
Attestation, it is hereby certified that the conclusions in the above decision
were reached in consultation before the case was assigned to the writer of the
opinion of the Court.
ARTEMIO
V. PANGANIBAN
Chief Justice
[1] Penned by former Associate Justice Artemio G. Tuquero with the late Associate Justice Eubulo G. Verzola and Associate Justice Elvi John S. Asuncion, concurring; Rollo, pp. 34-62.
[2]
[3]
[4] Note #1, supra.
[5] The Central Bank Act.
[6] G.R.
No. 7618_,
[7] G.R.
Nos. 70054 and 68878,
[8] Danan vs. Court of Appeals, G.R. No. 132759,
[9] Decision, pp. 27-28; Rollo, pp. 60-61.