SECOND DIVISION
|
PHILIPPINE
DEPOSIT INSURANCE
CORPORATION (PDIC), Petitioner,
- versus - PHILIPPINE
COUNTRYSIDE RURAL BANK,
INC., RURAL BANK OF
CARMEN ( INC., BANK OF
and PILIPINO
RURAL BANK ( Respondents. |
G.R. No.
176438 Present: CARPIO, J.,
Chairperson, NACHURA, PERALTA, ABAD, and MENDOZA, JJ. Promulgated: January 24, 2011 |
x ----------------------------------------------------------------------------------------x
D E C I S I O N
MENDOZA, J.:
This is a petition for review on
certiorari under Rule 45 of the Rules of Court filed by the Philippine Deposit
Insurance Corporation (PDIC) assailing the September 18, 2006 Decision
of the Court of Appeals-Cebu (CA-Cebu), which granted the petition for
injunction filed by respondents Philippine Countryside Rural Bank, Inc. (PCRBI),
Rural Bank of Carmen (Cebu), Inc. (RBCI), Bank of East Asia (Minglanilla,
Cebu), Inc. (BEAI), and Pilipino Rural Bank (Cebu), Inc. (PRBI),
all collectively referred to as “Banks.”
The dispositive portion of the CA-Cebu decision reads:
WHEREFORE, in view of all the foregoing premises,
the petition for injunction is hereby GRANTED. The respondent PDIC is restrained from
further conducting investigations or examination on petitioners-banks without
the requisite approval from the Monetary Board.
SO ORDERED.[1]
In a resolution dated
THE FACTS
On
On May 25, 2005, the PDIC Board adopted another resolution,
Resolution No. 2005-05-056,[4]
approving the conduct of an investigation on PCRBI based on a
Complaint-Affidavit filed by a corporate depositor, the Philippine School of
Entrepreneurship and Management (PSEMI) through its president, Jacinto
L. Jamero.
On
On
According to PDIC, in the course of
its investigation, PCRBI was found to have granted loans to certain
individuals, which were settled by way of dacion of properties. These properties, however, had already been
previously foreclosed and consolidated under the names of PRBI, BEAI and RBCI.[7]
On
The notices stated that the
investigation was to be conducted pursuant to Section 9 (b-1) of the PDIC
Charter and upon authority of PDIC Board Resolution No. 2005-03-032 authorizing
the twelve (12) named representatives of PDIC to conduct the investigation.[10]
The investigation was sought because
the Banks were found to be among the ten (10) banks collectively known as
“Legacy Banks.” The Reports of General
and Special Examinations of the BSP as of June 30, 2004, disclosed, among others, that the Legacy
Banks were commonly owned and/or controlled by Legacy Plans Inc. (now Legacy
Consolidated Plans, Inc.), and Celso Gancayco delos Angles, Jr. and his
family.[11]
The notice of investigation was served
on PRBI the next day,
On
Subsequently, PRBI and BEAI refused
entry to their bank premises and access to their records and documents by the
PDIC Investigation Team, upon advice of their respective counsels.[15]
On June 16 and 17, 2005, Atty. Victoria
G. Noel (Atty. Noel) of the Tiongson & Antenor Cruz Law Office sent
letters to the PDIC[16]
informing it of her legal advice to PCRBI and BEAI not to submit to PDIC
investigation on the ground that its investigatory power pursuant to Section
9(b-1) of R.A. No. 3591, as amended (An Act Establishing The Philippine
Deposit Insurance Corporation, Defining Its Powers And Duties And For Other
Purposes), cannot be differentiated from the examination powers accorded to
PDIC under Section 8, paragraph 8 of the same law, under which, prior approval
from the Monetary Board is required.
On
On June 27 and 28, 2005, the Banks,
through counsel, sought further clarification from PDIC on its source of
authority to conduct the impending investigations and requested that PDIC
refrain from proceeding with the investigations.[19]
Simultaneously, the Banks wrote to the
Monetary Board requesting a clarification on the parameters of PDIC’s power of
investigation/examination over the Banks and for an issuance of a directive to
PDIC not to pursue the investigations pending the requested clarification.[20]
On
Notwithstanding, on July 11, 2005, the
Banks received a letter, dated July 8, 2005, from the PDIC General Counsel
reiterating its position that prior Monetary Board approval was not a
pre-requisite to PDIC’s exercise of its investigative power.[24]
Not in conformity, on
In the RTC Petition, the Banks prayed
for a judgment interpreting Section 9(b-1) of the PDIC Charter, as amended, to
require prior Monetary Board approval before PDIC could exercise its
investigation/examination power over the Banks.[26]
PDIC filed a motion to dismiss
alleging that the RTC had no jurisdiction over the said petition since a breach
had already been committed by the Banks when they received the notices of
investigation, and because PDIC need not secure prior Monetary Board approval
since “examination” and “investigation” are two different terms.[27]
Later, the Banks withdrew their
application for a temporary restraining order (TRO) reasoning that lower
courts cannot issue injunctions against PDIC.
Thus, the Banks instituted a petition for injunction with application
for TRO and/or Preliminary Injunction (CA-Manila petition) before the
Court of Appeals-Manila (CA-Manila).
The case was docketed as CA-G.R. SP No. 91038.[28]
Even before the CA-Manila could rule
on the application for a TRO and/or writ of preliminary injunction, the
RTC-Makati dismissed the petition on the ground that there already existed a
breach of law that isolated the case from the jurisdiction of the trial court.[29]
The Banks filed a motion for
reconsideration but it was denied by the RTC for lack of merit.[30] On
In view of the dismissal of the
RTC-Makati petition, the CA-Manila dismissed the petition for injunction for
being moot and academic. In its
Decision, dated
What remained for the petitioners to do was to litigate over the breach or violation by ordinary action, as the circumstances ensuing from the breach or violation warrant. The ordinary action may either be in the same case, if the RTC permitted the conversion, in which event the RTC may allow the parties to file such pleadings as may be necessary or proper, pursuant to Sec. 5, Rule 63; or the petitioners may file another action in the proper court (e.g. including the Court of Appeals, should injunction be among the reliefs to be sought) upon some cause of action that has arisen from the breach or violation.[34]
Thereafter, on
On
During the pendency of the CA-Cebu petition, PDIC filed with
this Court a Petition for Certiorari, Prohibition and Mandamus with Prayer
for Issuance of Temporary Restraining Order and/or Writ of Preliminary
Injunction under Rule 65 docketed as G.R. No. 173370.[37] It alleged that the CA-Cebu committed grave
abuse of discretion amounting to lack or excess of jurisdiction in taking
cognizance of the Banks’ petition, and in issuing a TRO and a writ of
preliminary injunction.[38]
On
Considering the allegations, issues and arguments adduced
in the petition for certiorari, prohibition and mandamus with prayer for
preliminary injunction and/or restraining order dated
On
[A]fter undergoing a series of amendments, the
controlling law with respect to PDIC’s power to conduct examination of banks
is-prior approval of the Monetary Board is a condition sine qua non for
PDIC to exercise its power of examination.
To rule otherwise would disregard the amendatory law of the PDIC’s
charter.
The Court is not also swayed by the contention of
respondent that what it seeks to conduct is an investigation and not an
examination of petitioners’ transactions, hence prior approval of the Monetary
Board is a mere surplusage.
The ordinary definition of the words “examination” and
“investigation” would lead one to conclude that both pertain to the same thing
and there seems to be no fine line differentiating one from the other. Black’s Law Dictionary defines the word
“investigate” as “to examine and inquire into with care and accuracy; to find out by careful inquisition;
examination and the word “examination” as an investigation. In Collin’s Dictionary of Banking and
Finance, the word “investigation” is defined as an “examination to find out
what is wrong.”
In the case of Anti-Graft League of the Philippines,
Inc. vs. Hon. Ortega, et al.,[41] the
Supreme Court using Ballentine’s Law Dictionary defines an “investigation” as
an inquiry, judicial or otherwise, for the discovery or collection of facts
concerning the matter or matters involved.
Such common definitions would show that there is really nothing to distinguish
between these two (2) terms as to support the PDIC view differentiating Section
9 (b-1) from paragraph 8, Section 8 of the PDIC Charter.
In the realm of the PDIC rules, specifically under
Section 3 of PDIC Regulatory Issuance No. 2205-02[42] “investigation” is defined
as: Investigation shall refer to fact-finding examination, study,
inquiry, for determining whether the allegations in a complaint or findings in
a final report of examination may properly be the subject of an administrative,
criminal or civil action.
From
the foregoing definition alone, it can be easily deduced that investigation and
examination are synonymous terms. Simply
stated, investigation encompasses a fact-finding examination. Thus, it is inconsistent with the rules if respondent
PDIC be (sic) allowed to conduct an investigation without the approval of the
Monetary Board.
Moreover,
the Court sees that the rationale of the law in requiring a (sic) prior
approval from the Monetary Board whenever an examination or in this case an
investigation needs to be conducted by the PDIC is obviously to ensure that
there is no overlapping of efforts, duplication of functions and more
importantly to provide a check and balance to the otherwise unrestricted power
of respondent PDIC to conduct investigations on banks insured by it.
With
the foregoing premises, this Court rules that a prior approval from the
Monetary Board is necessary before respondent PDIC can proceed with its
investigations on petitioners-banks.[43]
PDIC moved for reconsideration but it was denied in a resolution
dated
Hence, this petition.
THE ISSUES
I.
WHETHER RESPONDENT BANKS VIOLATED THE RULE AGAINST FORUM SHOPPING
WHEN THEY FILED THE PETITION FOR INJUNCTION BEFORE THE COURT OF APPEALS-CEBU.
II.
WHETHER THE PRONOUNCEMENT OF THE REGIONAL TRIAL COURT OF MAKATI IN
THE PETITION FOR DECLARATORY RELIEF CONSTITUTES RES JUDICATA TO THE
PETITION FOR INJUNCTION IN THE COURT OF APPEALS-CEBU.
III.
WHETHER PETITIONER WAS DEPRIVED OF ITS
IV.
WHETHER THE ISSUES RAISED BY PETITIONERS ARE THE SAME ISSUES RAISED
IN G.R. NO. 173370 WHICH WAS EARLIER DISMISSED BY THIS COURT.
V.
WHETHER THE COURT OF APPEALS ERRED IN FINDING THAT PRIOR APPROVAL OF
THE MONETARY BOARD OF THE BANGKO SENTRAL NG PILIPINAS IS NECESSARY BEFORE THE
PDIC MAY CONDUCT AN INVESTIGATION OF RESPONDENT BANKS.
THE COURT’S RULING
I - Whether respondent banks violated the
rule against forum shopping when they filed the petition for injunction before
the Court of Appeals-Cebu.
II - Whether
the pronouncement of the Regional Trial Court of Makati in the petition for declaratory relief
constitutes res judicata to the
petition for injunction in the Court
of Appeals-Cebu.
In the recent case of Sameer Oversees
Placement Agency, Inc. v. Mildred R.
Forum shopping is defined as an act of a party, against
whom an adverse judgment or order has been rendered in one forum, of seeking and
possibly getting a favorable opinion in another forum, other than by appeal or
special civil action for certiorari.
It may also be the institution of two or more actions or proceedings
grounded on the same cause on the supposition that one or the other court would
make a favorable disposition. There is
forum shopping where the elements of litis pendentia are present,
namely: (a) there is identity of parties, or at least such parties as represent
the same interest in both actions; (b) there is identity of rights asserted and
relief prayed for, the relief being founded on the same set of facts; and (c)
the identity of the two preceding particulars is such that any judgment
rendered in the pending case, regardless of which party is successful, would
amount to res judicata in the other.
It is expressly prohibited by this Court because it trifles with and
abuses court processes, degrades the
administration of justice, and congests court dockets. A willful and deliberate violation of the
rule against forum shopping is a ground for summary dismissal of the case, and
may also constitute direct contempt.[46]
Juxtaposing the RTC-Makati, CA-Manila and CA-Cebu petitions,
what must be determined here, is whether the elements of litis pendentia
are present between and among these petitions, i.e. whether (a) there is
identity of parties, or at least such parties as represent the same interest in
both actions; (b) there is identity of rights asserted and relief prayed for,
the relief being founded on the same set of facts; and (c) the identity of the
two preceding particulars is such that any judgment rendered in the pending case, regardless of which party is
successful, would amount to res judicata in the other.
The first element is clearly present as between the RTC-Makati
petition and the CA-Cebu petition. Both
involved the Banks on one hand, and the PDIC on the other.
The second and third elements of litis pendentia,
however, are patently wanting. The
rights asserted and reliefs prayed for were different, though founded on the
same set of facts. The RTC-Makati
Petition was one for declaratory relief while the CA-Manila Petition was one
for injunction with a prayer for preliminary injunction.
A petition for declaratory relief is filed by any person
interested under a deed, will, contract or other written instrument, or whose
rights are affected by a statute, executive order or regulation, ordinance, or
any other governmental regulation, before breach or violation, thereof, to
determine any question of construction or validity arising, and for a
declaration of his rights or duties thereunder.[47]
Injunction, on the other hand, is “a judicial writ, process
or proceeding whereby a party is
directed either to do a particular act, in which case it is called a mandatory injunction,
or to refrain from doing a particular act, in which case it is called a
prohibitory injunction. As a main
action, injunction seeks to permanently enjoin the defendant through a final
injunction issued by the court and contained in the judgment.”[48]
Clearly, there is a marked difference between the reliefs
sought under an action for declaratory relief and an action for
injunction. While an action for
declaratory relief seeks a declaration of rights or duties, or the
determination of any question or validity arising under a statute, executive
order or regulation, ordinance, or any other governmental regulation, or under
a deed, will, contract or other written instrument, under which his rights are
affected, and before breach or violation, an action for injunction ultimately
seeks to enjoin or to compel a party to perform certain acts.
Moreover, as stated in the RTC-Makati Decision, because the
Banks had already breached the provisions of law on which declaratory judgment
was being sought, it was without jurisdiction to take cognizance of the
same. Any judgment rendered in the
RTC-Makati petition would not amount to res judicata in the CA-Manila
Petition. Thus, the RTC was correct in
dismissing the case, having been bereft of jurisdiction to take cognizance of
the action for declaratory judgment.
As between the CA-Manila and the CA-Cebu petitions, the
second and third elements of litis pendentia are absent. The rights asserted and reliefs prayed for were
different, although founded on the same set of facts.
The CA-Manila Petition is a petition for injunction wherein
the Banks prayed that:
1)
Immediately upon filing of this Petition, a Writ of Preliminary Injunction
and/or Temporary Restraining Order be issued commanding the respondent and all its
officers, employees and agents to cease and desist from proceeding with the
investigations sought to be conducted on the petitioners’ head and branch
offices while the Petition for Declaratory Relief before Branch 58 of the
Makati Regional Trial Court is pending.
2) After due proceedings, judgment be rendered
declaring as permanent the Writ of Preliminary Injunction and/or Temporary
Restraining Order prayed for above.
Other
equitable reliefs are likewise prayed for.[49]
[Underscoring
supplied]
The CA-Cebu Petition, on the other hand, is denominated as a
Petition for Injunction With Prayer for Writ of Preliminary Injunction and/or
Restraining Order. The Banks prayed
therein that:
1) Upon filing of
this Petition, a Writ of Preliminary Injunction and/or Temporary Restraining
Order be issued forthwith, enjoining Respondent PDIC and all its officers,
employees and agents to cease and desist from conducting
examinations/investigations on Petitioner Banks’ head and branch offices
without securing the requisite approval from the Monetary Board of the Bangko
Sentral ng Pilipinas, as required by Sec. 8, Paragraph 8 of the PDIC Charter,
as amended;
2) After due
proceedings, judgment be rendered declaring as permanent the Writ of
Preliminary Injunction and/or Temporary Restraining Order prayed for above.
Other equitable reliefs are likewise prayed for.[50]
As can be gleaned from the above-cited portions of the
CA-Manila and CA-Cebu petitions, the petitions seek different reliefs.
Therefore, as between and among the RTC Makati, and the
CA-Manila and CA-Cebu petitions, there is no forum shopping.
III - Whether
petitioner was deprived of its opportunity to be heard when the Court of
Appeals-Cebu issued the writ of
injunction.
PDIC alleges that the CA-Cebu, in
issuing the TRO in its March 15, 2006 Resolution, and subsequently, the
preliminary injunction in its May 16, 2006 Resolution, violated the fundamental
rule that courts should avoid issuing injunctive relief which would in effect
dispose of the main case without trial.[51] PDIC argues that a TRO is intended only as a
restraint until the propriety of granting a temporary injunction can be
determined, and it goes no further
than to preserve the status
until that determination.[52] Moreover, its purpose is merely to suspend
proceedings until such time when there may be an opportunity to inquire whether
any injunction should be granted, and it is not intended to operate as an
injunction pendente lite, and should not, in effect, determine the
issues involved before the parties can have their day in court, or give an
advantage to either party by proceeding in the acquisition or alteration of the
property the right to which is disputed while the hands of the other party are
tied.[53]
On the other hand, the Banks claim that PDIC was given every
opportunity to present its arguments against the issuance of the injunction.[54] Its active participation in the proceedings
negates its assertion that it was denied procedural due process in the issuance
of the writ of injunction.[55] Citing Salonga v. Court of Appeals,[56]
the Banks state that the essence of due process is the reasonable opportunity
to be heard and to submit evidence one may have in support of one’s defense,[57]
and PDIC was able to do so.
On
On
On
The essence of procedural due process is found in the
reasonable opportunity to be heard and submit one’s evidence in support of his
defense.[63] The Court finds that procedural due process
was observed by the CA-Cebu. The parties
were afforded equal opportunity to present their arguments. In the absence of any indication to the
contrary, the CA-Cebu must be accorded the presumption of regularity in the
performance of their functions. However,
as discussed herein, the matter of whether it erred in its conclusion and
issuance of the TRO, preliminary injunction and final injunction is another
matter altogether.
IV – Whether
the issues raised by petitioner are the same issues raised in G.R. No. 173370
which was earlier dismissed by this Court.
In G.R. 173370, a petition for certiorari under
Rule 65 of the Rules of Court, PDIC
alleged that the CA-Cebu committed grave abuse of discretion amounting to lack
or excess of jurisdiction in taking cognizance of the Bank’s petition, and in
issuing a TRO and a writ of preliminary injunction.[64]
In the case at bench, a petition for review under Rule
45, PDIC’s core contention is that the CA-Cebu erred in finding that prior
approval of the
Monetary Board of the BSP is necessary before it may conduct an investigation
of the Banks.
Clearly then, the two petitions were of different nature
raising different issues.
G.R. 173370 challenged the CA-Cebu’s having taken cognizance
of the Bank’s petition and interlocutory orders on the issuance of a TRO and a
writ of preliminary injunction. This
case, however, strikes at the core of the final decision on the merits of the
CA-Cebu, and not merely the interlocutory orders. While both G.R. 173370 and the present case
may have been anchored on the same set of facts, that is, the refusal of the
Banks to allow PDIC to conduct an investigation without the prior consent of
the Monetary Board, the issues raised in the two petitions are not
identical. Moreover, the disposal of the
first case does not amount to res judicata in this case.
V – Whether
the Court of Appeals-Cebu erred in finding that prior approval of the Monetary
Board of the Bangko Sentral ng Pilipinas is necessary before the PDIC may
conduct an investigation of respondent banks.
PDIC is of the position that in order
for it to exercise its power of investigation, the law requires that:
(a) The
investigation is based on a complaint of a depositor or any other government
agency, or on the report of examination of [the] Bangko Sentral ng Pilipinas
(BSP) and/or PDIC; and,
(b) The complaint
alleges, or the BSP and/or PDIC Report of Examination contains adverse findings
of, fraud, irregularities or anomalies committed by the Bank and/or its
directors, officers, employees or agents; and,
(c) The
investigation is upon the authority of the PDIC Board of Directors.[65]
It argues that when it commenced its
investigation on the Banks, all of the aforementioned requirements were
met. PDIC stresses that its power of
examination is different from its power of investigation, in such that the
former requires prior approval of the Monetary Board while the latter requires merely
the approval of the PDIC Board.[66] It further claims that the power of
examination cannot be exercised within twelve (12) months from the last
examination conducted, whereas the power of investigation is without limitation
as to the frequency of its conduct. It
states that the purpose of the PDIC’s power of examination is merely to look
into the condition of the bank, whereas the power of investigation aims to
address fraud, irregularities and anomalies based on complaints from depositors
and other government agencies or upon reports of examinations conducted by the
PDIC itself or by the BSP.[67]
The Banks, on the other hand, are of
the opinion that a holistic reading of the PDIC charter shows that petitioner’s
power of examination is synonymous with its power of investigation.[68] They cite, as bases, the law
dictionary definitions, Section 8, Eighth paragraph[69]
and Section 9(b-1)[70]
of the PDIC Charter, and Rule 1, Section 3(1) of PDIC Regulatory Issuance No.
2005-02, which defines “investigation” as follows:
(l) ‘Investigation’ shall refer to fact-finding
examination, study or inquiry for determining whether the allegations in a
complaint or findings in a final report of examination may properly be the
subject of an administrative, criminal or civil action.
The Banks further cite Section X658 of
the Manual of Regulations for Banks, which states:
Sec. X658 - Examination by the BSP. The term ‘examination’ shall, henceforth,
refer to an investigation of an institution under the supervisory authority of
the BSP to determine compliance with laws and regulations. It shall include
determination that the institution is conducting its business on a safe and
sound basis. Examination requires full
and comprehensive looking into the operations and books of institutions, and shall
include, but need not be limited to the following:
a. Determination
of the bank’s solvency and liquidity position;
b. Evaluation
of asset quality as well as determination of sufficiency of valuation reserves
on loans and other risk assets;
c. Review of all aspects of bank operations;
d. Assessment
of risk management system, including the evaluation of the effectiveness of the
bank management’s oversight functions, policies, procedures, internal control
and audit;
e. Appraisal
of overall management of the bank;
f. Review
of compliance and applicable laws, rules and regulations; and any other
activities relevant to the above.”
After an evaluation of the respective
positions of the parties, the Court is of the view that the Monetary Board
approval is not required for PDIC to conduct an investigation on the
Banks.
The disagreement stems from the
interpretation of these two key provisions of the PDIC Charter. The confusion can be attributed to the fact
that although “investigation” and “examination” are two separate and
distinct procedures under the charter of the PDIC and the BSP, the words seem
to be used loosely and interchangeably.
It does not help that indeed these
terms are very closely related in a generic sense. However, while “examination” connotes a mere
generic perusal or inspection, “investigation” refers to a more intensive
scrutiny for a more specific fact-finding purpose. The latter term is also usually associated
with proceedings conducted prior to criminal prosecution.
The PDIC was created by R.A. No. 3591
on
Section 1 of the PDIC Charter states:
SECTION 1. There is hereby created a Philippine Deposit Insurance
Corporation hereinafter referred to as the “Corporation” which shall insure, as
herein provided, the deposits of all banks which are entitled to the benefits
of insurance under this Act, and which shall have the powers hereinafter
granted.
The Corporation shall, as a basic policy, promote and
safeguard the interests of the depositing public by way of providing permanent
and continuing insurance coverage on all insured deposits.
Section 1 of R.A. No. 9576 further
provides: An Act Increasing the Maximum
Deposit Insurance Coverage, and in connection therewith, to Strengthen the
Regulatory and Administrative Authority, and Financial Capability of the Philippine Deposit
Insurance Corporation (PDIC), amending for this purpose R.A. No. 3591, as
Amended, otherwise known as the PDIC Charter.
SECTION 1. Statement of State Policy and Objectives. - It is hereby declared to be the policy of
the State to strengthen the mandatory deposit insurance coverage system to
generate, preserve, maintain faith and
confidence in the country’s banking system, and protect it from illegal schemes
and machinations.
Towards this end, the government must extend all means
and mechanisms necessary for the Philippine Deposit Insurance Corporation to
effectively fulfill its vital task of promoting and safeguarding the interests
of the depositing public by way of providing permanent and continuing insurance
coverage on all insured deposits, and in helping develop a sound and stable
banking system at all times.
Under its charter, the PDIC is empowered to conduct
examination of banks with prior approval of the Monetary Board:
Eighth – To conduct examination of banks with prior
approval of the Monetary Board:
Provided, That no examination can be conducted within twelve (12)
months from the last examination date:
Provided, however, That the Corporation may, in coordination with
the Bangko Sentral, conduct a special examination as the Board of
Directors, by an affirmative vote of a majority of all its members, if there is
a threatened or impending closure of a bank; Provided, further, That,
notwithstanding the provisions of Republic Act No. 1405, as amended, Republic
Act No. 6426, as amended, Republic Act No. 8791, and other laws, the
Corporation and/or the Bangko Sentral, may inquire into or examine deposit
accounts and all information related thereto in case there is a finding of unsafe
or unsound banking practice; Provided, That to avoid overlapping of
efforts, the examination shall maximize the efficient use of the relevant reports,
information, and findings of the Bangko
Sentral, which it shall make available to the Corporation; (As amended by
R.A. 9302, 12 August 2004, R.A. 9576, 1 June 2009)
xxx. [Underlining
supplied]
Section 9(b-1) of the PDIC Charter further provides that the
PDIC Board shall have the power to:
POWERS AND RESPONSIBILITIES AND
PROHIBITIONS
SECTION
9. xxx
(b) The Board of Directors shall appoint examiners who
shall have power, on behalf of the Corporation to examine any insured
bank. Each such examiner shall have the
power to make a thorough examination of all the affairs of the bank and in doing
so, he shall have the power to administer oaths, to examine and take and
preserve the testimony of any of the officers and agents thereof, and, to compel the presentation of books,
documents, papers, or records necessary in his judgment to ascertain the facts
relative to the condition of the bank; and shall make a full and detailed
report of the condition of the bank to the Corporation. The Board of Directors in like manner shall
appoint claim agents who shall have the power to investigate and examine all
claims for insured deposits and transferred
deposits. Each claim agent shall have
the power to administer oaths and to examine under oath and take and preserve
testimony of any person relating to such claim.
(As amended by E.O. 890, 08 April 1983; R.A. 7400, 13 April 1992)
(b-1) The investigators
appointed by the Board of Directors shall have the power on behalf of the
Corporation to conduct investigations on frauds, irregularities and
anomalies committed in banks, based on reports of examination conducted by
the Corporation and Bangko Sentral ng Pilipinas or complaints from
depositors or from other government agency. Each such investigator shall have
the power to administer oaths, and to examine and take and preserve the
testimony of any person relating to the
subject of investigation. (As added by R.A. 9302,
xxx. [Underscoring supplied]
As stated above, the charter empowers the PDIC to conduct an
investigation of a bank and to appoint examiners who shall have the power to
examine any insured bank. Such
investigators are authorized to conduct investigations on frauds,
irregularities and anomalies committed in banks, based on an examination
conducted by the PDIC and the BSP or on complaints from depositors or
from other government agencies.
The distinction between the power to investigate and the
power to examine is emphasized by the existence of two separate sets of rules
governing the procedure in the conduct of investigation and examination. Regulatory Issuance (RI) No. 2005-02
or the PDIC Rules on Fact-Finding Investigation of Fraud, Irregularities and
Anomalies Committed in Banks covers the procedural requirements of the
exercise of the PDIC’s power of investigation.
On the other hand, RI No. 2009-05 sets forth the guidelines for the
conduct of the power of examination.
The definitions provided under the two aforementioned
regulatory issuances elucidate on the distinction between the power of
examination and the power of investigation.
Section 2 of RI No. 2005-02 states that its coverage shall be
applicable to “all fact-finding investigations on fraud, irregularities
and/or anomalies committed in banks that are conducted by PDIC based on: [a]
complaints from depositors or other government agencies; and/or [b] final
reports of examinations of banks conducted by the Bangko Sentral ng Pilipinas
and/or PDIC.”
The same issuance states that the Final Report of Examination[72]
is one of the three pre-requisites to the conduct of an investigation, in
addition to the authorization of the PDIC Board[73]
and a complaint.[74] Juxtaposing this provision with Section
9(b-1) of the PDIC Charter, since an examination is explicitly made the basis
of a fact-finding examination, then clearly examination and investigation are
two different proceedings. It would
obviously defy logic to make the result of an “investigation” the basis of the
same proceeding. Thus, RI No. 2005-02
defines an “investigation” as a “fact-finding examination, study or inquiry for
determining whether the allegations in a complaint or findings in a final
report of examination may properly be the subject of an administrative,
criminal or civil action.”[75]
The Banks cite the dictionary definitions of “examination”
and “investigation” to justify their conclusion that these terms refer to one
and the same proceeding. It is tempting
to use these two terms interchangeably, which practice may be perfectly
justified in a purely literary sense.
Indeed, a reading of the PDIC Charter shows that the two terms have been
used interchangeably at some point.
However, based on the provisions aforecited, the intention of the laws
is clearly to differentiate between the process of investigation and that of
examination.
In 2009, to clarify procedural matters, PDIC released RI No.
2009-05 or the Rules and Regulations on Examination of Banks. Section 2 thereof differentiated between the
two types of examination as follows:
Section 2. Types of
Examination
a. Regular Examination - An examination conducted independently or
jointly with the BSP. It requires the prior
approval of the PDIC Board of Directors and the Monetary Board (MB). It may be conducted only after an interval of
at least twelve (12) months from the closing date of the last Regular
Examination.
b. Special
Examination – An examination conducted at any time in coordination with the
BSP, by an affirmative vote of a majority of all the members of the PDIC Board
of Directors, without need of prior
MB approval, if there is a threatened or impending bank closure as
determined by the PDIC Board of Directors. [Underscoring supplied]
Section 3 of RI No. 2009-05 provides for the general scope of
the PDIC examination:
Section 3. Scope of Examination
The
examination shall include, but need not be limited to, the following:
a. Determination of the bank’s solvency and liquidity
position;
b. Evaluation of asset quality as well as determination
of sufficiency of valuation reserves on loans and other risk assets;
c. Review of all aspects of bank
operations;
d. Assessment
of risk management system, including the evaluation of the effectiveness of the
bank management’s oversight functions, policies, procedures, internal control
and audit;
e. Appraisal of overall management of the bank;
f. Review
of compliance with applicable banking laws, and rules and regulations,
including PDIC issuances;
g. Follow-through
of specific exceptions/ violations noted during a previous examination; and
h. Any other activity relevant to
the above.
Rule 2, Section 1 of PDIC RI No. 2005-02 or the PDIC Rules
on Fact-Finding Investigation of Fraud, Irregularities and Anomalies Committed
in Banks provides for the scope of fact-finding investigations as follows:
SECTION 1. Scope of the
Investigation.
Fact-finding
Investigations shall be limited to the particular acts or omissions subject of
a complaint or a Final Report of Examination.
From the above-cited provisions, it is clear that the process
of examination covers a wider scope than that of investigation.
Examination involves an evaluation of the current status of a
bank and determines its compliance with the set standards regarding solvency,
liquidity, asset valuation, operations, systems, management, and compliance
with banking laws, rules and regulations.
Investigation, on the other hand, is conducted based on
specific findings of certain acts or omissions which are subject of a complaint
or a Final Report of Examination.
Clearly, investigation does not involve a general evaluation
of the status of a bank. An
investigation zeroes in on specific acts and omissions uncovered via an
examination, or which are cited in a complaint.
An examination entails a review of essentially all the
functions and facets of a bank and its operation. It necessitates poring through voluminous
documents, and requires a detailed evaluation thereof. Such a process then involves an intrusion
into a bank’s records.
In contrast, although it also involves a detailed evaluation,
an investigation centers on specific acts of omissions and, thus, requires a
less invasive assessment.
The practical justification for not requiring the Monetary
Board approval to conduct an investigation of banks is the administrative
hurdles and paperwork it entails, and the correspondent time to complete those
additional steps or requirements. As in
other types of investigation, time is always of essence, and it is prudent to
expedite the proceedings if an accurate conclusion is to be arrived at, as an
investigation is only as precise as the evidence on which it is based. The promptness with which such evidence is
gathered is always of utmost importance because evidence, documentary evidence
in particular, is remarkably fungible. A
PDIC investigation is conducted to “determine[e] whether the allegations in a
complaint or findings in a final report of examination may properly be the subject
of an administrative, criminal or civil action.”[76] In other words, an investigation is based on
reports of examination and an examination is conducted with prior Monetary
Board approval. Therefore, it would be
unnecessary to secure a separate approval for the conduct of an investigation.
Such would merely prolong the process and provide unscrupulous
individuals the opportunity to cover their tracks.
Indeed, while in a literary sense, the two terms may be used
interchangeably, under the PDIC Charter, examination and investigation refer to
two different processes. To reiterate,
an examination of banks requires the prior consent of the Monetary Board,
whereas an investigation based on an examination report, does not.
WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of
Appeals in CA G.R. CEB SP. No. 01550, dated
SO ORDERED.
JOSE
CATRAL
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
ANTONIO EDUARDO
B. NACHURA DIOSDADO M. PERALTA
Associate Justice Associate Justice
ROBERTO A. ABAD
Associate Justice
A T T E S T A T I O N
I attest that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
ANTONIO
T. CARPIO
Associate Justice
Chairperson, Second Division
C E R T I F I C A T I O N
Pursuant
to Section 13, Article VIII of the Constitution and the Division Chairperson’s
Attestation, I certify that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
RENATO C. CORONA
Chief Justice
[1] Rollo, p. 107. Penned by Justice Pampio A. Abarintos with Justice Agustin S. Dizon and Justice Priscilla Baltazar-Padilla, concurring.
[2]
[3]
[4]
[5]
[6]
[7]
[8]
[9]
[10]
[11]
[12]
[13]
[14]
[15]
[16]
[17]
[18]
[19]
[20]
[21]
[22]
[23]
[24]
[25]
[26]
[27]
[28]
[29]
[30]
[31]
[32]
[33]
[34]
[35]
[36]
[37]
[38]
[39]
[40]
[41] 188 Phil. 55, 58 (1980).
[42] This should read “Regulatory Issuance No. 2005-02.”
[43] Rollo, pp. 102-104.
[44]
[45] G.R. No. 152579,
[46]
[47] Rule 63, Section 1 Revised Rules of Civil Procedure.
[48] PEZA v. Carantes, G.R. No. 181274,
[49] Rollo, p. 452.
[50]
[51]
[52]
[53]
[54]
[55]
[56] 336 Phil. 514, 528 (1997).
[57] Rollo, p. 605.
[58]
[59]
[60]
[61]
[62]
[63] Republic of the Philippines v. Sandiganbayan, et al., 461 Phil. 598, 614 (2003), citing Mutuc v. Court of Appeals, G.R. No. 48108, September 26, 1990, 190 SCRA 43.
[64] Rollo, p. 583.
[65]
[66]
[67]
[68]
[69] Section 8 of R.A. 3591 provides:
“POWERS AS A CORPORATE BODY
SECTION 8. The Corporation as a corporate body shall have the power –
xxx
Eighth – To conduct examination of banks with prior approval of the
Monetary Board: Provided, That no
examination can be conducted within twelve (12) months from the last
examination date: Provided, however,
That the Corporation may, in coordination with the Bangko Sentral, conduct
a special examination as the Board of Directors, by an affirmative vote of a
majority of all its members, if there is a threatened or impending closure of a
bank; Provided, further, That, notwithstanding the provisions of
Republic Act No. 1405, as amended, Republic Act No. 6426, as amended, Republic
Act No. 8791, and other laws, the Corporation and/or the Bangko Sentral, may
inquire into or examine deposit accounts and all information related thereto in
case there is a finding of unsafe or unsound banking practice; Provided,
That to avoid overlapping of efforts, the examination shall maximize the
efficient use of the relevant reports, information, and findings of the Bangko
Sentral, which it shall make available to the Corporation; (As amended by
R.A. 9302, 12 August 2004, R.A. 9576, 1 June 2009)
xxx”
[70] Section 9(b-1) of the PDIC Charter further provides that the Board of Directors of the PDIC shall have the power to:
“POWERS AND RESPONSIBILITIES AND PROHIBITIONS
SECTION 9. xxx
(b) The Board of Directors shall appoint examiners who shall have
power, on behalf of the Corporation to examine any insured bank. Each such examiner
shall have the power to make a thorough examination of all the affairs of the
bank and in doing so, he shall have the power to administer oaths, to examine
and take and preserve the testimony of any of the officers and agents thereof,
and, to compel the presentation of books, documents, papers, or records
necessary in his judgment to ascertain the facts relative to the condition of
the bank; and shall make a full and detailed report of the condition of the
bank to the Corporation. The Board of
Directors in like manner shall appoint claim agents who shall have the power to
investigate and examine all claims for insured deposits and transferred
deposits. Each claim agent shall have
the power to administer oaths and to examine under oath and take and preserve
testimony of any person relating to such claim.
(As amended by E.O. 890, 08 April 1983; R.A. 7400, 13 April 1992)
(b-1) The investigators appointed by the Board of Directors shall
have the power on behalf of the Corporation to conduct investigations on
frauds, irregularities and anomalies committed in banks, based on reports of
examination conducted by the Corporation and Bangko Sentral ng Pilipinas
or complaints from depositors or from
other government agency. Each such
investigator shall have the power to administer oaths, and to examine and take
and preserve the testimony of any person relating to the subject of
investigation. (As added by R.A. 9302,
xxx”
[71] Republic Act No. 3591, as amended, Section 1.
[72] The “Final Report of Examination” is defined under Section 2, Rule 3 of RI No. 2005-02 as follows:
“SECTION 2. Final Report of Examination.
A Final Report of Examination shall refer to the document approved by the PDIC Board or the Monetary Board containing a written statement/narration of the findings and/or recommendations resulting from an examination of a bank.
A Final Report of Examination of examiners of PDIC and/or BSP shall contain the following:
If possible, full name(s) and address(es) of the bank and/or its directors, officers, employees or agents or such description as would identify who appear to be responsible for the commission of fraud, irregularities and/or anomalies; and
A narration of the relevant and material facts which shows the fraudulent, irregular or anomalous acts or omissions allegedly committed in a bank.
In addition to the foregoing, copies of relevant documents, if available, should accompany the Final Report of Examination.”
[73] Section 1, Rule 3 of RI No. 2005-02 states:
“SECTION 1. Authorization by
the PDIC Board.
In all cases, a fact-finding investigation shall be conducted only upon authorization by the PDIC Board acting on the recommendation contained in a Final Report of Examination or based on any adverse finding stated therein, and/or a complaint from a depositor or government agency.
The Board shall likewise authorize the filing of criminal, civil, and/or administrative charges, if warranted. For this purpose, said authority is delegated to the President and Chief Executive Officer or the General Counsel in accordance with existing PDIC policies.”
[74] Section 3, Rule 3 of RI No. 2005-02 provides for the definition of a complaint as follows:
“SECTION 3. Complaint.
A complaint is a verified statement from a depositor alleging the commission or omission of certain acts which constitute fraud, irregularity or anomaly in a bank. The complaint shall follow the form attached hereto as Annex “A” and/or contain the following:
Full name and address of the complainant;
Full name and address of the bank and/or the names or sufficient description that will identify the directors, officers, employees and/or agents thereof who appear to be responsible for the commission of fraud, irregularities and/or anomalies;
A narration of the relevant and material facts which shows the fraudulent, irregular or anomalous act or acts allegedly committed in a bank;
A statement that the complainant has not commenced any action or filed any claim involving the same issues with BSP or any court, tribunal or quasi-judicial agency and, to the best of his/her knowledge, no such other action or claim is pending therein; or a full disclosure of the status of an action or claim involving the same issues filed with BSP or any court, tribunal or quasi-judicial agency;
An undertaking that if the complainant should thereafter learn that a similar action or claim has been filed or is pending, he/she shall report the fact within five (5) days therefrom to PDIC;
If the incident complained of involves the deposit account of the complainant with the subject bank, a statement authorizing PDIC to look into the desposit account of the complainant for purposes of the investigation; and
Documents and/or affidavits, if any, supporting the allegations in the complaint.
In the absence of any one of the aforementioned requirements other than paragraph [g], the complaint may be dismissed.
A report from a government agency of fraud/irregularity/anomaly allegedly committed in a bank that is furnished PDIC, accompanied by a written request for the conduct of an investigation, is considered a valid complaint under these Rules.”
[75] Sec. 3(I), PDIC Regulatory Issuance No. 2005-02.
[76] Sec. 3(l), PDIC Regulatory Issuance No. 2005-02.