G.R. No. 168859 and G.R. No. 168897, June 30, 2009.
UNITED COCONUT PLANTERS BANK, JERONIMO U. KILAYKO, LORENZO V. TAN, ENRIQUE L. GANA, JAIME W. JACINTO and EMILY R. LAZARO, petitioners, vs. E. GANZON, INC., Respondent. / E. GANZON, INC., petitioner, vs. UNITED COCONUT PLANTERS BANK, JAIME W. JACINTO and EMILY R. LAZARO, Respondents.

FACTS

E. Ganzon, Inc. (EGI) availed of credit facilities from United Coconut Planters Bank (UCPB) from 1995 to 1998, secured by mortgages on its condominium inventories. After defaulting on payments due to the Asian financial crisis, EGI and UCPB entered into a Memorandum of Agreement (MOA) on December 28, 1998, to settle EGI’s outstanding loan obligations, which UCPB represented as ₱915,838,822.50. An Amendment of Agreement on January 18, 2000, valued the properties EGI would transfer to UCPB at ₱904,491,052.00. UCPB foreclosed some properties, with proceeds of ₱723,592,000.00 applied to the principal per BSP Circular No. 239, leaving an unpaid balance of ₱192,246,822.50. On May 8, 2001, EGI transferred additional properties via dacion en pago valued at ₱166,127,369.50. During this process, EGI discovered that the documents stated its remaining balance had increased to ₱226,963,905.50 due to added transaction costs. EGI later obtained a UCPB Internal Memorandum dated February 22, 2001, which showed two columns: “ACTUAL” (₱146,849,412.58) and “DISCLOSED TO EGI” (₱226,967,194.80). EGI demanded a refund for overpayment. UCPB explained the discrepancy was due to BSP Circular No. 202 and the Manual of Regulations for Banks, which prohibit banks from accruing interest on non-performing loans in their books, whereas the amount “DISCLOSED TO EGI” included all accrued interest and costs based on loan documents. UCPB filed a criminal case for theft/discovery of secrets against EGI officers, which was dismissed. On November 5, 2002, EGI filed an administrative complaint with the Bangko Sentral ng Pilipinas (BSP) against UCPB and its officers for alleged violations of banking laws and unsafe/unsound business practices. The BSP Monetary Board dismissed the complaint in a letter-decision dated September 16, 2003. EGI’s motion for reconsideration was denied. EGI then filed a Petition for Review with the Court of Appeals (CA). The CA, in its Decision dated October 14, 2004, granted EGI’s petition, set aside the BSP’s dismissal, and remanded the case to the BSP Monetary Board for further proceedings. Both UCPB, et al. and EGI filed motions for reconsideration, which were denied by the CA in a Resolution dated July 7, 2005. These consolidated petitions for review followed.

ISSUE

Whether the Court of Appeals erred in setting aside the BSP Monetary Board’s dismissal of EGI’s administrative complaint and remanding the case for further proceedings.

RULING

The Supreme Court denied the petitions and affirmed the Court of Appeals’ Decision and Resolution. The Court held that the BSP Monetary Board’s letter-decision dismissing EGI’s complaint was void for having been issued in violation of EGI’s right to due process. The BSP failed to conduct a formal investigation or hearing, depriving EGI of the opportunity to present evidence and confront the evidence against it, as required by the Manual of Regulations for Banks and administrative due process. The Court found that the BSP’s dismissal was based solely on an ex parte evaluation by its departments without affording EGI a hearing. Consequently, the BSP’s decision was invalid. The Court of Appeals correctly remanded the case to the BSP Monetary Board to conduct the proper administrative proceedings. The Supreme Court also clarified that the BSP has exclusive jurisdiction over administrative cases against banks and their officers for unsafe or unsound banking practices. The Court found no merit in UCPB’s claim that the CA had no jurisdiction, as EGI’s petition before the CA was filed under Rule 43, which allows appeals from quasi-judicial agencies to the CA. The Court further held that the remand was proper to allow the BSP to fulfill its regulatory mandate and determine if administrative sanctions were warranted. EGI’s request for the Court to directly impose sanctions was denied, as the determination of unsafe or unsound practices and the imposition of administrative penalties are primarily vested in the BSP Monetary Board.