G.R. No. L-21146 September 20, 1965
RURAL BANK OF LUCENA, INC., petitioner, vs. HON. FRANCISCO ARCA, as Judge of the Court of First Instance of Manila, Branch 1, and CENTRAL BANK OF THE PHILIPPINES, respondents.

FACTS

The Rural Bank of Lucena, Inc. (Lucena bank) filed an action in the Court of First Instance (CFI) of Manila (Civil Case No. 47345) to collect damages and to enjoin the Central Bank from enforcing Monetary Board Resolution No. 928, which directed the bank to reorganize its board and imposed restrictions on its operations. While this case was pending, the Monetary Board, upon a recommendation for liquidation, adopted Resolution No. 122 on February 2, 1962, requesting the Solicitor General to file a petition for the bank’s liquidation under Section 29 of Republic Act No. 265 (Central Bank Act). The bank was notified and temporarily closed. The Lucena bank then filed a separate suit in the CFI of Quezon (Case No. 6471) to annul Resolution No. 122 and enjoin its enforcement, obtaining a preliminary injunction. On February 14, 1962, the Manila CFI (Judge Gatmaitan) decided Case No. 47345, enjoining the enforcement of Resolution No. 928 and awarding damages to the Lucena bank. Meanwhile, the Quezon CFI dissolved its preliminary injunction against Resolution No. 122 on February 24, 1962. Subsequently, the Central Bank, as liquidator, petitioned the CFI of Manila (Judge Arca) for assistance in liquidation (Civil Case No. 50019). Judge Arca issued an interlocutory order on March 28, 1963, directing the Lucena bank to turn over all its assets, properties, and papers to the Central Bank. The Lucena bank filed the present certiorari petition, alleging grave abuse of discretion in issuing the turnover order.

ISSUE

Whether Judge Arca gravely abused his discretion in issuing the interlocutory order directing the turnover of the Lucena bank’s assets to the Central Bank for liquidation under Section 29 of the Central Bank Act.

RULING

No, Judge Arca did not commit grave abuse of discretion. The Supreme Court denied the writ of certiorari. The Court held that Section 29 of the Central Bank Act ( Republic Act No. 265 ), which provides for liquidation proceedings upon a finding of insolvency or that continuance in business would involve probable loss to depositors or creditors, is applicable to rural banks organized under Republic Act No. 720 , as made applicable by Section 27 of the Rural Banks Act. The prior hearing requirement under Section 10 of the Rural Banks Act for a takeover of management does not apply to liquidation under Section 29 of the Central Bank Act. The validity of Monetary Board Resolution No. 122 (for liquidation) was subject to judicial review within ten days under Section 29. The Lucena bank sought such review in the Quezon CFI (Case No. 6471), but that court dissolved the preliminary injunction, allowing the resolution to take effect, and the bank did not further prosecute that case. The proceedings before Judge Gatmaitan in Manila (Case No. 47345) concerned the earlier Resolution No. 928 for management takeover, not the subsequent Resolution No. 122 for liquidation, and thus did not constitute the judicial review for the liquidation order. Since more than a year had elapsed between Resolution No. 122 and Judge Arca’s order, the validity of the resolution could no longer be litigated before him; his role was confined to assisting and supervising the liquidation. The correctness of the Monetary Board’s resolution and any claim for damages should be threshed out in the still-pending Quezon case (No. 6471).