BSP vs. Valenzuela

BSP vs. Hon. Nina G. Antonio-Valenzuela et.
al
G.R No. 184778, October 2, 2009
Ponente: Velasco, JR.,J.
FACTS:
Supervision and Examinations Department (SED) of BSP conducted examinations of
the books of the respondent banks and eventually found that these banks had deficiencies in
their Capital. After the said examinations, exit conferences were held with the
officers/representatives of the banks wherein SED examiners provided them with list of
deficiencies. They were then instructed to comment and make remedial measures however
SED found that they failed to carry out the required remedial measures.
In response, they said that they haven’t received any Report of Examination (ROE)
and that their rights were violated because of that. They then filed before the RTC a writ of
preliminary injunction with TRO as well as the nullification of the ROE. Furthermore, they
contend that the closure that the Monetary Board might impose upon the receipt of the ROE
will result in irrepealable damage to the public.
RTC ruled in favor of the respondents which was affirmed by the CA. BSP then files
a petition and TRO, questioning the decision of the CA.
SC then issued a TRO on the RTC and CA. SEB was then able to submit their ROE to the
MB who the prohibited the respondent banks from transacting business and placed them
under receivership by PDIC .
ISSUE:
Whether due process has been violated.
RULING:
NO. The issuance by the RTC of writs of preliminary injunction is an unwarranted
interference with the powers of the MB. Secs. 29 and 30 of RA 7653 10 refer to the
appointment of a conservator or a receiver for a bank, which is a power of the MB for which
they need the ROEs done by the supervising or examining department. The writs of
preliminary injunction issued by the trial court hinder the MB from fulfilling its function
under the law. The actions of the MB under Secs. 29 and 30 of RA 7653 "may not be
restrained or set aside by the court except on 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." The writs of preliminary injunction order are precisely what
cannot be done under the law by preventing the MB from taking action under either Sec. 29
or Sec. 30 of RA 7653.
This "close now, hear later" scheme is grounded on practical and legal considerations
to prevent unwarranted dissipation of the bank’s assets and as a valid exercise of police
power to protect the depositors, creditors, stockholders, and the general public. The writ of
preliminary injunction cannot, thus, prevent the MB from taking action, by preventing the
submission of the ROEs and worse, by preventing the MB from acting on such ROEs.
The trial court required the MB to respect the respondent banks’ right to due process by
allowing the respondent banks to view the ROEs and act upon them to forestall any sanctions
the MB might impose. Such procedure has no basis in law and does in fact violate the "close
now, hear later" doctrine.
The "close now, hear later" doctrine has already been justified as a measure for the
protection of the public interest. Swift action is called for on the part of the BSP when it finds
that a bank is in dire straits. Unless adequate and determined efforts are taken by the
government against distressed and mismanaged banks, public faith in the banking system is
certain to deteriorate to the prejudice of the national economy itself, not to mention the losses
suffered by the bank depositors, creditors, and stockholders, who all deserve the protection of
the government.
It is well-settled that the closure of a bank may be considered as an exercise of police

power. The action of the MB on this matter is final and executory. Such exercise may
nonetheless be subject to judicial inquiry and can be set aside if found to be in excess of
jurisdiction or with such grave abuse of discretion as to amount to lack or excess of
jurisdiction.12
The respondent banks cannot—through seeking a writ of preliminary injunction by

appealing to lack of due process, in a roundabout manner— prevent their closure by the MB.
Their remedy, as stated, is a subsequent one, which will determine whether the closure of the
bank was attended by grave abuse of discretion. Judicial review enters the picture only after
the MB has taken action; it cannot prevent such action by the MB. The threat of the
imposition of sanctions, even that of closure, does not violate their right to due process, and
cannot be the basis for a writ of preliminary injunction.

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BSP vs. Hon. Nina G. Antonio-Valenzuela et.

It is well-settled that the closure of a bank may be considered as an exercise of police

The respondent banks cannot—through seeking a writ of preliminary injunction by

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