G.R. No. 254333 – JOSEF-DAX AGUILAR, petitioner, vs. BANGKO SENTRAL NG PILIPINAS, THE MONETARY BOARD, and PHILIPPINE DEPOSIT INSURANCE CORPORATION, respondents.

LEONEN, J.

Rule Synopsis

The Bangko Sentral ng Pilipinas (BSP), through its Monetary Board (MB), has the authority, by virtue of its police power, to summarily, and without need for prior hearing, forbid a bank from doing business in the Philippines upon finding, supported with substantial evidence, that it has insufficient realizable assets to meet its liabilities, and/or it cannot continue in business without involving probable losses to its depositors or creditors, among others. Only the stockholders of record representing the majority of the capital stock can assail such authority by filing a 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 in excess of jurisdiction within 10 days from receipt by the board of directors of the institution of the order directing receivership, liquidation, or conservatorship.

Facts

Maximum Savings Bank, Inc. (MaxBank) is a thrift bank licensed by the BSP in February 2006. Josef-Dax Aguilar (Aguilar) was MaxBank’s president and Chief Executive Officer (CEO) in December 2018.

In March 2008, the MB initiated MaxBank to Prompt Corrective Actions (PCA) status due to management and other supervisory concerns. In July 2014, a failure of PCA was declared as MaxBank did not meet minimum capital requirements.

MaxBank’s shareholdings were acquired twice by third-party investors who failed to infuse sufficient capital. Thus, it further entered into an agreement to transfer 100% its stockholdings to three newly incorporated shell companies: Unicorn Wing Investments Limited, Century Merit Global Limited and DLO Holdings Philippines, Inc. (collectively, third-party investors). The MB approved the transfer.

MaxBank underwent regular examinations during December 2017 to January 2018 where critical deficiencies and risks were noted. BSP directed MaxBank to comply with its remaining commitments and improve its risk management. In a subsequent regular examination conducted from February 2019 to April 2019, the MB issued a resolution confirming the unsafe and unsound practices of MaxBank.

In November 2019, the MB issued Resolution No. 1704.C prohibiting MaxBank from doing business in the Philippines pursuant to Sec. 30 (b) and (c) of Republic Act (RA) 7653, as amended, or the New Central Bank Act (CBA), and designating the Philippine Deposit Insurance Corporation (PDIC) as its receiver.

Through several letters, Aguilar requested BSP for (a) a hearing pursuant to Sec. 37 of the New CBA; (b) a copy of its report of examination; and (c) access to the documents considered in its report. BSP noted Aguilar’s letters without action.

Thus, in February 2020, Aguilar filed a mandamus petition with a prayer for a writ of preliminary injunction before the Court of Appeals (CA) to command the BSP, MB and PDIC to (a) implement Sec. 9 of RA 7906, or the Thrift Bank Act of 1995, concerning MaxBank’s capital deficiency, and Sec. 13 of the same law for the alleged violations committed by the bank; (b) provide due process by conducting a hearing mandated by Sec. 37 of the New CBA; and (c) to submit the accurate financial condition and/or result of operation of MaxBank.

The CA denied Aguilar’s petition. It also denied his motion for reconsideration.

Hence, the instant petition.

Issues

1. Does the CA correctly dismiss the petition for mandamus filed by Aguilar for being the wrong remedy?
2. Does Aguilar have standing to question MaxBank’s closure under Sec. 30 of RA 7653, as amended? If none, is the said provision constitutional?
3. Is Aguilar denied due process? Particularly, is Sec. 37 of RA 7653 applicable, and is he entitled to have a copy of the Report of Examination?
4. Does MaxBank’s closure have factual and legal basis?

Ruling and Discussion

Aguilar’s petition is denied.

1. Yes. The CA correctly dismissed the petition for mandamus filed by Aguilar for being the wrong remedy.
   
   Sec. 30 of the New CBA specifically enumerates the grounds and conditions on which the MB shall declare a bank closure, and clearly specifies the procedure in the receivership and liquidation of banks or quasi-banks. Further, said Sec. 30 expressly provides that the actions of the MB under it shall be final and executory, and may not be restrained or set aside by the courts, except through: (a) a 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; (b) filed by the stockholders of record representing the majority of the capital stock; and (c) within 10 days from the BOD’s receipt of the order directing receivership, liquidation or conservatorship.
   
   Here, the MB issued Resolution 1704.C exercising its power under said Sec. 30. The mandamus petition must therefore be denied outright for failing to comply with the explicit procedural requisites.
   
   First, Aguilar failed to file a certiorari petition based on the stated ground. The mandamus petition is unavailing as it lies only when there is a clear legal duty imposed upon the office or the officer sought to be compelled to perform an act, and when the party seeking mandamus has a clear legal right to the performance of such act. It should only issue to direct the exercise of a ministerial and not a discretionary duty. Determining whether a distressed bank shall be supported or liquidated is an exercise of BSP’s discretion. Further, the MB exercises discretion of a judicial nature. As a quasi-judicial agency, it investigates facts, ascertains the existence of facts, holds hearings, and draws conclusions from them as a basis for its official action. Thus, to question the bank closure, the proper remedy is to file a certiorari petition based on the stated ground.
   
   Moreover, Aguilar failed to prove BSP’s and MB’s ministerial duty to provide him a copy of the Report of Examination, to order a hearing under Sec. 37 of the New CBA, or to apply Sec. 9 of RA 7906 to solve the bank’s capital deficiency (see further discussion in No. 3). Even a mandamus based on excluding one from the use and enjoyment of a right or office would not prosper. Aguilar has no enforceable right over his employment as a former president and CEO.
   
   Second, even if the mandamus petition is treated as a certiorari petition, it will still not be meritorious, not having been filed by the proper party within 10 days from BOD’s receipt of the order directing receivership, liquidation, or conservatorship.
   
   The law is explicit that only the stockholders of record representing a majority of the capital stock may sue to set aside a resolution placing a bank under conservatorship. Here, Aguilar admits having filed the present petition based on his right as a nominal shareholder, a former president and CEO, who is allegedly deprived of his livelihood and denied due process. Additionally, he filed his petition assailing MB Resolution No. 1704.C well beyond the 10 days from its receipt. The Resolution was dated November 2019, while Aguilar filed his petition only in February 2020.
2. No. Aguilar does not have standing to question MaxBank’s closure under Sec. 30 of RA 7653, as amended. The said provision is also constitutional.
   
   As mentioned, the law is explicit that only the stockholders of record representing majority of the capital stock may bring the action to set aside a resolution placing a bank under conservatorship. Here, Aguilar is not the “stockholders of record representing the majority of the capital stock” as required by law. He further admitted having filed the present petition based on his right as a nominal shareholder, a former president and CEO, who is allegedly deprived of his livelihood and denied due process.
   
   The Congress can, by law, define the limit of an agency’s jurisdiction. Further, a law is presumed valid and constitutional absent proof of a clear and unequivocal breach of the Constitution.
   
   Here, Aguilar failed to overcome the presumption of constitutionality of Sec. 30 of the New CBA. He insists on its unconstitutionality because it limits the manner of complaint, the person who can complain, and the period to complain, which allegedly modify Rules 43 and 65 of the Rules of Court, and encroach on the rule-making power of the Supreme Court. However, he admits that he seeks the declaration of unconstitutionality of said Sec. 30 only if the Court declares that he has no legal standing. This is a conditional and collateral attack on the law’s constitutionality, which shall not be permitted. Lastly, Aguilar’s statement that he recognizes that the law’s unconstitutionality may not be collaterally attacked, but insists that his petition be heard, reveals that his attack on its constitutionality is a mere afterthought upon his failure to file the appropriate remedy.
3. No. Aguilar is not denied due process. Sec. 37 of RA 7653 is not applicable. Lastly, he is not entitled to have a copy of the Report of Examination.
   
   The closure and liquidation of a bank is an exercise of police power. MB may appoint a receiver without notice and hearing. However, its action is subject to judicial inquiry to ensure the protection of the banking institution. Due process does not necessarily require a prior hearing; an opportunity to be heard may be provided after the closure. Requiring a prior hearing may result in dire consequences. Bank runs would be the order of the day, resulting in panic and hysteria. In the process, fortunes may be wiped out, and disillusionment will run the gamut of the entire banking community.
   
   Further, Aguilar failed to prove BSP’s and MB’s ministerial duty to provide him a copy of the Report of Examination, to order a hearing under Sec. 37 of the New CBA, or to apply Sec. 9 of RA 7906 to solve the bank’s capital deficiency. There is no provision of law pointing to BSP’s duty to provide a copy of the Report of Examination to the bank being examined. Further, Aguilar cannot claim denial of due process for not having a hearing under Sec. 37 of the New CBA because this provision contemplates the exercise of MB’s discretion in determining whether administrative sanctions should be imposed on banks, its director, officer or employee, which is entirely different from Sec. 30, which is the applicable provision in this case. Finally, to apply Sec. 9 of RA 7906 to solve the bank’s capital deficiency is also discretionary on the part of BSP and MB, and asking for its application is an implied admission of Aguilar that MaxBank’s capital accounts are deficient.
4. Yes. MaxBank’s closure have factual and legal basis.
   
   MB issued Resolution 1704.C based on Sec. 30 (b) and (c) of the New CBA, specifically upon finding that MaxBank: (a) has insufficient realizable assets, as determined by BSP, to meet its liabilities; or (b) cannot continue in business without involving probable losses to its depositors or creditors. Like any administrative body, the MB and the BSP, in concluding that there were grounds for bank closure, should have sufficient basis. Furthermore, their findings of fact must be supported by substantial evidence. A bank’s inability to pay is a factual finding, which is generally binding to the Supreme Court, absent any compelling reason to rule otherwise.
   
   Here, whether MaxBank has insufficient realizable assets to meet its liabilities, and whether it cannot continue in business without involving probable losses to its depositors and creditors are questions of fact, which are generally binding. While the general rule admits exceptions, the party challenging questions of fact must allege, prove, and substantiate that its case falls under the exception, which Aguilar failed to do here.
   
   At any rate, under Sec. 30 of the New CBA, only a “report of the head of the supervising or examining department” of the BSP is necessary for the MB to forbid the institution from doing business in the Philippines. Here, the MB issued its resolution prohibiting MaxBank from doing business in the Philippines based on the findings noted in the regular examination, and the report of the BSP’s Financial Supervision Department VIII and Financial System Integrity Department.

dispositive

Petition denied. Decision and Resolution of the CA affirmed.