[G.R. No. L-56047. April 27, 1982.]

THE OVERSEAS BANK OF MANILA, Petitioner, v. THE HONORABLE COURT OF APPEALS and JULIAN R. CORDERO, Respondents.

Emmanuel Pelaez, Sr. for Petitioner.

Alberto S. Ortiz for Private Respondent.

SYNOPSIS

Respondent Cordero deposited different sums of money with The Overseas Bank of Manila. Before said deposits could be withdrawn, the Central Bank passed Resolutions Nos. 1327 and 1263 providing among others, the suspension of the operations of the said bank. The Supreme Court however annulled the aforesaid resolutions in Ramos, Et. Al. v. Central Bank (40 SCRA 565), for which reason, petitioner bank is ready to accept its liability for the payment to private respondent of the balance of the principal amount deposited with it but submits that it is not liable for the interests thereon during the period that the bank was closed. The judgment of the trial court as modified by the Court of Appeals ordered TOBM to pay the aforesaid amount with interest until fully paid. Hence, this petition.

On review by certiorari, the Supreme Court ruled that respondent is not entitled to the payment of the interest in question, in line with Its pronouncements in the following cases: The Overseas Bank of Manila v. Court of Appeals and Tony D. Tapia, G.R. No. L-49353, June 11, 1981, (105 SCRA 49) and The Overseas Bank of Manila v. Vicente Cordero, G.R. No. L-33582, March 30, 1982, which are materially identical to the one at bar.

Decision under review, reversed.

SYLLABUS

COMMERCIAL LAW; BANKS; TIME DEPOSIT; INTEREST; PAYMENT CEASES UPON SUSPENSION OF BANKING OPERATIONS BY CENTRAL BANK; CASE AT BAR. Where petitioner bank does not deny and is ready to accept its liability for the return or payment to herein private respondent of the balance of Thirty Thousand (P30,000.00) Pesos of the principal amount deposited by him but submits that it is not liable for the interests thereon during the period that Central Banks Resolutions Nos. 1327 and 1263 were in force and effect and the bank was, consequently, for all practical purposes under a state of liquidation, while on the other hand, private respondent maintains, and the Court of Appeals so held, that in view of the decision of this Court annulling the mentioned Central Bank resolutions, the herein petitioner bank was "not legally dead hence, "the ordinary laws governing the relationship of a time deposit (sic) and the bank are applicable, the issue thus joined by the parties is precisely the very same one already resolved in the Overseas Bank of Manila v. Court of Appeals and Tony D. Tapia, G.R. No. L-49353, June 11, 1981, 105 SCRA 49 and The Overseas Bank of Manila v. Vicente Cordero, G.R. No. L-33582, March 30, 1982 to the effect that" it should be deemed read into every contract of deposit with a bank that the obligation to pay interest on the deposit ceases the moment the operation of the bank is completely suspended by the duly constituted authority, the Central Bank."

D E C I S I O N

BARREDO, J.:

Petition for review of the decision of the Court of Appeals in its CA-G.R. No. 51339-R, Julian R. Cordero, plaintiff-appellee v. The Overseas Bank of Manila, Defendant-Appellant, which modified the judgment of the trial court but nevertheless sentenced herein petitioner thus:chanroblesvirtual|awlibrary

"WHEREFORE, the judgment appealed from is hereby modified. Defendant-appellant The Overseas Bank of Manila is hereby ordered to pay the sum of P30,000.00 with 6% interest per annum from July 20, 1967 until fully paid. In all other respects, the judgment is affirmed.

"SO ORDERED." (P. 33, Record.)

The background facts hereof are parallel in all material respects to those in The Overseas Bank of Manila v. Court of Appeals and Tony D. Tapia, G.R. No. L-49353, June 11, 1981, 105 SCRA 49, and the more recent case of The Overseas Bank of Manila v. Vicente Cordero, G.R. No. L-33582, March 30, 1982.

Briefly stated, in all these three cases Tapia and the Corderos deposited, on time basis, different sums of money respectively with the Overseas Bank of Manila. Before they could withdraw said deposits, "by Resolution No. 1327 confirmed on August 13, 1968 (Exh. 1-TOBM), the Monetary Board decided, among others, . . .To affirm the decisions of the Board under its Resolution No. 1263 dated July 30, 1968 prohibiting TOBM from participating in clearing and Resolution No. 1290 dated August 13, 1968 authorizing the Board of Directors of TOBM to suspend the operations of the said Bank . . ." The Board also excluded TOBM from clearing as even with the P10 million special fund loan intended to be made available under Section 90 of Republic Act No. 265 to TOBM, the extremely distressed financial condition of said Bank will continue to prevail and that . . . there seem to be no other alternative except to liquidate the bank under Section 29 of R.A. 265. In another resolution (Exh. 2-TOBM) the Monetary Board pursuant to Section 29 of Republic Act No. 265 decided to forbid TOBM to do business in the Philippines; to instruct the Superintendent of Banks to take such further action as may be necessary pursuant to Section 29 of Republic Act 265." (P. 25, Record).

Subsequently, however, on October 24, 1971, this Supreme Court annulled the Central Bank Resolution No. 1263. As stated by the Court of Appeals in the decision under review:jgc:chanrobles.com.ph

"The Supreme Court, in Ramos, Et. Al. v. Central Bank of the Philippines, 1 while recognizing the precarious financial condition of the defendant-appellant, ruled that a previous commitment of the Central Bank for the continued operation of, and rehabilitation of, the OBM (defendant-appellant bank) estopped the Central Bank through the Monetary Board from liquidating and declaring the bank insolvent. This commitment is embodied in a Voting Trust Agreement, executed by the petitioners on November 20, 1967 and prepared by the attorneys of the Central Bank. Thus the Supreme Court said:chanrob1es virtual 1aw library

Bearing in mind that the communications Annexes B and G as well as the voting trust agreement, Annex A, had been prepared by the CB and the well known rule that ambiguities therein are to be construed against the party that caused them, the record becomes clear that, in consideration of the execution of the voting trust agreement by the petitioner stockholders of OBM, and of the mortgage or assignment of their personal properties to the CB (Res. Nos. 2015, 16 October 1967, Annex F Petition), the CB had agreed to announce its readiness to support the new management, in order to allay the fear of depositors and creditors. (Annex B), and to stave off liquidation by providing adequate funds for the rehabilitation, normalization and stabilization of the OBM, in a manner similar to what the CB had previously done with the Republic Bank (Petition, Annex G, ante). While no express terms in the document refer to the provision of funds by the CB for the purpose, the same is necessarily implied, for in no other way could it rehabilitate, normalize and stabilize a distressed bank.

Even in the absence of contract, the record plainly shows that the CB made express representations to petitioners herein that it would support the OBM, and avoid its liquidation if the petitioners would execute (a) the Voting Trust Agreement turning over the management of OBM to the CB or its nominees, and (b) mortgage or assign their properties to the Central Bank to cover the overdraft balance of OBM. The petitioners having complied with these conditions and parted with value to the profit of the Central Bank (which thus acquired additional security for its own advances), the CB may not now renege on its representation and liquidate the OBM, to the detriment of its stockholders, depositors and other creditors, under the rule of promissory estoppel (19 Am. Jur., pages 657-658, 28 Am. Jur. 2d, 656-657).

"As a result of these findings, the Supreme Court annulled the Central Banks Resolution Nos. 1263, 1290 and 1333 (that prohibit the Overseas Bank of Manila to participate in clearing, direct the suspension of its operations, and ordering liquidation of said bank) and directed the Central Bank to comply with its obligations under the Voting Trust Agreement, and further, to desist from taking action in violation thereof." (Pp. 29-31, Record.)

Under the foregoing facts, petitioner bank does not deny and is ready to accept its liability for the return or payment to herein private respondent Julian R. Cordero of the balance of Thirty Thousand (P30,000.00) Pesos of the principal amount deposited by him but submits that it is not liable for the interests thereon during the period that Central Banks Resolution Nos. 1327 and 1263 were in force and effect and the bank was, consequently, for all practical purposes under a state of liquidation. On the other hand, private respondent maintains, and the Court of Appeals so held, that in view of the decision of this Supreme Court annulling the mentioned Central Banks resolutions, the herein petitioner bank was "not legally dead", hence "the ordinary laws governing the relationship of a time deposit (sic?) and the bank are applicable."cralaw virtua1aw library

The issue thus joined by the parties is precisely the very same one We already resolved in Tapia and Cordero (Vicente) supra. In this latest case, Mr. Justice Escolin held for the Court thus:jgc:chanrobles.com.ph

"Thus, with the principal claim of respondent having been satisfied, the only remaining issue to be determined is whether respondent is entitled to (1) interest on his time deposit during the period that petitioner was closed and (2) to attorneys fees.

"We find the answer to be in the negative.

"The pronouncement made by this Court, per Justice Barredo, in the recent case of Overseas Bank of Manila versus Court of Appeals (105 SCRA 49) is explicit and categorical. We quote:chanrob1es virtual 1aw library

It is a matter of common knowledge which we take judicial notice of, that what enables a bank to pay stipulated interest on money deposited with it is that thru the other aspects of its operation, it is able to generate funds to cover the payment of such interest. Unless a bank can lend money, engage in international transactions, acquire foreclosed mortgaged properties or their proceeds and generally engage in other banking and financing activities, from which it can derive income, it is inconceivable how it can carry on as a depository obligated to pay stipulated interest. . . . Consequently, it should be deemed read into every contract of deposit with a bank that the obligation to pay interest on the deposit ceases the moment the operation of the bank is completely suspended by the duly constituted authority, the Central Bank.

We consider it of trivial consequence that the stoppage of the banks operations by the Central Bank has been subsequently declared illegal by the Supreme Court, for before the Courts order, the bank had no alternative under the law than to obey the orders of the Central Bank. Whatever be the juridical significance of the subsequent action of the Supreme Court, the stubborn fact remained that the petitioner was totally crippled from then on from earning the income needed to meet its obligations to its depositors. If such a situation cannot, strictly speaking be legally denominated as force majeure as maintained by private respondent, We hold it is a matter of simple equity that it be treated as such.

"And concluding, this Court stated:chanrob1es virtual 1aw library

Parenthetically, We may add for the guidance of those who might be concerned and so that the unnecessary litigations may be avoided from further clogging the dockets of the courts that in the light of the consideration expounded in the above opinion, the same formula that exempts petitioner from the payment of interest to its depositors during the whole period of factual stoppage of its operations by orders of the Central Bank, modified in effect by the decision as well as the approval of a formula-of rehabilitation by this Court, should be, as a matter of consistency, applicable or followed in respect to all other obligations of petitioner which could not be paid during the period of its actual complete closure.

"Neither can respondent Cordero recover attorneys fees. The trial court found that herein petitioners refusal to pay was not due to a willful and dishonest refusal to comply with its obligation but to restrictions imposed by the Central Bank (Record on Appeal [CA] p. 49). Since respondent did not appeal from this decision, he is now barred from contesting the same."cralaw virtua1aw library

We cannot perceive any justifiable ground or reason to depart from the considerations and judgments in those earlier cases materially identical to the one at bar. Private respondent has not adduced any cogent argument which could persuade Us otherwise.chanrobles lawlibrary : rednad

WHEREFORE, the decision under review is hereby reversed and petitioner is declared not liable for the interest on private respondents time deposit in question in accordance with the previous rulings of this Court above referred to. No costs.

De Castro, Ericta and Escolin, JJ., concur.

Concepcion Jr., and Abad Santos, JJ., are on leave.

G.R. No. L-29119February 28, 1983

CO CHIN LENG, petitioner-appellee, vs.CO CHIN TONG, MACARIO CO LING and ONG HAI TONG, respondents-appellants.

Jose V. Santos for petitioner-appellee.

Eriberto D. Ignacio for respondent Ong Hai Tong.

Manuel P. Dumatol for respondents Macario Co Ling, et al.

TEEHANKEE, J.:

This is an appeal frm an order of the Court of First Instance of Manila, Branch IV, directing respondent-appellant Ong Hai Tong or anyone of the other respondents-appellants in possession of the owner's duplicate of Transfer Certificate of Title No. 58759 to surrender the same to the Register of Deeds of Manila within five (5) days from receipt thereof and authorizing the Register of Deeds to cancel said owner's duplicate certificate and issue a new one, in case it is not presented to the court within the time specified in the order.

Petitioner-appellee is a co-owner of one-tenth (1/10) share of a property covered by Transfer Certificate of Title No. 587519 of the Register of Deeds of Manila, with an area of 1,084.20 square meters. He mortgaged his share to the China Banking Corporation but the Register of Deeds of Manila refused to register the mortgage because he could -not present the owner's duplicate copy. Petitioner-appellee filed a petition with the Court of First Instance of Manila alleging that the owner's duplicate certificate of title is in the possession of one of the co-owners, Co Chin Tong, and that in spite of several demands made of him, he refused without justifiable reasons to surrender said duplicate copy. Even the letter of the Register of Deeds of Manila, requesting for the surrender of the owner's duplicate of title, was ignored for unknown reasons. Co Chin Leng prayed "that after due notice and hearing and upon failure of respondents to surrender the Owner's Duplicate Certificate of Title No. 58759, within five (5) days from receipt hereof or within a reasonable time thereafter this Honorable Court may grant, to declare null and void said title and direct the Register of Deeds of Manila to issue a new one in lieu thereof, after payment of the fees prescribed by law. "

In the course of the hearing of the petition, Co Chin Tong's counsel manifested that the questioned document was not in the possession of his client but in the possession of Ong Hai Tong, a co-owner. For this reason, Ong Hai Tong was made a co-respondent, together with Macario Co Ling, the only other remaining co-owner.

Respondents-appellants Macario Co Ling and Co Chin Tong filed an opposition alleging that they were not in possession of the owner's duplicate copy of Transfer Certificate of Title No. 58759. In asking for the denial of the petition, they further alleged that the lower court, sitting as a land registration court, had no jurisdiction over the petition because it partakes of the nature of a civil case, which should be litigated in a proper civil action; that there is no provision of law, rule or regulation, authorizing the lower court, sitting as a land registration court, to declare null and void a valid title and issue a new one in lieu thereof; that the petition did not state a cause of action; and that the remedy prayed for is not the proper remedy under the circumstances, assuming, without admitting, that the facts alleged were true.

On the other hand, respondent-appellant Ong Hai Tong filed a separate opposition on grounds that (1) the lower court, as a court of land registration, has no jurisdiction; (2) the petition and the reliefs prayed for state no cause of action.

After petitioner-appellee had filed his reply to respondents' oppositions, the lower court, issued the following order: "Ong Hai Tong or anyone of the respondents in possession of the owner's duplicate of Transfer Certificate of Title No. 58759 is hereby directed to surrender to the Register of Deeds of Manila, within five (5) days from receipt hereof, said owner's duplicate certificate. Should respondents fail or refuse to comply with the terms of this Order within the time specified, the Register of Deeds is authorized to cancel said owner's copy and issue a new one in lieu thereof. "

A motion for reconsideration of the order was filed, but the court below issued an order denying the motion.

The Court finds no error of law in the granting of the petition by the lower court based on its findings "that the deed of mortgage executed by petitioner over his one-tenth share of the property described in Transfer Certificate of Title No. 58759 could not be given due course in registration inasmuch as possession of the owner's duplicate of said title is being withheld by one of the herein respondents and cannot be produced before the Register of Deeds as required by Section 55 and 61 of Act No. 496; that the subject matter of the mortgage contract is limited to the share of petitioner in the property described in the title and does not in any way affect the interest and participation of the other co-owners as evidenced by a copy of the deed of mortgage, Annex 'S-1' that the instant proceeding may be considered as one filed under the provisions of Section 72 of Act No. 496 by force and authority of the doctrine laid down in the case of Director of Lands vs. Heirs of Abadezco, G.R. No. L-36155, promulgated May 8,1934, where the Supreme Court ruled that in the registration of a mortgage if the owner's duplicate certificate is being withheld or otherwise could not be presented at the time of registration, the procedure outlined in Section 72 may be availed of by the interested party to the end that registration of the deed of mortgage may be accomplished; that it is indubitable that this Court, acting as a land registration court, has the authority and jurisdiction to pass upon all issues raised under the provisions of Section 72 of Act No. 496 and to enforce its order by suitable process by force and effect of the provisions of the second paragraph of Section 112 of the same Act which requires that all petitions and motions after original registration shall be filed and entitled in the original case in which the decree of registration was entered; and considering finally that insofar as the merits of the issue involved in this case are concerned respondent Ong Tai Tong has not advanced any valid or justifiable reason to support her refusal to surrender the owner's duplicate of Transfer Certificate of Title No. 58759 but has limited herself to a discussion of the technical or procedural aspects of the remedy sought by the petitioner and has, furthermore, impliedly admitted being in possession of said owner's duplicate certificate by her failure to deny the allegation in the amended petition to that effect. "

The cited case of Director of Lands vs. Heirs of Pablo Abadezco et al., properly relied upon by the lower court in its questioned order duly outlined the procedure a party may take in order that the registration of any instrument or deed affecting registered land may be recorded, in case the owner neglects or refuses to surrender his duplicate certificate of title, as follows:

The provisions of the Land Registration Act relating to disposition of land after registration, are found in its sections 50, to 99,110 and 111. Section 50 provides that no deed, mortgage, lease or other voluntary disposition of registered land shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties as evidence of authority to the register of deeds to effect the registration. The registration of such voluntary disposition is the operative act which conveys and binds the land. Under Section 52, such registration shall be effected by filing with the register of deeds the instrument creating or transferring or claiming such interest and by a brief memorandum thereof made by the register of deeds upon the certificate of title; but, under Section 55, no such memorandum shall be made unless the owner's duplicate certificate is presented to the register of deeds.

It is evident, therefore, that, in order that the registration of any instrument or deed affecting registered land may be made, the owner's duplicate certificate must be presented to the register of deeds. What should then be the legal process in case the owner neglects or refuses to surrender his duplicate certificate? In case of an absolute sale or transfer of title in fee simple, the party claiming to be entitled to the registration Of such sale or transfer, may, under Section 111, file a petition to the court, and after hearing, the court may order the holder of such certificate to surrender the same, and direct the entry of a new certificate upon such surrender. In case of an attachment or other lien or adverse claim of any description, the register of deeds shall, under section 72 and within twenty-four hours after the registration of such attachment, lien or adverse claim, send notice by mail to the registered owner requesting him to send or produce his certificate; but if the owner neglects or refuses to comply within a reasonable time, the register of deeds shall suggest the fact to the court, and the court, after notice, shall enter an order requiring the owner to produce his certificate at a time and place to be named in the order, and may enforce the order by suitable process. In case of a judgment or decree rendered in an action to recover the possession of title to real estate or an interest therein, the court, on application and after due notice, shall enter an order requiring the owner to produce his certificate, and may also enforce the order by suitable process. (Sections 82 and 83).

The Court further expressly declared therein that as in the case at bar, "in order to give full effect to the purposes of Sections 50, 52 and 55 of the Land Registration Act, in relation to Sections 60 to 63 thereof, the provisions of Section 72 are also applicable to the registration of a mortgage deed affecting registered land."

The other point, raised by respondents-appellants questioning petitioner- appellee's right to constitute a mortgage on his individual one-tenth share in co-ownership with them on the ground that they had an agreement requiring the unanimous consent thereto of all co-owners before the actual partition of the property was likewise correctly rejected by the lower court, with its ruling in its order denying reconsideration that "the order sought to be reconsidered was limited to the issue of whether or not respondents may be compelled to surrender the owner's duplicate certificate in order that the deed of mortgage executed by petitioner may be given due course in registration and that the law and the evidence presented adequately support the issuance thereof; that in a proceeding for the surrender of the owner's duplicate in order that a mortgage may be annotated thereon the court does not pass upon questions relative to the validity or effect of the mortgage which can be determined only in an ordinary case before the courts, (and) does not have the jurisdiction to pass upon the alleged effect or invalidity ...

ACCORDINGLY, the appealed orders are hereby affirmed, with costs jointly and severally against respondents-appellants.

Melencio-Herrera Plana, Vasquez, Relova and Gutierrez, Jr., JJ., concur.

G.R. No. 150886 February 16, 2007

RURAL BANK OF SAN MIGUEL, INC. and HILARIO P. SORIANO, in his capacity as majority stockholder in the Rural Bankof San Miguel, Inc., Petitioners, vs.MONETARY BOARD, BANGKO SENTRAL NG PILIPINAS and PHILIPPINE DEPOSIT INSURANCE CORPORATION, Respondents.

D E C I S I O N

CORONA, J.:

This is a petition for review on certiorari1 of a decision2 and resolution3 of the Court of Appeals (CA) dated March 28, 2000 and November 13, 2001, respectively, in CA-G.R. SP No. 57112.

Petitioner Rural Bank of San Miguel, Inc. (RBSM) was a domestic corporation engaged in banking. It started operations in 1962 and by year 2000 had 15 branches in Bulacan.4 Petitioner Hilario P. Soriano claims to be the majority stockholder of its outstanding shares of stock.5

On January 21, 2000, respondent Monetary Board (MB), the governing board of respondent Bangko Sentral ng Pilipinas (BSP), issued Resolution No. 105 prohibiting RBSM from doing business in the Philippines, placing it under receivership and designating respondent Philippine Deposit Insurance Corporation (PDIC) as receiver:

On the basis of the comptrollership/monitoring report as of October 31, 1999 as reported by Mr. Wilfredo B. Domo-ong, Director, Department of Rural Banks, in his memorandum dated January 20, 2000, which report showed that [RBSM] (a) is unable to pay its liabilities as they become due in the ordinary course of business; (b) cannot continue in business without involving probable losses to its depositors and creditors; that the management of the bank had been accordingly informed of the need to infuse additional capital to place the bank in a solvent financial condition and was given adequate time within which to make the required infusion and that no infusion of adequate fresh capital was made, the Board decided as follows:

1. To prohibit the bank from doing business in the Philippines and to place its assets and affairs under receivership in accordance with Section 30 of [RA 7653];

2. To designate the [PDIC] as receiver of the bank;

xxx xxx xxx6

On January 31, 2000, petitioners filed a petition for certiorari and prohibition in the Regional Trial Court (RTC) of Malolos, Branch 22 to nullify and set aside Resolution No. 105.7 However, on February 7, 2000, petitioners filed a notice of withdrawal in the RTC and, on the same day, filed a special civil action for certiorari and prohibition in the CA. On February 8, 2000, the RTC dismissed the case pursuant to Section 1, Rule 17 of the Rules of Court.8

The CAs findings of facts were as follows.

To assist its impaired liquidity and operations, the RBSM was granted emergency loans on different occasions in the aggregate amount of P375 [million].

As early as November 18, 1998, Land Bank of the Philippines (LBP) advised RBSM that it will terminate the clearing of RBSMs checks in view of the latters frequent clearing losses and continuing failure to replenish its Special Clearing Demand Deposit with LBP. The BSP interceded with LBP not to terminate the clearing arrangement of RBSM to protect the interests of RBSMs depositors and creditors.

After a year, or on November 29, 1999, the LBP informed the BSP of the termination of the clearing facility of RBSM to take effect on December 29, 1999, in view of the clearing problems of RBSM.

On December 28, 1999, the MB approved the release of P26.189 [million] which is the last tranche of the P375 million emergency loan for the sole purpose of servicing and meeting the withdrawals of its depositors. Of the P26.180 million, xxx P12.6 million xxx was not used to service withdrawals [and] remains unaccounted for as admitted by [RBSMs Treasury Officer and Officer-in-Charge of Treasury]. Instead of servicing withdrawals of depositors, RBSM paid Forcecollect Professional Solution, Inc. and Surecollect Professional, Inc., entities which are owned and controlled by Hilario P. Soriano and other RBSM officers.

On January 4, 2000, RBSM declared a bank holiday. RBSM and all of its 15 branches were closed from doing business.

Alarmed and disturbed by the unilateral declaration of bank holiday, [BSP] wanted to examine the books and records of RBSM but encountered problems.

Meanwhile, on November 10, 1999, RBSMs designated comptroller, Ms. Zenaida Cabais of the BSP, submitted to the Department of Rural Banks, BSP, a Comptrollership Report on her findings on the financial condition and operations of the bank as of October 31, 1999. Another set of findings was submitted by said comptroller [and] this second report reflected the financial status of RBSM as of December 31, 1999.

The findings of the comptroller on the financial state of RBSM as of October 31, 1999 in comparison with the financial condition as of December 31, 1999 is summed up pertinently as follows:

FINANCIAL CONDITION OF RBSM

As of Oct. 31, 1999As of Dec. 31, 1999Total obligations/LiabilitiesP1,076,863,000.001,009,898,000.00Realizable Assets898,588,000.00796,930,000.00Deficit178,275,000.00212,968,000.00Cash on Hand101,441.547.008,266,450.00Required Capital Infusion P252,120,000.00

Capital Infusion P5,000,000.00

(On Dec. 20, 1999)Actual Breakdown of Total Obligations:

1) Deposits of 20,000 depositors P578,201,000.00

2) Borrowings from BSP P320,907,000.00

3) Unremitted withholding and gross receipt taxes P57,403,000.00.9

Based on these comptrollership reports, the director of the Department of Rural Banks Supervision and Examination Sector, Wilfredo B. Domo-ong, made a report to the MB dated January 20, 2000.10 The MB, after evaluating and deliberating on the findings and recommendation of the Department of Rural Banks Supervision and Examination Sector, issued Resolution No. 105 on January 21, 2000.11 Thereafter, PDIC implemented the closure order and took over the management of RBSMs assets and affairs.

In their petition12 before the CA, petitioners claimed that respondents MB and BSP committed grave abuse of discretion in issuing Resolution No. 105. The petition was dismissed by the CA on March 28, 2000. It held, among others, that the decision of the MB to issue Resolution No. 105 was based on the findings and recommendations of the Department of Rural Banks Supervision and Examination Sector, the comptroller reports as of October 31, 1999 and December 31, 1999 and the declaration of a bank holiday. Such could be considered as substantial evidence.13

Pertinently, on June 9, 2000, on the basis of reports prepared by PDIC stating that RBSM could not resume business with sufficient assurance of protecting the interest of its depositors, creditors and the general public, the MB passed Resolution No. 966 directing PDIC to proceed with the liquidation of RBSM under Section 30 of RA 7653.14

Hence this petition.

It is well-settled that the closure of a bank may be considered as an exercise of police power.15 The action of the MB on this matter is final and executory.16 Such exercise may nonetheless be subject to judicial inquiry and can be set aside if found to be in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction.17

Petitioners argue that Resolution No. 105 was bereft of any basis considering that no complete examination had been conducted before it was issued. This case essentially boils down to one core issue: whether Section 30 of RA 7653 (also known as the New Central Bank Act) and applicable jurisprudence require a current and complete examination of the bank before it can be closed and placed under receivership.

Section 30 of RA 7653 provides:

SECTION 30. Proceedings in Receivership and Liquidation. Whenever, upon report of the head of the supervising or examining department, the Monetary Board finds that a bank or quasi-bank:

(a) is unable to pay its liabilities as they become due in the ordinary course of business: Provided, That this shall not include inability to pay caused by extraordinary demands induced by financial panic in the banking community;

(b) has insufficient realizable assets, as determined by the [BSP] to meet its liabilities; or

(c) cannot continue in business without involving probable losses to its depositors or creditors; or

(d) has willfully violated a cease and desist order under Section 37 that has become final, involving acts or transactions which amount to fraud or a dissipation of the assets of the institution; in which cases, 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.

xxx xxx xxx

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. The petition for certiorari may only be filed by the stockholders of record representing the majority of the capital stock within ten (10) days from receipt by the board of directors of the institution of the order directing receivership, liquidation or conservatorship. (Emphasis supplied)

xxx xxx xxx

Petitioners contend that there must be a current, thorough and complete examination before a bank can be closed under Section 30 of RA 7653. They argue that this section should be harmonized with Sections 25 and 28 of the same law:

SECTION 25. Supervision and Examination. The [BSP] shall have supervision over, and conduct periodic or special examinations of, banking institutions and quasi-banks, including their subsidiaries and affiliates engaged in allied activities.

xxx xxx xxx

SECTION 28. Examination and Fees. The supervising and examining department head, personally or by deputy, shall examine the books of every banking institution once in every twelve (12) months, and at such other time as the Monetary Board by an affirmative vote of five (5) members may deem expedient and to make a report on the same to the Monetary Board: Provided that there shall be an interval of at least twelve (12) months between annual examinations. (Emphasis supplied)

xxx xxx xxx

According to the petitioners, it is clear from these provisions that the "report of the supervising or examining department" required under Section 30 refers to the report on the examination of the bank which, under Section 28, must be made to the MB after the supervising or examining head conducts an examination mandated by Sections 25 and 28.18 They cite Banco Filipino Savings & Mortgage Bank v. Monetary Board, Central Bank of the Philippines19 wherein the Court ruled:

There is no question that under Section 29 of the Central Bank Act, the following are the mandatory requirements to be complied with before a bank found to be insolvent is ordered closed and forbidden to do business in the Philippines: Firstly, an examination shall be conducted by the head of the appropriate supervising or examining department or his examiners or agents into the condition of the bank; secondly, it shall be disclosed in the examination that the condition of the bank is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors; thirdly, the department head concerned shall inform the Monetary Board in writing, of the facts; and lastly, the Monetary Board shall find the statements of the department head to be true.20 (Emphasis supplied)

Petitioners assert that an examination is necessary and not a mere report, otherwise the decision to close a bank would be arbitrary.

Respondents counter that RA 7653 merely requires a report of the head of the supervising or examining department. They maintain that the term "report" under Section 30 and the word "examination" used in Section 29 of the old law are not synonymous. "Examination" connotes in-depth analysis, evaluation, inquiry or investigation while "report" connotes a simple disclosure or narration of facts for informative purposes.21

Petitioners contention has no merit. Banco Filipino and other cases petitioners cited22 were decided using Section 29 of the old law (RA 265):

SECTION 29. Proceedings upon insolvency. Whenever, upon examination by the head of the appropriate supervising or examining department or his examiners or agents into the condition of any bank or non-bank financial intermediary performing quasi-banking functions, it shall be disclosed that the condition of the same is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors, it shall be the duty of the department head concerned forthwith, in writing, to inform the Monetary Board of the facts. The Board may, upon finding the statements of the department head to be true, forbid the institution to do business in the Philippines and designate an official of the Central Bank or a person of recognized competence in banking or finance, as receiver to immediately take charge of its assets and liabilities, as expeditiously as possible collect and gather all the assets and administer the same for the benefits of its creditors, and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution, exercising all the powers necessary for these purposes including, but not limited to, bringing and foreclosing mortgages in the name of the bank or non-bank financial intermediary performing quasi-banking functions. (Emphasis supplied)

xxx xxx xxx

Thus in Banco Filipino, we ruled that an "examination [conducted] by the head of the appropriate supervising or examining department or his examiners or agents into the condition of the bank"23 is necessary before the MB can order its closure.

However, RA 265, including Section 29 thereof, was expressly repealed by RA 7653 which took effect in 1993. Resolution No. 105 was issued on January 21, 2000. Hence, petitioners reliance on Banco Filipino which was decided under RA 265 was misplaced.

In RA 7653, only a "report of the head of the supervising or examining department" is necessary. It is an established rule in statutory construction that where the words of a statute are clear, plain and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation:24

This plain meaning rule or verba legis derived from the maxim index animi sermo est (speech is the index of intention) rests on the valid presumption that the words employed by the legislature in a statute correctly express its intention or will and preclude the court from construing it differently. The legislature is presumed to know the meaning of the words, to have used words advisedly, and to have expressed its intent by use of such words as are found in the statute. Verba legis non est recedendum, or from the words of a statute there should be no departure.25

The word "report" has a definite and unambiguous meaning which is clearly different from "examination." A report, as a noun, may be defined as "something that gives information" or "a usually detailed account or statement."26 On the other hand, an examination is "a search, investigation or scrutiny."27

This Court cannot look for or impose another meaning on the term "report" or to construe it as synonymous with "examination." From the words used in Section 30, it is clear that RA 7653 no longer requires that an examination be made before the MB can issue a closure order. We cannot make it a requirement in the absence of legal basis.

Indeed, the court may consider the spirit and reason of the statute, where a literal meaning would lead to absurdity, contradiction, injustice, or would defeat the clear purpose of the lawmakers.28 However, these problems are not present here. Using the literal meaning of "report" does not lead to absurdity, contradiction or injustice. Neither does it defeat the intent of the legislators. The purpose of the law is to make the closure of a bank summary and expeditious in order to protect public interest. This is also why prior notice and hearing are no longer required before a bank can be closed.29

Laying down the requisites for the closure of a bank under the law is the prerogative of the legislature and what its wisdom dictates. The lawmakers could have easily retained the word "examination" (and in the process also preserved the jurisprudence attached to it) but they did not and instead opted to use the word "report." The insistence on an examination is not sanctioned by RA 7653 and we would be guilty of judicial legislation were we to make it a requirement when such is not supported by the language of the law.

What is being raised here as grave abuse of discretion on the part of the respondents was the lack of an examination and not the supposed arbitrariness with which the conclusions of the director of the Department of Rural Banks Supervision and Examination Sector had been reached in the report which became the basis of Resolution No. 105.1awphi1.net

The absence of an examination before the closure of RBSM did not mean that there was no basis for the closure order. Needless to say, the decision of the MB and BSP, like any other administrative body, must have something to support itself and its findings of fact must be supported by substantial evidence. But it is clear under RA 7653 that the basis need not arise from an examination as required in the old law.

We thus rule that the MB had sufficient basis to arrive at a sound conclusion that there were grounds that would justify RBSMs closure. It relied on the report of Mr. Domo-ong, the head of the supervising or examining department, with the findings that: (1) RBSM was unable to pay its liabilities as they became due in the ordinary course of business and (2) that it could not continue in business without incurring probable losses to its depositors and creditors.30 The report was a 50-page memorandum detailing the facts supporting those grounds, an extensive chronology of events revealing the multitude of problems which faced RBSM and the recommendations based on those findings.

In short, MB and BSP complied with all the requirements of RA 7653. By relying on a report before placing a bank under receivership, the MB and BSP did not only follow the letter of the law, they were also faithful to its spirit, which was to act expeditiously. Accordingly, the issuance of Resolution No. 105 was untainted with arbitrariness.

Having dispensed with the issue decisive of this case, it becomes unnecessary to resolve the other minor issues raised.31

WHEREFORE, the petition is hereby DENIED. The March 28, 2000 decision and November 13, 2001 resolution of the Court of Appeals in CA-G.R. SP No. 57112 are AFFIRMED.

G.R. No. 115849 January 24, 1996

FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and MERCURIO RIVERA, petitioners, vs.COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO DEMETRIA, and JOSE JANOLO, respondents.

D E C I S I O N

PANGANIBAN, J.:

In the absence of a formal deed of sale, may commitments given by bank officers in an exchange of letters and/or in a meeting with the buyers constitute a perfected and enforceable contract of sale over 101 hectares of land in Sta. Rosa, Laguna? Does the doctrine of "apparent authority" apply in this case? If so, may the Central Bank-appointed conservator of Producers Bank (now First Philippine International Bank) repudiate such "apparent authority" after said contract has been deemed perfected? During the pendency of a suit for specific performance, does the filing of a "derivative suit" by the majority shareholders and directors of the distressed bank to prevent the enforcement or implementation of the sale violate the ban against forum-shopping?

Simply stated, these are the major questions brought before this Court in the instant Petition for review on certiorari under Rule 45 of the Rules of Court, to set aside the Decision promulgated January 14, 1994 of the respondent Court of Appeals1 in CA-G.R CV No. 35756 and the Resolution promulgated June 14, 1994 denying the motion for reconsideration. The dispositive portion of the said Decision reads:

WHEREFORE, the decision of the lower court is MODIFIED by the elimination of the damages awarded under paragraphs 3, 4 and 6 of its dispositive portion and the reduction of the award in paragraph 5 thereof to P75,000.00, to be assessed against defendant bank. In all other aspects, said decision is hereby AFFIRMED.

All references to the original plaintiffs in the decision and its dispositive portion are deemed, herein and hereafter, to legally refer to the plaintiff-appellee Carlos C. Ejercito.

Costs against appellant bank.

The dispositive portion of the trial court's2 decision dated July 10, 1991, on the other hand, is as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows:

1.Declaring the existence of a perfected contract to buy and sell over the six (6) parcels of land situated at Don Jose, Sta. Rosa, Laguna with an area of 101 hectares, more or less, covered by and embraced in Transfer Certificates of Title Nos. T-106932 to T-106937, inclusive, of the Land Records of Laguna, between the plaintiffs as buyers and the defendant Producers Bank for an agreed price of Five and One Half Million (P5,500,000.00) Pesos;

2.Ordering defendant Producers Bank of the Philippines, upon finality of this decision and receipt from the plaintiffs the amount of P5.5 Million, to execute in favor of said plaintiffs a deed of absolute sale over the aforementioned six (6) parcels of land, and to immediately deliver to the plaintiffs the owner's copies of T.C.T. Nos. T-106932 to T- 106937, inclusive, for purposes of registration of the same deed and transfer of the six (6) titles in the names of the plaintiffs;

3.Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. Janolo and Demetrio Demetria the sums of P200,000.00 each in moral damages;

4.Ordering the defendants, jointly and severally, to pay plaintiffs the sum of P100,000.00 as exemplary damages ;

5.Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of P400,000.00 for and by way of attorney's fees;

6.Ordering the defendants to pay the plaintiffs, jointly and severally, actual and moderate damages in the amount of P20,000.00;

With costs against the defendants.

After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to sur-rejoinder, the petition was given due course in a Resolution dated January 18, 1995. Thence, the parties filed their respective memoranda and reply memoranda. The First Division transferred this case to the Third Division per resolution dated October 23, 1995. After carefully deliberating on the aforesaid submissions, the Court assigned the case to the undersigned ponente for the writing of this Decision.

The Parties

Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines; petitioner Bank, for brevity) is a banking institution organized and existing under the laws of the Republic of the Philippines. Petitioner Mercurio Rivera (petitioner Rivera, for brevity) is of legal age and was, at all times material to this case, Head-Manager of the Property Management Department of the petitioner Bank.

Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the assignee of original plaintiffs-appellees Demetrio Demetria and Jose Janolo.

Respondent Court of Appeals is the court which issued the Decision and Resolution sought to be set aside through this petition.

The Facts

The facts of this case are summarized in the respondent Court's Decision3 as follows:

(1)In the course of its banking operations, the defendant Producer Bank of the Philippines acquired six parcels of land with a total area of 101 hectares located at Don Jose, Sta. Rose, Laguna, and covered by Transfer Certificates of Title Nos. T-106932 to T-106937. The property used to be owned by BYME Investment and Development Corporation which had them mortgaged with the bank as collateral for a loan. The original plaintiffs, Demetrio Demetria and Jose O. Janolo, wanted to purchase the property and thus initiated negotiations for that purpose.

(2)In the early part of August 1987 said plaintiffs, upon the suggestion of BYME investment's legal counsel, Jose Fajardo, met with defendant Mercurio Rivera, Manager of the Property Management Department of the defendant bank. The meeting was held pursuant to plaintiffs' plan to buy the property (TSN of Jan. 16, 1990, pp. 7-10). After the meeting, plaintiff Janolo, following the advice of defendant Rivera, made a formal purchase offer to the bank through a letter dated August 30, 1987 (Exh. "B"), as follows:

August 30, 1987

The Producers Bank of the PhilippinesMakati, Metro Manila

Attn.Mr. Mercurio Q. RiveraManager, Property Management Dept.

Gentleman:

I have the honor to submit my formal offer to purchase your properties covered by titles listed hereunder located at Sta. Rosa, Laguna, with a total area of 101 hectares, more or less.

TCT NO.

AREA

T-106932

113,580 sq. m.

T-106933

70,899 sq. m.

T-106934

52,246 sq. m.

T-106935

96,768 sq. m.

T-106936

187,114 sq. m.

T-106937

481,481 sq. m.

My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3,500,000.00) PESOS, in cash.

Kindly contact me at Telephone Number 921-1344.

(3) On September 1, 1987, defendant Rivera made on behalf of the bank a formal reply by letter which is hereunder quoted (Exh. "C"):

September 1, 1987

JP M-P GUTIERREZ ENTERPRISES142 Charisma St., Doa Andres IIRosario, Pasig, Metro Manila

Attention: JOSE O. JANOLO

Dear Sir:

Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta. Rosa, Laguna (formerly owned by Byme Industrial Corp.). Please be informed however that the bank's counter-offer is at P5.5 million for more than 101 hectares on lot basis.

We shall be very glad to hear your position on the on the matter.

Best regards.

(4)On September 17, 1987, plaintiff Janolo, responding to Rivera's aforequoted reply, wrote (Exh. "D"):

September 17, 1987

Producers BankPaseo de RoxasMakati, Metro Manila

Attention:Mr. Mercurio Rivera

Gentlemen:

In reply to your letter regarding my proposal to purchase your 101-hectare lot located at Sta. Rosa, Laguna, I would like to amend my previous offer and I now propose to buy the said lot at P4.250 million in CASH..

Hoping that this proposal meets your satisfaction.

(5)There was no reply to Janolo's foregoing letter of September 17, 1987. What took place was a meeting on September 28, 1987 between the plaintiffs and Luis Co, the Senior Vice-President of defendant bank. Rivera as well as Fajardo, the BYME lawyer, attended the meeting. Two days later, or on September 30, 1987, plaintiff Janolo sent to the bank, through Rivera, the following letter (Exh. "E"):

The Producers Bank of the PhilippinesPaseo de Roxas, MakatiMetro Manila

Attention: Mr. Mercurio Rivera

Re: 101 Hectares of Landin Sta. Rosa, Laguna

Gentlemen:

Pursuant to our discussion last 28 September 1987, we are pleased to inform you that we are accepting your offer for us to purchase the property at Sta. Rosa, Laguna, formerly owned by Byme Investment, for a total price of PESOS: FIVE MILLION FIVE HUNDRED THOUSAND (P5,500,000.00).

Thank you.

(6)On October 12, 1987, the conservator of the bank (which has been placed under conservatorship by the Central Bank since 1984) was replaced by an Acting Conservator in the person of defendant Leonida T. Encarnacion. On November 4, 1987, defendant Rivera wrote plaintiff Demetria the following letter (Exh. "F"):

Attention:Atty. Demetrio Demetria

Dear Sir:

Your proposal to buy the properties the bank foreclosed from Byme investment Corp. located at Sta. Rosa, Laguna is under study yet as of this time by the newly created committee for submission to the newly designated Acting Conservator of the bank.

For your information.

(7)What thereafter transpired was a series of demands by the plaintiffs for compliance by the bank with what plaintiff considered as a perfected contract of sale, which demands were in one form or another refused by the bank. As detailed by the trial court in its decision, on November 17, 1987, plaintiffs through a letter to defendant Rivera (Exhibit "G") tendered payment of the amount of P5.5 million "pursuant to (our) perfected sale agreement." Defendants refused to receive both the payment and the letter. Instead, the parcels of land involved in the transaction were advertised by the bank for sale to any interested buyer (Exh, "H" and "H-1"). Plaintiffs demanded the execution by the bank of the documents on what was considered as a "perfected agreement." Thus:

Mr. Mercurio RiveraManager, Producers BankPaseo de Roxas, MakatiMetro Manila

Dear Mr. Rivera:

This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase your 101-hectare lot located in Sta. Rosa, Laguna, and which are covered by TCT No. T-106932 to 106937.

From the documents at hand, it appears that your counter-offer dated September 1, 1987 of this same lot in the amount of P5.5 million was accepted by our client thru a letter dated September 30, 1987 and was received by you on October 5, 1987.

In view of the above circumstances, we believe that an agreement has been perfected. We were also informed that despite repeated follow-up to consummate the purchase, you now refuse to honor your commitment. Instead, you have advertised for sale the same lot to others.

In behalf of our client, therefore, we are making this formal demand upon you to consummate and execute the necessary actions/documentation within three (3) days from your receipt hereof. We are ready to remit the agreed amount of P5.5 million at your advice. Otherwise, we shall be constrained to file the necessary court action to protect the interest of our client.

We trust that you will be guided accordingly.

(8)Defendant bank, through defendant Rivera, acknowledged receipt of the foregoing letter and stated, in its communication of December 2, 1987 (Exh. "I"), that said letter has been "referred . . . to the office of our Conservator for proper disposition" However, no response came from the Acting Conservator. On December 14, 1987, the plaintiffs made a second tender of payment (Exh. "L" and "L-1"), this time through the Acting Conservator, defendant Encarnacion. Plaintiffs' letter reads:

PRODUCERS BANK OFTHE PHILIPPINESPaseo de Roxas,Makati, Metro Manila

Attn.:Atty. NIDA ENCARNACIONCentral Bank Conservator

We are sending you herewith, in - behalf of our client, Mr. JOSE O. JANOLO, MBTC Check No. 258387 in the amount of P5.5 million as our agreed purchase price of the 101-hectare lot covered by TCT Nos. 106932, 106933, 106934, 106935, 106936 and 106937 and registered under Producers Bank.

This is in connection with the perfected agreement consequent from your offer of P5.5 Million as the purchase price of the said lots. Please inform us of the date of documentation of the sale immediately.

Kindly acknowledge receipt of our payment.

(9)The foregoing letter drew no response for more than four months. Then, on May 3, 1988, plaintiff, through counsel, made a final demand for compliance by the bank with its obligations under the considered perfected contract of sale (Exhibit "N"). As recounted by the trial court (Original Record, p. 656), in a reply letter dated May 12, 1988 (Annex "4" of defendant's answer to amended complaint), the defendants through Acting Conservator Encarnacion repudiated the authority of defendant Rivera and claimed that his dealings with the plaintiffs, particularly his counter-offer of P5.5 Million are unauthorized or illegal. On that basis, the defendants justified the refusal of the tenders of payment and the non-compliance with the obligations under what the plaintiffs considered to be a perfected contract of sale.

(10)On May 16, 1988, plaintiffs filed a suit for specific performance with damages against the bank, its Manager Rivers and Acting Conservator Encarnacion. The basis of the suit was that the transaction had with the bank resulted in a perfected contract of sale, The defendants took the position that there was no such perfected sale because the defendant Rivera is not authorized to sell the property, and that there was no meeting of the minds as to the price.

On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip Salazar Hernandez and Gatmaitan, filed a motion to intervene in the trial court, alleging that as owner of 80% of the Bank's outstanding shares of stock, he had a substantial interest in resisting the complaint. On July 8, 1991, the trial court issued an order denying the motion to intervene on the ground that it was filed after trial had already been concluded. It also denied a motion for reconsideration filed thereafter. From the trial court's decision, the Bank, petitioner Rivera and conservator Encarnacion appealed to the Court of Appeals which subsequently affirmed with modification the said judgment. Henry Co did not appeal the denial of his motion for intervention.

In the course of the proceedings in the respondent Court, Carlos Ejercito was substituted in place of Demetria and Janolo, in view of the assignment of the latters' rights in the matter in litigation to said private respondent.

On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, Henry Co and several other stockholders of the Bank, through counsel Angara Abello Concepcion Regala and Cruz, filed an action (hereafter, the "Second Case") purportedly a "derivative suit" with the Regional Trial Court of Makati, Branch 134, docketed as Civil Case No. 92-1606, against Encarnacion, Demetria and Janolo "to declare any perfected sale of the property as unenforceable and to stop Ejercito from enforcing or implementing the sale"4 In his answer, Janolo argued that the Second Case was barred by litis pendentia by virtue of the case then pending in the Court of Appeals. During the pre-trial conference in the Second Case, plaintiffs filed a Motion for Leave of Court to Dismiss the Case Without Prejudice. "Private respondent opposed this motion on the ground, among others, that plaintiff's act of forum shopping justifies the dismissal of both cases, with prejudice."5 Private respondent, in his memorandum, averred that this motion is still pending in the Makati RTC.

In their Petition6 and Memorandum7, petitioners summarized their position as follows:

I.

The Court of Appeals erred in declaring that a contract of sale was perfected between Ejercito (in substitution of Demetria and Janolo) and the bank.

II.

The Court of Appeals erred in declaring the existence of an enforceable contract of sale between the parties.

III.

The Court of Appeals erred in declaring that the conservator does not have the power to overrule or revoke acts of previous management.

IV.

The findings and conclusions of the Court of Appeals do not conform to the evidence on record.

On the other hand, petitioners prayed for dismissal of the instant suit on the ground8 that:

I.

Petitioners have engaged in forum shopping.

II.

The factual findings and conclusions of the Court of Appeals are supported by the evidence on record and may no longer be questioned in this case.

III.

The Court of Appeals correctly held that there was a perfected contract between Demetria and Janolo (substituted by; respondent Ejercito) and the bank.

IV.

The Court of Appeals has correctly held that the conservator, apart from being estopped from repudiating the agency and the contract, has no authority to revoke the contract of sale.

The Issues

From the foregoing positions of the parties, the issues in this case may be summed up as follows:

1)Was there forum-shopping on the part of petitioner Bank?

2)Was there a perfected contract of sale between the parties?

3)Assuming there was, was the said contract enforceable under the statute of frauds?

4)Did the bank conservator have the unilateral power to repudiate the authority of the bank officers and/or to revoke the said contract?

5)Did the respondent Court commit any reversible error in its findings of facts?

The First Issue: Was There Forum-Shopping?

In order to prevent the vexations of multiple petitions and actions, the Supreme Court promulgated Revised Circular No. 28-91 requiring that a party "must certify under oath . . . [that] (a) he has not (t)heretofore commenced any other action or proceeding involving the same issues in the Supreme Court, the Court of Appeals, or any other tribunal or agency; (b) to the best of his knowledge, no such action or proceeding is pending" in said courts or agencies. A violation of the said circular entails sanctions that include the summary dismissal of the multiple petitions or complaints. To be sure, petitioners have included a VERIFICATION/CERTIFICATION in their Petition stating "for the record(,) the pendency of Civil Case No. 92-1606 before the Regional Trial Court of Makati, Branch 134, involving a derivative suit filed by stockholders of petitioner Bank against the conservator and other defendants but which is the subject of a pending Motion to Dismiss Without Prejudice.9

Private respondent Ejercito vigorously argues that in spite of this verification, petitioners are guilty of actual forum shopping because the instant petition pending before this Court involves "identical parties or interests represented, rights asserted and reliefs sought (as that) currently pending before the Regional Trial Court, Makati Branch 134 in the Second Case. In fact, the issues in the two cases are so interwined that a judgement or resolution in either case will constitute res judicata in the other." 10

On the other hand, petitioners explain 11 that there is no forum-shopping because:

1)In the earlier or "First Case" from which this proceeding arose, the Bank was impleaded as a defendant, whereas in the "Second Case" (assuming the Bank is the real party in interest in a derivative suit), it was plaintiff;

2)"The derivative suit is not properly a suit for and in behalf of the corporation under the circumstances";

3)Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank president and attached to the Petition identifies the action as a "derivative suit," it "does not mean that it is one" and "(t)hat is a legal question for the courts to decide";

4)Petitioners did not hide the Second Case at they mentioned it in the said VERIFICATION/CERTIFICATION.

We rule for private respondent.

To begin with, forum-shopping originated as a concept in private international law.12, where non-resident litigants are given the option to choose the forum or place wherein to bring their suit for various reasons or excuses, including to secure procedural advantages, to annoy and harass the defendant, to avoid overcrowded dockets, or to select a more friendly venue. To combat these less than honorable excuses, the principle of forum non conveniens was developed whereby a court, in conflicts of law cases, may refuse impositions on its jurisdiction where it is not the most "convenient" or available forum and the parties are not precluded from seeking remedies elsewhere.

In this light, Black's Law Dictionary 13 says that forum shopping "occurs when a party attempts to have his action tried in a particular court or jurisdiction where he feels he will receive the most favorable judgment or verdict." Hence, according to Words and Phrases14, "a litigant is open to the charge of "forum shopping" whenever he chooses a forum with slight connection to factual circumstances surrounding his suit, and litigants should be encouraged to attempt to settle their differences without imposing undue expenses and vexatious situations on the courts".

In the Philippines, forum shopping has acquired a connotation encompassing not only a choice of venues, as it was originally understood in conflicts of laws, but also to a choice of remedies. As to the first (choice of venues), the Rules of Court, for example, allow a plaintiff to commence personal actions "where the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff" (Rule 4, Sec, 2 [b]). As to remedies, aggrieved parties, for example, are given a choice of pursuing civil liabilities independently of the criminal, arising from the same set of facts. A passenger of a public utility vehicle involved in a vehicular accident may sue on culpa contractual, culpa aquiliana or culpa criminal each remedy being available independently of the others although he cannot recover more than once.

In either of these situations (choice of venue or choice of remedy), the litigant actually shops for a forum of his action, This was the original concept of the term forum shopping.

Eventually, however, instead of actually making a choice of the forum of their actions, litigants, through the encouragement of their lawyers, file their actions in all available courts, or invoke all relevant remedies simultaneously. This practice had not only resulted to (sic) conflicting adjudications among different courts and consequent confusion enimical (sic) to an orderly administration of justice. It had created extreme inconvenience to some of the parties to the action.

Thus, "forum shopping" had acquired a different concept which is unethical professional legal practice. And this necessitated or had given rise to the formulation of rules and canons discouraging or altogether prohibiting the practice. 15

What therefore originally started both in conflicts of laws and in our domestic law as a legitimate device for solving problems has been abused and mis-used to assure scheming litigants of dubious reliefs.

To avoid or minimize this unethical practice of subverting justice, the Supreme Court, as already mentioned, promulgated Circular 28-91. And even before that, the Court had prescribed it in the Interim Rules and Guidelines issued on January 11, 1983 and had struck down in several cases 16 the inveterate use of this insidious malpractice. Forum shopping as "the filing of repetitious suits in different courts" has been condemned by Justice Andres R. Narvasa (now Chief Justice) in Minister of Natural Resources, et al., vs. Heirs of Orval Hughes, et al., "as a reprehensible manipulation of court processes and proceedings . . ." 17 when does forum shopping take place?

There is forum-shopping whenever, as a result of an adverse opinion in one forum, a party seeks a favorable opinion (other than by appeal or certiorari) in another. The principle applies not only with respect to suits filed in the courts but also in connection with litigations commenced in the courts while an administrative proceeding is pending, as in this case, in order to defeat administrative processes and in anticipation of an unfavorable administrative ruling and a favorable court ruling. This is specially so, as in this case, where the court in which the second suit was brought, has no jurisdiction.18

The test for determining whether a party violated the rule against forum shopping has been laid dawn in the 1986 case of Buan vs. Lopez 19, also by Chief Justice Narvasa, and that is, forum shopping exists where the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in the other, as follows:

There thus exists between the action before this Court and RTC Case No. 86-36563 identity of parties, or at least such parties as represent the same interests in both actions, as well as identity of rights asserted and relief prayed for, the relief being founded on the same facts, and the identity on the two preceding particulars is such that any judgment rendered in the other action, will, regardless of which party is successful, amount to res adjudicata in the action under consideration: all the requisites, in fine, of auter action pendant.

xxx xxx xxx

As already observed, there is between the action at bar and RTC Case No. 86-36563, an identity as regards parties, or interests represented, rights asserted and relief sought, as well as basis thereof, to a degree sufficient to give rise to the ground for dismissal known as auter action pendant or lis pendens. That same identity puts into operation the sanction of twin dismissals just mentioned. The application of this sanction will prevent any further delay in the settlement of the controversy which might ensue from attempts to seek reconsideration of or to appeal from the Order of the Regional Trial Court in Civil Case No. 86-36563 promulgated on July 15, 1986, which dismissed the petition upon grounds which appear persuasive.

Consequently, where a litigant (or one representing the same interest or person) sues the same party against whom another action or actions for the alleged violation of the same right and the enforcement of the same relief is/are still pending, the defense of litis pendencia in one case is bar to the others; and, a final judgment in one would constitute res judicata and thus would cause the dismissal of the rest. In either case, forum shopping could be cited by the other party as a ground to ask for summary dismissal of the two 20 (or more) complaints or petitions, and for imposition of the other sanctions, which are direct contempt of court, criminal prosecution, and disciplinary action against the erring lawyer.

Applying the foregoing principles in the case before us and comparing it with the Second Case, it is obvious that there exist identity of parties or interests represented, identity of rights or causes and identity of reliefs sought.

Very simply stated, the original complaint in the court a quo which gave rise to the instant petition was filed by the buyer (herein private respondent and his predecessors-in-interest) against the seller (herein petitioners) to enforce the alleged perfected sale of real estate. On the other hand, the complaint 21 in the Second Case seeks to declare such purported sale involving the same real property "as unenforceable as against the Bank", which is the petitioner herein. In other words, in the Second Case, the majority stockholders, in representation of the Bank, are seeking to accomplish what the Bank itself failed to do in the original case in the trial court. In brief, the objective or the relief being sought, though worded differently, is the same, namely, to enable the petitioner Bank to escape from the obligation to sell the property to respondent. In Danville Maritime, Inc. vs. Commission on Audit. 22, this Court ruled that the filing by a party of two apparently different actions, but with the same objective, constituted forum shopping:

In the attempt to make the two actions appear to be different, petitioner impleaded different respondents therein PNOC in the case before the lower court and the COA in the case before this Court and sought what seems to be different reliefs. Petitioner asks this Court to set aside the questioned letter-directive of the COA dated October 10, 1988 and to direct said body to approve the Memorandum of Agreement entered into by and between the PNOC and petitioner, while in the complaint before the lower court petitioner seeks to enjoin the PNOC from conducting a rebidding and from selling to other parties the vessel "T/T Andres Bonifacio", and for an extension of time for it to comply with the paragraph 1 of the memorandum of agreement and damages. One can see that although the relief prayed for in the two (2) actions are ostensibly different, the ultimate objective in both actions is the same, that is, approval of the sale of vessel in favor of petitioner and to overturn the letter-directive of the COA of October 10, 1988 disapproving the sale. (emphasis supplied).

In an earlier case 23 but with the same logic and vigor, we held:

In other words, the filing by the petitioners of the instant special civil action for certiorari and prohibition in this Court despite the pendency of their action in the Makati Regional Trial Court, is a species of forum-shopping. Both actions unquestionably involve the same transactions, the same essential facts and circumstances. The petitioners' claim of absence of identity simply because the PCGG had not been impleaded in the RTC suit, and the suit did not involve certain acts which transpired after its commencement, is specious. In the RTC action, as in the action before this Court, the validity of the contract to purchase and sell of September 1, 1986, i.e., whether or not it had been efficaciously rescinded, and the propriety of implementing the same (by paying the pledgee banks the amount of their loans, obtaining the release of the pledged shares, etc.) were the basic issues. So, too, the relief was the same: the prevention of such implementation and/or the restoration of the status quo ante. When the acts sought to be restrained took place anyway despite the issuance by the Trial Court of a temporary restraining order, the RTC suit did not become functus oficio. It remained an effective vehicle for obtention of relief; and petitioners' remedy in the premises was plain and patent: the filing of an amended and supplemental pleading in the RTC suit, so as to include the PCGG as defendant and seek nullification of the acts sought to be enjoined but nonetheless done. The remedy was certainly not the institution of another action in another forum based on essentially the same facts, The adoption of this latter recourse renders the petitioners amenable to disciplinary action and both their actions, in this Court as well as in the Court a quo, dismissible.

In the instant case before us, there is also identity of parties, or at least, of interests represented. Although the plaintiffs in the Second Case (Henry L. Co. et al.) are not name parties in the First Case, they represent the same interest and entity, namely, petitioner Bank, because:

Firstly, they are not suing in their personal capacities, for they have no direct personal interest in the matter in controversy. They are not principally or even subsidiarily liable; much less are they direct parties in the assailed contract of sale; and

Secondly, the allegations of the complaint in the Second Case show that the stockholders are bringing a "derivative suit". In the caption itself, petitioners claim to have brought suit "for and in behalf of the Producers Bank of the Philippines" 24. Indeed, this is the very essence of a derivative suit:

An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holdsstock in order to protect or vindicate corporate rights, whenever the officials of the corporation refuse to sue, or are the ones to be sued or hold the control of the corporation. In such actions, the suing stockholder is regarded as a nominal party, with the corporation as the real party in interest. (Gamboa v. Victoriano, 90 SCRA 40, 47 [1979]; emphasis supplied).

In the face of the damaging admissions taken from the complaint in the Second Case, petitioners, quite strangely, sought to deny that the Second Case was a derivative suit, reasoning that it was brought, not by the minority shareholders, but by Henry Co et al., who not only own, hold or control over 80% of the outstanding capital stock, but also constitute the majority in the Board of Directors of petitioner Bank. That being so, then they really represent the Bank. So, whether they sued "derivatively" or directly, there is undeniably an identity of interests/entity represented.

Petitioner also tried to seek refuge in the corporate fiction that the personality Of the Bank is separate and distinct from its shareholders. But the rulings of this Court are consistent: "When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the circumvention of statutes, the achievement or perfection of a monopoly or generally the perpetration of knavery or crime, the veil with which the law covers and isolates the corporation from the members or stockholders who compose it will be lifted to allow for its consideration merely as an aggregation of individuals." 25

In addition to the many cases 26 where the corporate fiction has been disregarded, we now add the instant case, and declare herewith that the corporate veil cannot be used to shield an otherwise blatant violation of the prohibition against forum-shopping. Shareholders, whether suing as the majority in direct actions or as the minority in a derivative suit, cannot be allowed to trifle with court processes, particularly where, as in this case, the corporation itself has not been remiss in vigorously prosecuting or defending corporate causes and in using and applying remedies available to it. To rule otherwise would be to encourage corporate litigants to use their shareholders as fronts to circumvent the stringent rules against forum shopping.

Finally, petitioner Bank argued that there cannot be any forum shopping, even assuming arguendo that there is identity of parties, causes of action and reliefs sought, "because it (the Bank) was the defendant in the (first) case while it was the plaintiff in the other (Second Case)",citing as authority Victronics Computers, Inc., vs. Regional Trial Court, Branch 63, Makati, etc. et al., 27 where Court held:

The rule has not been extended to a defendant who, for reasons known only to him, commences a new action against the plaintiff instead of filing a responsive pleading in the other case setting forth therein, as causes of action, specific denials, special and affirmative defenses or even counterclaims, Thus, Velhagen's and King's motion to dismiss Civil Case No. 91-2069 by no means negates the charge of forum-shopping as such did not exist in the first place. (emphasis supplied)

Petitioner pointed out that since it was merely the defendant in the original case, it could not have chosen the forum in said case.

Respondent, on the other hand, replied that there is a difference in factual setting between Victronics and the present suit. In the former, as underscored in the above-quoted Court ruling, the defendants did not file any responsive pleading in the first case. In other words, they did not make any denial or raise any defense or counter-claim therein In the case before us however, petitioners filed a responsive pleading to the complaint as a result of which, the issues were joined.

Indeed, by praying for affirmative reliefs and interposing counterclaims in their responsive pleadings, the petitioners became plaintiffs themselves in the original case, giving unto themselves the very remedies they repeated in the Second Case.

Ultimately, what is truly important to consider in determining whether forum-shopping exists or not is the vexation caused the courts and parties-litigant by a party who asks different courts and/or administrative agencies to rule on the same or related causes and/or to grant the same or substantially the same reliefs, in the process creating the possibility of conflicting decisions being rendered by the different fora upon the same issue. In this case, this is exactly the problem: a decision recognizing the perfection and directing the enforcement of the contract of sale will directly conflict with a possible decision in the Second Case barring the parties front enforcing or implementing the said sale. Indeed, a final decision in one would constitute res judicata in the other 28.

The foregoing conclusion finding the existence of forum-shopping notwithstanding, the only sanction possible now is the dismissal of both cases with prejudice, as the other sanctions cannot be imposed because petitioners' present counsel entered their appearance only during the proceedings in this Court, and the Petition's VERIFICATION/CERTIFICATION contained sufficient allegations as to the pendency of the Second Case to show good faith in observing Circular 28-91. The Lawyers who filed the Second Case are not before us; thus the rudiments of due process prevent us from motu propio imposing disciplinary measures against them in this Decision. However, petitioners themselves (and particularly Henry Co, et al.) as litigants are admonished to strictly follow the rules against forum-shopping and not to trifle with court proceedings and processes They are warned that a repetition of the same will be dealt with more severely.

Having said that, let it be emphasized that this petition should be dismissed not merely because of forum-shopping but also because of the substantive issues raised, as will be discussed shortly.

The Second Issue: Was The Contract Perfected?

The respondent Court correctly treated the question of whether or not there was, on the basis of the facts established, a perfected contract of sale as the ultimate issue. Holding that a valid contract has been established, respondent Court stated:

There is no dispute that the object of the transaction is that property owned by the defendant bank as acquired assets consisting of six (6) parcels of land specifically identified under Transfer Certificates of Title Nos. T-106932 to T-106937. It is likewise beyond cavil that the bank intended to sell the property. As testified to by the Bank's Deputy Conservator, Jose Entereso, the bank was looking for buyers of the property. It is definite that the plaintiffs wanted to purchase the property and it was precisely for this purpose that they met with defendant Rivera, Manager of the Property Management Department of the defendant bank, in early August 1987. The procedure in the sale of acquired assets as well as the nature and scope of the authority of Rivera on the matter is clearly delineated in the testimony of Rivera himself, which testimony was relied upon by both the bank and by Rivera in their appeal briefs. Thus (TSN of July 30, 1990. pp. 19-20):

A:The procedure runs this way: Acquired assets was turned over to me and then I published it in the form of an inter-office memorandum distributed to all branches that these are acquired assets for sale. I was instructed to advertise acquired assets for sale so on that basis, I have to entertain offer; to accept offer, formal offer and upon having been offered, I present it to the Committee. I provide the Committee with necessary information about the property such as original loan of the borrower, bid price during the foreclosure, total claim of the bank, the appraised value at the time the property is being offered for sale and then the information which are relative to the evaluation of the bank to buy which the Committee considers and it is the Committee that evaluate as against the exposure of the bank and it is also the Committee that submit to the Conservator for final approval and once approved, we have to execute the deed of sale and it is the Conservator that sign the deed of sale, sir.

The plaintiffs, therefore, at that meeting of August 1987 regarding their purpose of buying the property, dealt with and talked to the right person. Necessarily, the agenda was the price of the property, and plaintiffs were dealing with the bank official authorized to entertain offers, to accept offers and to present the offer to the Committee before which the said official is authorized to discuss information relative to price determination. Necessarily, too, it being inherent in his authority, Rivera is the officer from whom official information regarding the price, as determined by the Committee and approved by the Conservator, can be had. And Rivera confirmed his authority when he talked with the plaintiff in August 1987. The testimony of plaintiff Demetria is clear on this point (TSN of May 31,1990, pp. 27-28):

Q:When you went to the Producers Bank and talked with Mr. Mercurio Rivera, did you ask him point-blank his authority to sell any property?

A:No, sir. Not point blank although it came from him, (W)hen I asked him how long it would take because he was saying that the matter of pricing will be passed upon by the committee. And when I asked him how long it will take for the committee to decide and he said the committee meets every week. If I am not mistaken Wednesday and in about two week's (sic) time, in effect what he was saying he was not the one who was to decide. But he would refer it to the committee and he would relay the decision of the committee to me.

Q Please answer the question.

A He did not say that he had the authority (.) But he said he would refer the matter to the committee and he would relay the decision to me and he did just like that.

"Parenthetically, the Committee referred to was the Past Due Committee of which Luis Co was the Head, with Jose Entereso as one of the members.

What transpired after the meeting of early August 1987 are consistent with the authority and the duties of Rivera and the bank's internal procedure in the matter of the sale of bank's assets. As advised by Rivera, the plaintiffs made a formal offer by a letter dated August 20, 1987 stating that they would buy at the price of P3.5 Million in cash. The letter was for the attention of Mercurio Rivera who was tasked to convey and accept such offers. Considering an aspect of the official duty of Rivera as some sort of intermediary between the plaintiffs-buyers with their proposed buying price on one hand, and the bank Committee, the Conservator and ultimately the bank itself with the set price on the other, and considering further the discussion of price at the meeting of August resulting in a formal offer of P3.5 Million in cash, there can be no other logical conclusion than that when, on September 1, 1987, Rivera informed plaintiffs by letter that "the bank's counter-offer is at P5.5 Million for more than 101 hectares on lot basis," such counter-offer price had been determined by the Past Due Committee and approved by the Conservator after Rivera had duly presented plaintiffs' offer for discussion by the Committee of such matters as original loan of borrower, bid price during foreclosure, total claim of the bank, and market value. Tersely put, under the established facts, the price of P5.5 Million was, as clearly worded in Rivera's letter (Exh. "E"), the official and definitive price at which the bank was selling the property.

There were averments by defendants below, as well as before this Court, that the P5.5 Million price was not discussed by the Committee and that price. As correctly characterized by the trial court, this is not credible. The testimonies of Luis Co and Jose Entereso on this point are at best equivocal and considering the gratuitous and self-serving character of these declarations, the bank's submission on this point does not inspire belief. Both Co ad Entereso, as members of the Past Due Committee of the bank, claim that the offer of the plaintiff was never discussed by the Committee. In the same vein, both Co and Entereso openly admit that they seldom attend the meetings of the Committee. It is important to note that negotiations on the price had started in early August and the plaintiffs had already offered an amount as purchase price, having been made to understand by Rivera, the official in charge of the negotiation, that the price will be submitted for approval by the bank and that the bank's decision will be relayed