G.R. No. 67125 & G.R. No. 82337, August 24, 1990
PHILIPPINE VETERANS BANK EMPLOYEES UNION-NUBE, ET AL. vs. THE PHILIPPINE VETERANS BANK, ET AL. / SIMEON C. MEDALLA, ET AL. vs. CENTRAL BANK OF THE PHILIPPINES, ET AL.

FACTS

The Philippine Veterans Bank (PVB), established for war veterans, encountered severe financial distress. On April 10, 1983, the Monetary Board of the Central Bank placed PVB under receivership via Resolution No. 334. Subsequently, the PVB Employees Union (in G.R. No. 67125 ) challenged the bank’s retrenchment program, securing a temporary restraining order. While this case was pending, the Monetary Board, finding the bank insolvent with liabilities exceeding P540 million, ordered its liquidation on June 7, 1985, through Resolution No. 612. The Union and the Veterans Federation of the Philippines opposed this liquidation, with the latter proposing rehabilitation plans.
In a separate but consolidated petition (G.R. No. 82337), a group of veterans, representing themselves and other veteran-heirs, filed for restitution and extraordinary writs. They sought a declaration of their ownership rights over PVB and to restrain the Central Bank from liquidating its assets. During the proceedings, the Supreme Court issued a writ of preliminary injunction on March 26, 1987, halting the liquidation, but later amended it to allow the sale of certain foreclosed assets. Ancillary petitions were also filed concerning the payment of employee back wages and benefits.

ISSUE

The primary issue is whether the Central Bank acted within its legal authority in ordering the liquidation of the insolvent Philippine Veterans Bank, and whether the petitions to stop such liquidation and to declare veteran ownership are meritorious.

RULING

The Supreme Court dismissed both petitions and lifted the injunctive reliefs. The Court upheld the authority of the Central Bank, under Section 29 of Republic Act No. 265 (The Central Bank Act), to order the liquidation of an insolvent bank. The law grants the Monetary Board this power once it finds that a bank cannot resume business with safety to its creditors, depositors, and the general public. The Court found that the Central Bank’s findings of PVB’s insolvency were supported by substantial evidence, including an enormous deficit, and were thus conclusive and not subject to judicial review absent proof of arbitrariness or bad faith.
The Court rejected the argument that the veterans’ ownership rights under its charter ( R.A. No. 3518 ) precluded liquidation. While recognizing the veterans as the bank’s intended beneficiaries, the Court ruled that their proprietary interest does not override the state’s police power to regulate banking for public welfare. The bank’s charter did not exempt it from general banking laws. Furthermore, the petitions for mandamus and prohibition were improper. The acts of the Central Bank and the Liquidator were discretionary functions undertaken within their legal mandate, not ministerial duties that could be compelled by mandamus. The Court concluded that bank liquidation is a complex, technical matter best left to the expertise of the Central Bank and the supervision of the liquidation court, in accordance with established procedure. The decision, however, expressed hope that administrative authorities might still find a path for the bank’s rehabilitation.