CENTRAL BANK OF THE PHILIPPINES V. CA G.R. NO. 76118

Central Bank of the Philippines v. CA

G.R. NO. 76118        DATE: March 30, 1993

PONENTE: Bellosillo, J.

FACTS: The Supervision and Examination Sector of the Central Bank submitted an examination report which says that the financial condition of Triumph Savings Bank is one of insolvency and its continuance in business would involve probable loss to its depositors and creditors. As a result, the Monetary Board issued a resolution, ordering TSB’s closure and placing it under receivership and appointed Tiaoqui as receiver.

Triumph Savings Bank filed a complaint to annul the resolution and prayed for injunction. RTC granted the TRO.

ISSUE/S: WON prior notice and hearing is required before a bank may be directed to stop operations and placed under receivership

RULING: NO. The absence of prior notice and hearing does not constitute acts of arbitrariness and bad faith. Thus, an MB resolution placing a bank under receivership, or conservatorship for that matter, may only be annulled after a determination has been made by the trial court that its issuance was tainted with arbitrariness and bad faith. Until such determination is made, the status quo shall be maintained, i.e., the bank shall continue to be under receivership.

Sec. 29 of R.A. 265 does not require a previous hearing before the Monetary Board can implement its resolution closing a bank, since its action is subject to judicial scrutiny as provided by law. It may be emphasized that Sec. 29 does not altogether divest a bank or a non-bank financial institution placed under receivership of the opportunity to be heard and present evidence on arbitrariness and bad faith because within ten (10) days from the date the receiver takes charge of the assets of the bank, resort to judicial review may be had by filing an appropriate pleading with the court.

TSB did in fact avail of this remedy by filing a complaint with the RTC of Quezon City on the 8th day following the takeover by the receiver of the bank's assets on 3 June 1985. This "close now and 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.

Admittedly, the mere filing of a case for receivership by the Central Bank can trigger a bank run and drain its assets in days or even hours leading to insolvency even if the bank be actually solvent. The procedure prescribed in Sec. 29 is truly designed to protect the interest of all concerned, i.e., the depositors, creditors and stockholders, the bank itself, and the general public, and the summary closure pales in comparison to the protection afforded public interest. At any rate, the bank is given full opportunity to prove arbitrariness and bad faith in placing the bank under receivership, in which event, the resolution may be properly nullified and the receivership lifted as the trial court may determine.