1. Bangko Sentral ng Pilipinas v.

Banco Filipino Savings and Mortgage Bank

FACTS:
Pursuant to Resolution No. 223 dated February 14, 1963 of the Monetary Board (MB) of the Central Bank
of the Philippines (CB), Banco Filipino commenced its operations as savings and mortgage bank on July
9, 1964. However, pursuant to MB Resolution No. 75, MB ordered the closure of Banco Filipino n the
ground that the latter was found to be "insolvent and that its continuance in business would involve
probable loss to its depositors and creditors x x x ".

Banco FIlipino sought to annul MB Resolution No. 75, which was subsequently granted. Central Bank and
the Monetary Board are ordered to reorganize Banco Filipino and allow the latter to resume business in
the Philippines under the comptrollership of both the Central Bank and the Monetary Board.

Consequently, Republic Act No. 7653 abolished the CB and a new central monetary authority was
established known as Bangko Sentral ng Pilipinas (BSP). Under the said law, the CB will continue to exist
under the name Central Bank-Board of Liquidators (CB-BOL) for the sole purpose of administering and
liquidating the assets and liabilities of the CB that were not transferred to the BSP.

During a meeting, BSP-MB resolved to allow Banco Filipino to reopen and resume business under the
comptrollership of BSP. Five years after, BSP and Banco Filipino entered into a Memorandum of
Agreement where the latter was to repay to BSP the amount of P3,673,031,589.36 by way of dacion en
pago of some of its real properties. The amount owed by BFSMB represented the so-called advances
extended to it by the defunct CB. Further, pursuant to the aforementioned agreement, BSP has to lift its
comptrollership over BFSMB on January 20, 2000, and deliver to the latter all collaterals in its custody,
including government securities held by designated comptrollers.

Later on, Banco Filipino experienced massive withdrawals. Thus, it applied for emergency financial
assistance from BSP to maintain liquidity. BSP however refused to assist, reasoning that there are strict
requirements imposed by Republic Act No. 7653. Banco Filipino asserted BSP, “having stepped into the
shoes of the old CB” was obligated to "reorganize" it.

ISSUE:
Whether or not relief prayed for by Banco Filipino can be mandated by judicial compulsion through a mere
revival of judgment considering that they lie within the discretion of the BSP-MB taking into account sound
banking principles.

RULING:
No. That the Court purposely left the finer details of the reorganization and the conditions thereof to the
sound discretion of then CB-MB was an acknowledgment of the fact that the CB alone was vested by
statute with the power and/or authority to determine or prescribe the conditions under which such
resumption of business shall take place.

Verily, nothing changed with the enactment of Republic Act No. 7653. BSP, the independent central
monetary authority established by the law, is still given sufficient independence and latitude to carry out
its mandate. Sections to of Republic Act No. 7653 bear this out, viz.:

SECTION 1. Declaration of Policy. - The State shall maintain a central monetary authority that shall
function and operate as an independent and accountable body corporate in the discharge of its mandated
responsibilities concerning money, banking and credit. In line with this policy, and considering its unique
functions and responsibilities, the central monetary authority established under this Act, while being
government-owned corporation, shall enjoy fiscal and administrative autonomy.

Accordingly, given that the reliefs prayed for by Banco Filipino are outside the ambit of the judgment
sought to be revived, coupled with its (Banco Filipino) admission in its petition, it is evident that the
judgment obligation imposed by the Decision in G.R. No. 70054 had already been extinguished through
its performance – Banco Filipino had been reopened and reorganized under the comptrollership of the
BSP-MB, which comptrollership lasted until January 20, 2000, upon the agreement of BSP-MB and
Banco Filipino to implement the Memorandum of Agreement.

2. Banco Filipino Savings and Mortgage Bank v. Bangko Sentral ng Pilipinas

FACTS:
A closed bank under receivership can only sue or be sued through its receiver, the Philippine Deposit
Insurance Corporation (PDIC). Hence, the petition filed by the petitioner bank which has been placed
under receivership is dismissible as it did not join PDIC as a party to the case.
Petitioner bank has been placed under receivership when it filed a Petition for Certiorari with the Supreme
Court. Said Petition was assailed by the respondent that contended that the same should be dismissed
outright for being led without Philippine Deposit Insurance Corporation's authority. It asserts that petitioner
was placed under receivership on March 17, 2011, and thus, petitioner's Executive Committee would
have had no authority to sign for or on behalf of petitioner absent the authority of its receiver, Philippine
Deposit Insurance Corporation. They also point out that both the Philippine Deposit Insurance
Corporation Charter and Republic Act No. 7653 categorically state that the authority to file suits or retain
counsels for closed banks is vested in the receiver. Thus, the verification and certification of non-forum
shopping signed by petitioner's Executive Committee has no legal effect.

ISSUE:
Whether or not petitioner Banco Filipino, as a closed bank under receivership, could file this Petition for
Review without joining its statutory receiver, the Philippine Deposit Insurance Corporation, as a party to
the case.

RULING:
A closed bank under receivership can only sue or be sued through its receiver, the Philippine Deposit
Insurance Corporation. Under Republic Act No. 7653, when the Monetary Board finds a bank insolvent, it
may "summarily and without need for prior hearing forbid the institution from doing business in the
Philippines and designate the Philippine Deposit Insurance Corporation as receiver of the banking
institution."

The relationship between the Philippine Deposit Insurance Corporation and a closed bank is fiduciary in
nature. Section 30 of Republic Act No. 7653 directs the receiver of a closed bank to "immediately gather
and take charge of all the assets and liabilities of the institution" and "administer the same for the benefit
of its creditors." The law likewise grants the receiver "the general powers of a receiver under the Revised
Rules of Court." Under Rule 59, Section 6 of the Rules of Court, "a receiver shall have the power to bring
and defend, in such capacity, actions in his [or her] own name." Thus, Republic Act No. 7653 provides
that the receiver shall also "in the name of the institution, and with the assistance of counsel as [it] may
retain, institute such actions as may be necessary to collect and recover accounts and assets of, or
defend any action against, the institution." Considering that the receiver has the power to take charge of
all the assets of the closed bank and to institute for or defend any action against it, only the receiver, in its
fiduciary capacity, may sue and be sued on behalf of the closed bank.

When petitioner was placed under receivership, the powers of its Board of Directors and its officers were
suspended. Thus, its Board of Directors could not have validly authorized its Executive Vice Presidents to
file the suit on its behalf. The Petition, not having been properly verified, is considered an unsigned
pleading. A defect in the certification of non-forum shopping is likewise fatal to petitioner's cause.
Considering that the Petition was led by signatories who were not validly authorized to do so, the Petition
does not produce any legal effect. Being an unauthorized pleading, this Court never validly acquired
jurisdiction over the case. The Petition, therefore, must be dismissed.
3. SIBAYAN V. ALDA
G.R. No. 233395, January 17, 2018

FACTS:
Respondent Elizabeth, through her daughter Ruby O. Aida (Ruby) charged Norlina of unauthorized
deduction of her BDO Savings Account as well as for failure to post certain check deposits to the said
account with the Office of Special Investigation of the Bangko Sentral ng Pilipinas (OSI-BSP). Norlina
argued that the charges were only meant to harass her and BDO as Norlina previously filed a criminal
case against Elizabeth, Ruby, and their cohorts, for theft, estafa, and violation of the Access Devise
Regulation Act of 1998.

Meanwhile, during the investigation, parties submitted their respective pleadings. The OSI-BSP issued a
Resolution finding a prima facie case against Norlina for Conducting Business in an Unsafe or Unsound
Manner under The General Banking Law of 2000. OGCLS-BSP then directed Norlina to submit her sworn
answer to the formal charge filed by the OSI-BSP.

Norlina then filed a Request to Answer Written Interrogatories addressed to Elizabeth. She likewise filed a
Motion for Production of Documents praying that the bank to allow her inspect and copy the Statement of
Account of Ruby. She alleged that Ruby is the legal and beneficial owner of said account in connection to
the earlier case of theft Norlina filed against the her.

Unfortunately, the Motion for Production of Bank Documents filed by the Norlina is denied. Norlina
counter-argued that the examination is exempted from the rule on secrecy of bank deposit because the
money deposited in the subject bank accounts is the subject matter of litigation. OGCLS-BSP rules
otherwise. It said that the present action is an administrative proceeding aimed at determining
respondent's liability, if any, for violation of banking laws and that a deposit account may only be
examined or looked into if it is the subject matter of a pending litigation.

ISSUE:
Whether or not the bank account sought to be examined is privileged under Section 2 of Republic Act No.
1405, otherwise known as The Law on Secrecy of Bank Deposit

RULING:
YES. The denial of the motion for production of bank documents pertaining to the statement of account of
Ruby is justified as the bank accounts sought to be examined are privileged. Section 2 of Republic Act
No. 1405, otherwise known as The Law on Secrecy of Bank Deposit, provides:

Section 2. All deposits of whatever nature with banks or banking institutions in the Philippines including
investments in bonds issued by the Government of the Philippines, its political subdivisions and its
instrumentalities, are hereby considered as of an absolutely confidential nature and may not be
examined, inquired or looked into by any person, government official, bureau or office, except upon
written permission of the depositor, or in cases of impeachment, or upon order of a competent court in
cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or
invested is the subject matter of the litigation.

Norlina bemoans that by suppressing her right to avail of discovery measures, the OGCLS-BSP violated
her right to due process. She maintains that the administrative character of the proceedings involved is
not sufficient to defeat such right.

Administrative due process cannot be fully equated with due process in its strict judicial sense. It is
enough that the party is given the chance to be heard before the case against him is decided. As
established by the facts, Norlina was afforded the opportunity to be heard and to explain her side before
the OGCLS-BSP. She was allowed to submit her answer and all documents in support of her defense. In
fact, her defense of fraud committed by Ruby is sufficiently contained in the pleadings and attachments
submitted by the parties to aid the OGCLSBSP in resolving the case before it.
Clearly then, the Requests to Answer Written Interrogatories and Motion for Production of Documents
were both unnecessary and improper.

4. BANGKO SENTRAL NG PILIPINAS, Petitioner, v. FELICIANO P. LEGASPI

FACTS
Petitioner BSP filed a Complaint for annulment of title, revocation of certificate and damages (with
application for TRO/writ of preliminary injunction) against Secretary Jose L. Atienza, Jr., Luningning G. De
Leon, Engr. Ramon C. Angelo, Jr., Ex-Mayor Matilde A. Legaspi and respondent Feliciano P. Legaspi
before the RTC of Malolos, Bulacan. Respondent, together with his fellow defendants, filed their Answer
to the complaint. Thereafter, the RTC issued an Order mandating the issuance of preliminary injunction,
enjoining the construction, development and/or operation of a dumpsite or landfill in Barangay San Mateo,
Norzagaray, Bulacan, in an area allegedly covered by OCT No. P858/Free Patent No. 257917, the
property subject of the complaint.

Herein respondent Legaspi filed a Motion to Dismiss alleging that the RTC did not acquire jurisdiction
over the person of the petitioner BSP because the suit is unauthorized by petitioner BSP itself and that
the counsel representing petitioner BSP is not authorized and thus cannot bind the same petitioner. In
addition, respondent Legaspi asserted that the complaint was initiated without the authority of the
Monetary Board and that the complaint was not prepared and signed by the Office of the Solicitor General
(OSG), the statutory counsel of government agencies.

In opposing the Motion to Dismiss, petitioner BSP argued that the complaint was filed pursuant to
Monetary Board Resolution No. 8865. Petitioner BSP further claimed that it is not precluded from being
represented by a private counsel of its own choice.

In denying the Motion to Dismiss, the RTC ruled that it had acquired jurisdiction over the person of the
petitioner when the latter filed with the court the Complaint. Furthermore, the RTC adjudged that in suits
involving the BSP, the Monetary Board may authorize the Governor to represent it personally or through
counsel, even a private counsel, and the authority to represent the BSP may be delegated to any other
officer thereof. It took into account the Monetary Board Resolution No. 900 containing the Board's
approval of the recommendation of the Asset Management Department (AMD) to engage the services of
Ongkiko Kalaw Manhit and Acorda Law Offices (OKMA Law).

Respondent Legaspi filed a motion for reconsideration, adding as its argument that the RTC failed to
acquire jurisdiction over the action because the complaint, a real action, failed to allege the assessed
value of the subject property. As an opposition to respondent Legaspi's additional contention, petitioner
BSP claimed that since the subject property contains an area of 4,838,736 square meters, it is
unthinkable that said property would have an assessed value of less than P20,000.00 which is within the
jurisdiction of the Municipal Trial Courts. Petitioner BSP further stated that a tax declaration showing the
assessed value of P28,538,900.00 and latest zonal value of P145,162,080.00 was attached to the
complaint.

RTC likewise denied respondent Legaspi's motion for reconsideration. Respondent Legaspi elevated the
case to the CA via a petition for certiorari under Rule 65 of the Rules of Court. CA granted respondent’s
motion and dismissed BSP’s complaint.

ISSUES
1. Whether or not The Regional Trial Court of Malolos City has exclusive original jurisdiction over the
subject matter of the action.
2. Whether or not BSP can lawfully engaged the services of a private counsel.

RULING
1. The RTC has exclusive original jurisdiction over the case. Under Batas Pambansa Bilang 129, as
amended by Republic Act No. 7691, the RTC has exclusive original jurisdiction over civil actions
 which involve title to possession of real property, or any interest therein, where the assessed value of
the property involved exceeds Twenty Thousand Pesos (P20,000.00).

Petitioner BSP insists that the property involved has an assessed value of more than P20,000.00, as
shown in a Tax Declaration attached to the complaint. Incidentally, the complaint, on its face, is
devoid of any amount that would confer jurisdiction over the RTC. The non-inclusion on the face of
the complaint of the amount of the property, however, is not fatal because attached in the complaint is
a tax declaration (Annex "N" in the complaint) of the property in question showing that it has an
assessed value of P215,320.00. It must be emphasized that annexes to a complaint are deemed part
of, and should be considered together with the complaint. Since a copy of the tax declaration, which
is a public record, was attached to the complaint, the same document is already considered as on file
with the court, thus, the court can now take judicial notice of such.

2. BSP can lawfully engage the services of a private counsel. Anent the issue of the legal representation
of petitioner BSP, the CA ruled that the BSP, being a government-owned and controlled corporation,
should have been represented by the Office of the Solicitor General (OSG) or the Office of the
Government Corporate Counsel (OGCC) and not a private law firm or private counsel, as in this case.

Under Republic Act No. 7653, or the New Central Bank Act, the BSP Governor is authorized to
represent the Bangko Sentral, either personally or through counsel, including private counsel, as may
be authorized by the Monetary Board, in any legal proceedings, action or specialized legal studies.
Under the same law, the BSP Governor may also delegate his power to represent the BSP to other
officers upon his own responsibility.

As aptly found by the RTC, petitioner BSP was able to justify its being represented by a private
counsel, thus: BSP's complaint dated April 10, 2008 was verified by Geraldine C. Alag, an officer of
the BSP being
the Director of its Asset Management Department. It has been explained that this was authorized by
the Monetary Board, as per Resolution No. 865 dated June 17, 2004, which reads:

To approve delegation of authority to the Director, Asset Management Department (AMD), or in his
absence, the Officer-in-Charge, AMD to sign all documents, contracts, agreements and affidavits
relating to the consolidation of ownership, lease, cancellation of decision, redemption and sale of
acquired assets, and all documents to be filed in court upon clearance by the Office of the General
Counsel and Legal Services x x x.

Also submitted to this Court is the Secretary's Certificate issued by Silvina Q. Mamaril-Roxas, Officer-
in-Charge, Office of the Secretary of BSP's Monetary Board attesting to Monetary Board Resolution
No. 900, adopted and passed on July 18, 2008, which reads:

At the regular meeting of the MB on 18 July 2008, the MB adopted and passed MB Resolution No.
900, to wit: xxx The Board approved the recommendation of the Asset Management Department
(AMD) to engage the services of Ongkiko Kalaw Manhit and Acorda Law Offices (OKMA Law) as
follows:

xxx To act as counsel for the Bangko Sentral ng Pilipinas (BSP) in a complaint to be filed against the
Department of Environment and Natural Resources (DENR) Secretary, et al., xxx

5. FEDERAL EXPRESS CORP. V. ANTONINO

FACTS
In November 2003, monthly common charges on the unit situated in New York, USA and owned by
respondent Eliza Antonino became due. These charges were for the period of July 2003 to November
2003, and were for a total amount of US$9,742.81. On December 2003, respondents Luwalhati and Eliza
were in the Philippines. As the monthly common charges on the Unit had become due, they decided to
send several Citibank checks to Sison, who was based in New York.

Citibank checks allegedly amounting to US$17,726.18 for the payment of monthly charges and
US$11,619.35 for the payment of real estate taxes were sent by Luwalhati through FedEx with Account
No. x2546-4948-1 and Tracking No. 8442 4588 4268. The package was addressed to Sison who was
tasked to deliver the checks payable to MaxwellKates, Inc. and to the New York County Department of
Finance. Sison allegedly did not receive the package, resulting in the non-payment of Luwalhati and
Eliza's obligations and the foreclosure of the Unit.

After several follow-ups, Sison was informed that the package was delivered to her neighbor but there
was no signed receipt. On March 14, 2004, respondents, through their counsel, sent a demand letter to
FedEx for payment of damages due to the non-delivery of the package, but FedEx refused to heed their
demand. Hence, on April 5, 2004, they led their Complaint for damages.

FedEx contended that it should be absolved of liability as the respondents shipped prohibited items and
misdeclared these items as "documents." It pointed to conditions under its Air Waybill prohibiting the
"transportation of money (including but not limited to coins or negotiable instruments equivalent to cash
such as endorsed stocks and bonds)."

ISSUE
Whether or not the Citibank checks are considered money, within the prohibition of FedEx’s Air Waybill.

RULING
The prohibition has a singular object: money. What follows the phrase "transportation of money " is a
phrase enclosed in parentheses, and commencing with the words "including but not limited to." The
additional phrase, enclosed as it is in parentheses, is not the object of the prohibition, but merely a
postscript to the word "money." Moreover, its introductory words "including but not limited to" signify that
the items that follow are illustrative examples; they are not qualifiers that are integral to or inseverable
from "money." Despite the utterance of the enclosed phrase, the singular prohibition remains: money.

Money is "what is generally acceptable in exchange for goods." It can take many forms, most commonly
as coins and banknotes. Despite its myriad forms, its key element is its general acceptability. Laws
usually define what can be considered as a generally acceptable medium of exchange.

It is settled in jurisprudence that checks, being only negotiable instruments, are only substitutes for money
and are not legal tender; more so when the check has a named payee and is not payable to bearer. In
Philippine Airlines, Inc. v. Court of Appeals, the Court ruled that the payment of a check to the sheriff did
not satisfy the judgment debt as checks are not considered legal tender. This has been maintained in
other cases decided by the Supreme Court.

The Air Waybill's prohibition mentions "negotiable instruments" only in the course of making an example.
Thus, they are not prohibited items themselves. Moreover, the illustrative example does not even pertain
to negotiable instruments per se but to "negotiable instruments equivalent to cash." The checks involved
here are payable to specific payees, Maxwell-Kates, Inc. and the New York County Department of
Finance. Thus, they are order instruments. They are not payable to their bearer. Order instruments differ
from bearer instruments in their manner of negotiation:

Under Section 30 of the Negotiable Instruments Law, an order instrument requires an indorsement from
the payee or holder before it may be validly negotiated. A bearer instrument, on the other hand, does not
require an indorsement to be validly negotiated. There is no question that checks, whether payable to
order or to bearer, so long as they comply with the requirements under Section 1 of the Negotiable
Instruments Law, are negotiable instruments. The more relevant consideration is whether checks with a
specified payee are negotiable instruments equivalent to cash, as contemplated in the example added to
the Air Waybill's prohibition. The Court thinks they are not.
An order instrument, which has to be endorsed by the payee before it may be negotiated, cannot be a
negotiable instrument equivalent to cash. It is worth emphasizing that the instruments given as further
examples under the Air Waybill must be endorsed to be considered equivalent to cash.

6. SPOUSES JAIME and MATILDE POON vs. PRIME SAVINGS BANK represented by the
PHILIPPINE DEPOSIT INSURANCE CORPORATION as Statutory Liquidator
G.R. No. 183794, June 13, 2016

FACTS
Petitioners owned a commercial building in Naga City. On 3 November 2006, Matilde Poon and
respondent executed a 10-year Contract of Lease (Contract) over the building for the latter's use as its
branch office in Naga City. They agreed to a fixed monthly rental of P60,000, with an advance payment of
the rentals for the first 100 months in the amount of P6,000,000. As agreed, the advance payment was to
be applied immediately. In addition, paragraph 24 of the Contract provides:

Should the leased premises be closed, deserted or vacated by the LESSEE, the LESSOR shall have the
right to terminate the lease without the necessity of serving a court order and to immediately repossess
the leased premises. xxxxxxxxxx

The LESSOR shall thereupon have the right to enter into a new contract with another party. All advanced
rentals shall be forfeited in favor of the LESSOR. Barely three years later, however, the BSP placed
respondent under the receivership of the Philippine Deposit Insurance Corporation (PDIC) for wilfully
violating a cease and desist orders that has become final, involving acts or transactions which amount to
fraud or a dissipation of the assets of the institution, among other grounds. The BSP eventually ordered
respondent's liquidation.

On 12 May 2000, respondent vacated the leased premises and surrendered them to petitioners.
Subsequently, the PDIC issued petitioners a demand letter asking for the return of the unused advance
rental amounting to P3,480,000 on the ground that paragraph 24 of the lease agreement had become
inoperative, because respondent's closure constituted force majeure. The PDIC likewise invoked the
principle of rebus sic stantibus under Article 1267 of Republic Act No. 386 (Civil Code) as alternative legal
basis for demanding the refund. Petitioners, however, refused the PDIC's demand. They maintained that
they were entitled to retain the remainder of the advance rentals following paragraph 24 of their Contract.
Consequently, respondent sued petitioners before the RTC of Naga City for a partial rescission of
contract and/or recovery of a sum of money.

RTC ordered the partial rescission of the lease agreement and directed petitioner spouses Jaime and
Matilde Poon to return or refund the sum of One Million Seven Hundred Forty Thousand Pesos
(P1,740,000) representing one-half of the unused portion of the advance rentals. CA affirmed the RTC
Decision.

ISSUES
1. Whether respondent may be released from its contractual obligations to petitioners on grounds of
fortuitous event under Article 1174 of the Civil Code and unforeseen event under Article 1267 of the
Civil Code;
2. Whether the proviso in the parties' Contract allowing the forfeiture of advance rentals was a penal
clause; and
3. Whether the penalty agreed upon by the parties may be equitably reduced under Article 1229 of the
Civil Code.

RULING
1. The closure of respondent's business was neither a fortuitous nor an unforeseen event that rendered
the lease agreement functus officio. Respondent posits that it should be released from its contract
with petitioners, because the closure of its business upon the BSP' s order constituted a fortuitous
event as the Court held in Provident Savings Bank. The cited case, however, must always be read in
the context of the earlier Decision in Central Bank v. Court of Appeals. The Court ruled in that case
 that the Monetary Board had acted arbitrarily and in bad faith in ordering the closure of Provident
Savings Bank. Accordingly, in the subsequent case of Provident Savings Bank it was held that fuerza
mayor had interrupted the prescriptive period to file an action for the foreclosure of the subject
mortgage.

In contrast, there is no indication or allegation that the BSP's action in this case was tainted with
arbitrariness or bad faith. Instead, its decision to place respondent under receivership and liquidation
proceedings was pursuant to Section 30 of Republic Act No. 7653. Moreover, respondent was partly
accountable for the closure of its banking business. It cannot be said, then, that the closure of its
business was independent of its will as in the case of Provident Savings Bank.

The legal effect is analogous to that created by contributory negligence in quasi-delict actions. The
period during which the bank cannot do business due to insolvency is not a fortuitous event, unless it
is shown that the government's action to place a bank under receivership or liquidation proceedings is
tainted with arbitrariness, or that the regulatory body has acted without jurisdiction.

The Court cannot also give due course respondent lessee’s invocation of the doctrine of unforeseen
event under Article 1267 of the Civil Code, which provides:

Art. 1267. When the service has become so difficult as to be manifestly beyond the contemplation of
the parties, the obligor may also be released therefrom, in whole or in part. Tagaytay Realty Co., Inc.
v. Gacutan lays down the requisites for the application of Article 1267, as follows:

1. The event or change in circumstance could not have been foreseen at the time of the execution
of the contract.
2. It makes the performance of the contract extremely difficult but not impossible.
3. It must not be due to the act of any of the parties.
4. The contract is for a future prestation.

The first and the third requisites, however, are lacking. It must be noted that the lease agreement was
for 10 years. As shown by the unrebutted testimony of Jaime Poon during trial, the parties had
actually considered the possibility of a deterioration or loss of respondent's business within that
period. Moreover, the closure of respondent's business was not an unforeseen event. As the lease
was long-term, it was not lost on the parties that such an eventuality might occur, as it was in fact
covered by the terms of their Contract. Besides, the event was not independent of respondent's will.

2. The forfeiture clause in the Contract is penal in nature. It is settled that a provision is a penal clause if
it calls for the forfeiture of any remaining deposit still in the possession of the lessor, without prejudice
to any other obligation still owing, in the event of the termination or cancellation of the agreement by
reason of the lessee's violation of any of the terms and conditions thereof. This kind of agreement
may be validly entered into by the parties. The clause is an accessory obligation meant to ensure the
performance of the principal obligation by imposing on the debtor a special prestation in case of
nonperformance or inadequate performance of the principal obligation. The forfeiture clauses of the
Contract, therefore, served the two functions of a penal clause, i.e., (1) to provide for liquidated
damages and (2) to strengthen the coercive force of the obligation by the threat of greater
responsibility in case of breach.

3. A reduction of the penalty agreed upon by the parties is warranted under Article 1129 of the Civil
Code. At stake in this case are not just the rights of petitioners and the correlative liabilities of
respondent lessee. Over and above those rights and liabilities is the interest of innocent debtors and
creditors of a delinquent bank establishment. These overriding considerations justify the 50%
reduction of the penalty agreed upon by petitioners and respondent lessee in keeping with Article
1229 of the Civil Code. Under the circumstances, it is neither fair nor reasonable to deprive
depositors and creditors of what could be their last chance to recoup whatever bank assets or
receivables the PDIC can still legally recover. Besides, nothing has prevented petitioners from putting
 their building to other profitable uses, since respondent surrendered the premises immediately after
the closure of its business.

Distinguish a deposit substitute under the banking law and deposit substitute under the tax law. The
distinction is on the purpose. If a bank or non-bank financial intermediary sells debt instruments to 20
or more lenders/placers at any one time, irrespective of outstanding amounts, for the purpose of
relending or purchasing of receivables or obligations, it is considered to be performing a quasi-
banking function. Under the National Internal Revenue Code, however, deposit substitutes include
not only the issuances and sales of banks and quasi-banks for relending or purchasing receivables
and other similar obligations, but also debt instruments issued by commercial, industrial, and other
nonfinancial companies to finance their own needs or the needs of their agents or dealers. Banco de
Oro v. Republic of the Philippines, G.R. No. 198756, August 16, 2016.

7. SPOUSES CHUGANI V PHILIPPINE DEPOSIT INSURANCE CORP.

FACTS
Petitioners Spouses Chugani, signified their intention to open Time Deposits with Rural Bank of Mawab
(Davao), Inc., (RBMI) through inter-branch deposits to the accounts of RBMI maintained in Metrobank
and China Bank- Tagum, Davao Branches. Thereafter, Certificates of Time Deposits (CTDs) and Official
Receipts were issued to Spouses Chugani.

Sometime in September 2011, Spouses Chugani came to know that the Monetary Board of the Bangko
Sentral ng Pilipinas placed RBMI under receivership and thereafter closed the latter. Spouses Chugani,
then filed claims for insurance of their time deposits.

Respondent Philippine Deposit Insurance Corporation (PDIC) denied the claims on the following grounds:
1.) based on bank records submitted by RBMI, Spouses Chugani’s deposit accounts are not part of
RBMI's outstanding deposit liabilities; 2.) the time deposits of Spouses Chugani are fraudulent and their
CTDs were not duly issued by RBMI, but were mere replicas of unissued CTD's in the inventory
submitted by RBMI to PDIC; and 3.) the amounts purportedly deposited by the petitioners were credited
to the personal account of the president of RBMI, hence, they could not be construed as valid liabilities of
RBMI.

Spouses Chugani filed a request for reconsideration of PDIC's denial of their claim. PDIC however
rejected the same. Hence, Spouses Chugani filed a Petition for Certiorari under Rule 65 of the Rules of
Court with the Regional Trial Court (RTC).

RTC issued an Order dismissing the Petition for Certiorari filed by Spouses Chugani for lack of
jurisdiction. Aggrieved, Spouses Chugani appealed the RTC's Decision to the Court of Appeals (CA).
Meanwhile, CA denied the appeal of Spouses Chugani ruling that, RTC has no jurisdiction over the
Petitions for Certiorari filed by the petitioners questioning the PDIC's denial of their claim for deposit
insurance.

ISSUES
1. Whether or not RTC has jurisdiction over the Petitions for Certiorari questioning PDIC’s denial of
Spouses Chugani’s claim for deposit.
2. Whether or not PDIC acted in grave abuse of discretion in denying the claim for deposit insurance.

RULING
1. NO. The RTC has no jurisdiction. Consistent with Section 4, Rule 65, the CA has the jurisdiction to
rule on the alleged grave abuse of discretion of the PDIC. Therefore, the CA is correct when it held
that the RTC has no jurisdiction over the Petitions for Certiorari filed by the petitioners questioning the
PDIC's denial of their claim for deposit insurance. Nevertheless, any question as to where the petition
for certiorari should be filed to question PDIC's decision on claims for deposit insurance has been put
to rest by R.A. No. 10846. Section 7 therein provides:
 xxxx
"The actions of the Corporation taken under Section 5(g) shall be final and executory, and may only
be restrained or set aside by the Court of Appeals, upon appropriate petition for certiorarion the
ground that the action was taken in excess of jurisdiction or with such grave abuse of discretion as to
amount to a lack or excess of jurisdiction. The petition for certiorari may only be filed within thirty (30)
days from notice of denial of claim for deposit insurance”.

2. NO. PDIC did not acted in grave abuse of discretion. Based on its charter, the PDIC has the duty to
grant or deny claims for deposit insurance. Upon investigation by the PDIC, it was discovered that 1)
the money allegedly placed by the petitioners in RBMI was in fact credited to the personal account of
the president of RBMI, hence, they could not be construed as valid liabilities of RBMI to petitioners; 2)
based on bank records and the certified list of the bank's outstanding deposit liabilities, the alleged
deposits of petitioners are not part of RBMI's outstanding liabilities; and 3) the CTDs are not validly
issued by RBMI, but were mere replicas of the unissued and unused CTDs still included in the
inventory of RBMI. Considering the above disquisitions, it is sufficiently established that the PDIC, did
not commit any grave abuse of discretion in denying petitioners' claim for deposit insurance as the
same were validly grounded on the facts, law and regulations issued by the PDIC.

8. SO V. PHILIPPINE DEPOSIT INSURANCE CORP.

FACTS:
Petitioner Peter So (So) opened an account with the Cooperative Rural Bank Bulacan (CRBB) amounting
to P300,000, for which he was assigned the Special Incentive Savings Account (SISA) No. 05-15712-1.
On the same year, however, So learned that CRBB closed its operations and was placed under Philippine
Deposit Insurance Corporation's (PDIC's) receivership. This prompted So, together with other depositors,
to file an insurance claim with the PDIC. Acting upon such claim, PDIC sent a letter/notice requiring So to
submit additional documents, which So averred of having complied with. Upon investigation, the PDIC
found that So’s account originated from and was funded by the proceeds of a terminated SISA (mother
account), jointly owned by a certain Reyes family. Thus, based on the determination that So's account
was among the product of the splitting of the said mother account which is prohibited by law, PDIC denied
So's claim for payment of deposit insurance. So then filed a Request for Reconsideration, which was
likewise denied by the PDIC.

Aggrieved, So filed a Petition for Certiorari under Rule 65 before the RTC.RTC upheld the factual findings
and conclusions of the PDIC. According to the RTC, based on the records, the PDIC correctly denied
So's claim for insurance on the ground of splitting of deposits which is prohibited by law.

RTC also declared that, pursuant to its Charter (RA 3591), PDIC is empowered to determine and pass
upon the validity of the insurance deposits claims, it being the deposit insurer. As such, when it rules on
such claims, it is exercising a quasi-judicial function. Thus, it was held that petitioner's remedy to the
dismissal of his claim is to file a petition for certiorari with the Court of Appeals under Section 4, Rule 65,
stating that if the petition involves the acts or omissions of a quasi-judicial agency, unless otherwise
provided by law or the rules, it shall be filed in and cognizable only by the Court of Appeals (CA).

ISSUE
Whether or not RTC have jurisdiction over a petition for certiorari filed under Rule 65, assailing the PDIC's
denial of a deposit insurance claim.

RULING
NO. PDIC was created under RA 3591 as an insurer of deposits in all banks entitled to the benefits of
insurance under the said Act to promote and safeguard the interests of the depositing public. As such,
PDIC has the duty and authority to determine the validity of and grant or deny deposit insurance claims.
Section 16(a) of its Charter, as amended, provides that PDIC shall commence the determination of
insured deposits due the depositors of a closed bank upon its actual takeover of the closed bank. Also,
Section 1 of PDIC's Regulatory Issuance No. 2011-03, provides that as it is tasked to promote and
safeguard 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,
PDIC shall pay all legitimate deposits held by bona fide depositors and provide a mechanism by which
depositors may seek reconsideration from its decision, denying a deposit insurance claim.

Further, it bears stressing that as stated in Section 4(f) of its Charter, as amended, PDIC's action, such as
denying a deposit insurance claim, is considered as final and executory and may be reviewed by the court
only through a petition for certiorari on the ground of grave abuse of discretion.

Considering the foregoing, the legislative intent in creating the PDIC as a quasi-judicial agency is clearly
manifest. Accordingly, the actions of the Corporation taken under Section 5(g) shall be final and
executory, and may only be restrained or set aside by the Court of Appeals, upon appropriate petition for
certiorari on the ground that the action was taken in excess of jurisdiction or with such grave abuse of
discretion as to amount to a lack or excess of jurisdiction. The petition for certiorari may only be filed
within thirty (30) days from notice of denial of claim for deposit insurance.

As it stands, the controversy as to which court has jurisdiction over a petition for certiorari filed to question
the PDIC's action is already settled.

9. CU v. SMALL BUSINESS GUARANTEE AND FINANCE CORP

FACTS
Golden 7 Bank (G7 Bank) was granted a credit line worth Php 50 million by respondent Small Business
Guarantee and Finance Corp. The bank’s officers, herein petitioner Fidel Cu, Allan Cu and others were
made signatories to the loan documents including the postdated checks which were issued in payment for
the drawdowns on the credit line.

BSP placed G7 Bank under receivership by the Philippine Deposit Insurance Corporation (PDIC). PDIC
eventually took over the bank’s premises, per the closure order issued by the Monetary Board. In effect,
the Deputy Receiver of PDIC took over the bank and issued a cease and desist order which allowed
PDIC to close all of G7 Bank’s deposit accounts with other banks.

The postdated checks issued by Cu the matured and when SB Corp deposited the same to its account
with the LBP Makati Branch, they were all dishonored for the reason that the account was already closed.
SB Corp sent demand letters to Cu, demanding payment. Despite such, Cu failed to comply thus SB Corp
filed a criminal complaint against Cu and others for violation of BP 22. A petition for assistance in the
liquidation of G7 Bank’s assets was then filed by PDIC in the Naga City court.

The MeTC dismissed the BP 22 cases, and the dismissal was upheld by the RTC, by the reason that the
appointment of a receiver operates to suspend the authority of the bank and its officers to intermeddle
with its own property and transfer its assets to make do the payment with SB Corp. The CA reversed the
ruling, hence Cu’s petition.

ISSUE
Whether the criminal case for BP 22 against the bank officers should be dismissed due to the order for
receivership and despite a subsequent pending petition for assistance for liquidation.

RULING
YES, the SC found that both the MeTC and the RTC acted correctly when it ordered the dismissal of the
BP 22 cases against Cu. The Court found that:
(1) the closure of G7 Bank, placing it under receivership per Monetary Board Orders and the filing of the
petition for assistance in the liquidation proceedings effectively suspended the demandabililty of the
loan, thus the BP 22 case cannot proceed and was properly dismissed; and
(2) the filing of a petition for assistance in liquidation by PDIC as receiver as a result of the Monetary
Bank’s order for closure made it legally impossible for Cu to comply with his obligation with SB Corp,
thus the filing was clearly in bad faith

It applied the doctrine in the case of Gidwani v. People, in which the demandability of the payment for the
embroidery services rendered by the exporter was “suspended” by an SEC order, which ordered the
account from which the payments were to be drawn against, to be closed, after the exporter filed a
petition for declaration of a state of suspension of payments.

“In other words, the SEC Order also created a suspensive condition. When a contract is subject to a
suspensive condition, its birth takes place or its effectivity commences only if and when the event that
constitutes the condition happens or is fulfilled. Thus, at the time the payee presented the September and
October 1997 checks for encashment, it had no right to do so, as there was yet no obligation due from the
exporter, through its President.” “Consequently, because there was a suspension of the exporter's
obligations, its President may not be held liable for civil obligations of the corporation covered by the bank
checks at the time this case arose. However, it must be emphasized that the President's non liability
should not prejudice the right of the payee to pursue its claim through the remedies available to it, subject
to the SEC proceedings regarding the application for corporate rehabilitation.”

The Court pointed out that that G7 Bank was placed under receivership prior to the demand of the
payments. This means that when SB Corp. deposited the postdated checks, it was surely aware that
Bank was already under receivership and PDIC had already taken over the bank by virtue of the
Monetary Board’s closure thereof. SB Corp clearly acted in bad faith because it was aware that it was
legally impossible for Cu to fund those checks on the dates indicated therein, which were all past G7
Bank’s closure because all the bank accounts of G7 Bank were closed by PDIC.

Further, the effect of a petition for assistance in the liquidation of a closed bank is that it gives the
liquidation court the exclusive jurisdiction to adjudicate disputed claims against the closed bank, assist in
the individual liabilities of the stockholders, directors, and officers, and decide on all other issues as may
be material to implement the distribution plan adopted by the PDIC for general application to all closed
banks.

Considering the amount to be received by SB Corp was not yet determine as the liquidation proceeding
was still pending, the debtor’s obligation to pay or perform is suspended. This however, does not preclude
the proper filing of claims in the liquidation proceedings.

10. APEX BANCRIGHTS HOLDINGS, INC., LEAD BANCFUND HOLDINGS, et al. vs BANGKO
SENTRAL NG PILIPINAS and PHILIPPINE DEPOSIT INSURANCE CORPORATION
G.R. No. 214866, October 2, 2017

FACTS
EIB, entered into a three-way merger with Urban Bank, Inc. (UBI) and Urbancorp Investments, Inc. (UII) in
an attempt to rehabilitate UBI which was then under receivership. However, EIB then encountered its own
financial difficulties and failed to overcome those thus leading to PDIC placing it under receivership
pursuant to Section 30 of RA 7653 or the New Central Bank Act.

Accordingly, PDIC took over EIB. PDIC submitted its initial receivership report to the Monetary Board
which contained its finding that EIB can be rehabilitated or permitted to resume business; provided, that a
bidding for its rehabilitation would be conducted, and that the following conditions would be met: (a) there
are qualified interested banks that will comply with the parameters for rehabilitation of a closed bank,
capital strengthening, liquidity, sustainability and viability of operations, and strengthening of bank
governance; and (b) all parties (including creditors and stockholders) agree to the rehabilitation and the
revised payment terms and conditions of outstanding liabilities.
A public bidding was scheduled by PDIC, but the same failed as no bid was submitted. A rebidding was
then set which also did not materialize as no bids were submitted. Thereafter, PDIC informed BSP that
EIB can hardly be rehabilitated and so the Monetary Board directed PDIC to proceed with the liquidation.

Petitioners, who are stockholders representing the majority stock of EIB, filed a petition for certiorari
before the CA challenging the Resolution of Liquidation. In essence, petitioners blame PDIC for the failure
to rehabilitate EIB, contending that PDIC: (a) imposed unreasonable and oppressive conditions which
delayed or frustrated the transaction between BDO and EIB; (b) frustrated EIB's efforts to increase its
liquidity when PDIC disapproved EIB's proposal to sell its MRT bonds to a private third party and, instead,
required EIB to sell the same to government entities; (c) imposed impossible and unnecessary bidding
requirements; and (d) delayed the public bidding which dampened investors' interest.

In defense, PDIC countered that petitioners were already estopped from assailing the placement of EIB
under receivership and its eventual liquidation since they had already surrendered full control of the bank
to the BSP. For its part, BSP maintained that it had ample factual and legal bases to order EIB's
liquidation.

The CA ruled in favor of the BSP noting that nothing in the Section 30 of RA 7653requires the Monetary
Board to make its own independent factual determination on the bank's viability before ordering its
liquidation. The law only provides that the Monetary Board "shall notify in writing the board of directors of
its findings and direct the receiver to proceed with the liquidation of the institution," which it did in this
case.

ISSUE
Whether or not the monetary board did not gravely abuse its discretion when it directed the PDIC to
proceed with the liquidation of EIB.

RULING
NO. As per Section 30 (c) of RA 7653 on the Proceedings in Receivership and Liquidation provides that
“the Monetary Board may summarily and without need for prior hearing forbid the institution from doing
business in the Philippines and designate the Philippine Deposit Insurance Corporation as receiver of the
banking institution”.

The receiver shall immediately gather and take charge of all the assets and liabilities of the institution,
administer the same for the benefit of its creditors, and exercise the general powers of a receiver under
the Revised Rules of Court. If the receiver determines that the institution cannot be rehabilitated or
permitted to resume business in accordance with the next preceding paragraph, the Monetary Board shall
notify in writing the board of directors of its findings and direct the receiver to proceed with the liquidation
of the institution.

The 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 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.

It is settled that "the power and authority of the Monetary Board to close banks and liquidate them
thereafter when public interest so requires is an exercise of the police power of the State. Police power,
however, is subject to judicial inquiry. It may not be exercised arbitrarily or unreasonably and could be set
aside if it is either capricious, discriminatory, whimsical, arbitrary, unjust, or is tantamount to a denial of
due process and equal protection clauses of the Constitution."

Here, there was no grave abuse of discretion. In an attempt to forestall EIB's liquidation, petitioners insist
that the Monetary Board must first make its own independent finding that the bank could no longer be
rehabilitated — instead of merely relying on the findings of the PDIC — before ordering the liquidation of a
bank. Such position is untenable.
As correctly held by the CA, nothing in Section 30 of RA 7653 requires the BSP, through the Monetary
Board, to make an independent determination of whether a bank may still be rehabilitated or not. As
expressly stated in the afore-cited provision, once the receiver determines that rehabilitation is no longer
feasible, the Monetary Board is simply obligated to: (a) notify in writing the bank's board of directors of the
same; and (b) direct the PDIC to proceed with liquidation.