CA halts BSP from selling BF’s P10-B assets

MANILA, Philippines — The Court of Appeals (CA) has affirmed a lower court order stopping the Bangko Sentral ng Pilipinas (BSP) and its policy-making body, the Monetary Board (MB), from selling the more than P10 billion worth of acquired assets of Banco Filipino Savings and Mortgage Bank.

In a 21-page decision, the appellate court held that the Makati City Regional Trial Court (RTC) did not commit grave abuse of discretion in issuing an injunction to stop the purported sale of Banco Filipino’s assets.

The decision was penned by Associate Justice Sesinando E. Villon and concurred in by Associate Justices Mario V. Lopez and Amy Lazaro Javier of the CA’s Special Fifth Division.

On March 17, 2009, Judge Joselito Villarosa of the Makati RTC, Branch 66, issued a preliminary injunction enjoining the BSP from disposing of Banco Filipino’s assets, saying “the auction of the properties would deplete the financial resources of the bank, affecting its effort to reorganize, restore the destroyed branch network, and resume business.”

In affirming the RTC ruling, the CA threw out the petition filed by the BSP as it declared “unmeritorious” the Central Bank’s assertion that the trial court disposed of the main case on the merits without trial.

“We find that there was adequate justification for the respondent judge’s issuance of the assailed injunctive writ. Significantly, the rule is well-entrenched that the issuance of the writ of preliminary injunction rests upon the sound discretion of the rests upon the sound discretion of the trial court,” the CA pointed out.

It clarified that the injunction order issued by the RTC was “merely temporary, subject to the final resolution of the main case.”

“The assailed injunctive writ is not a judgment on the merits of the case for a writ of preliminary injunction is generally based solely on initial and incomplete evidence,” the CA said.

Banco Filipino, in its complaint filed before the RTC, claimed that BSP and the MB have ignored the 1991 directive of the Supreme Court (SC) to allow the bank to resume business and to allow it to fully recover from the damage incurred during its illegal closure in 1985.

It said that instead of helping Banco Filipino to recover from the damage, the BSP imposed on it a Memorandum of Agreement (MoA) that compelled it to recognize the “loans and advances” reportedly given by the defunct Central Bank and thereafter threatened to auction off the bank’s acquired properties.

Under that agreement signed in 1999, the Banco Filipino ceded pieces of property to the BSP in exchange for a liquidity loan.

Although the BSP had already lent the bank the funds it needed in exchange for the assets, the TRO would effectively prevent the Central Bank from consolidating the surrendered assets and putting them up for sale through an auction.

At the time the deal was struck, Banco Filipino owed the Central Bank P3.6 billion in emergency loans, overdrafts, loan lines and interest.

This was settled through a dacion en pago arrangement. Under the arrangement, the bank can buy back the assets transferred to the BSP within five years.

In issuing the injunction, the RTC said that Banco Filipino “has established that BSP and MB’s threat of auctioning its assets would surely cause serious damage to the bank’s finances and eventual destruction leading to its closure.”

Earlier, the SC had affirmed a CA decision ordering the RTC to proceed with the trial of the P18.8 billion damage suits filed by Banco Filipino against the Central Bank Board of Liquidators (CBBoL) in connection with the bank’s illegal closure in 1985.

CBBoL is a shell company that services all the liabilities of the old Central Bank after it was financial rehabilitated under Republic Act 7653, the law creating the BSP.

Also upheld by the SC was the CA’s ruling that the “Central Bank continues to exist and has remained a defendant but with a new name – CBBoL – while the Bangko Sentral ng Pilipinas … is the sole successor-in-interest of the old CB and that the transfer of assets from the CB to the BSP during the pendency of the subject civil cases constitutes the latter as a transferee pendente lite.”

In a resolution issued by its Third Division, the SC denied the petition filed by the CBBoL “for failure to sufficiently show that the appellate court committed any reversible error in the challenged decision as to warrant the exercise by this Court of its discretionary appellate jurisdiction.”

Banco Filipino was ordered padlocked and liquidated in 1985 by the defunct CB headed by the late Jose “Jobo” Fernandez Jr. as its governor and MB chairman. In 1991, the High Court declared the closure “arbitrary and with grave abuse of discretion."

On July 27, 1984 when Banco Filipino was placed under conservatorship through MB Resolution No. 955, the bank filed its first civil case denominated as CV No. 8108.

On Jan. 25, 1985, the then CB issued MB Resolution No. 75 that ordered the closure of Banco Filipino and placed it under receivership.

The second civil case denominated as CV No. 9675 was filed by Banco Filipino.

On March 22, 1985, Banco Filipino was placed under liquidation prompting the padlocked bank to file its third civil case denominated as CV No. 10183.

The three civil cases were ordered consolidated by the SC in a resolution dated Aug. 29, 1985. Six years later on Dec. 11, 1991, the SC annulled and set aside MB Resolution No. 75, ordered the reorganization and re-opening of Banco Filipino, and ruled that the closure was done "arbitrarily and with grave abuse of discretion."

Two years after the creation of BSP and the abolition of the CB in 1993 through Republic Act No. 7653, Banco Filipino filed in 1995 its first amended/supplemental complaint against CBBoL and individual defendants Fernandez, Carlota Valenzuela, Arnulfo Aurellano, and Ramon Tiaoqui – all members of the MB at the time the bank was padlocked in 1985.

In 2003, Banco Filipino filed its second amended/supplemental complaint before the RTC to include the BSP and its MB as additional party-defendants "to afford full and complete relief to the bank in the event that the 25-year period within which the CBBoL is to exist under RA 7653 expires.

"In Jan. 2004, the Makati City RTC admitted the second amended/supplemental complaint. The CBBoL’s motion for reconsideration was also denied.

The denial of the motion for reconsideration prompted the CBBoL to elevate the issue before the CA attributing abuse of discretion on the part of the trial court in accepting the second amended/supplemental complaint.

The CBBoL told the appellate court that the RTC abused its discretion in accepting the second amended/supplemental complaint filed by Banco Filipino since the amended/supplemental complaint constituted only a substitution or joining of a transferee pendente lite despite the fact that the BSP is being impleaded as an additional party-defendant for purposes of litigating completely new causes of action against it.

It also pointed out that the addition of new causes of action against the BSP would further delay the proceedings, aside from the fact that impleading BSP to succeed CBBoL on account of the latter’s limited lifetime is not a proper ground for substitution or joinder of parties.

Edmer Panesa, Manila Bulletin