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PHILIPPINE VETERANS BANK EMPLOYEES UNION-NUBE v. PHILIPPINE VETERANS BANK

FACTS:

The Philippine Veterans Bank (PVB) was created in 1963 to support war veterans but encountered financial difficulties and was placed under receivership by the Central Bank on April 10, 1983. The Bank's retrenchment and reorganization program were questioned by the Philippine Veterans Bank Employees Union, who sought a temporary restraining order. While the case was pending, the Bank was ordered to be liquidated due to its outstanding liability. The Union opposed the liquidation and filed a supplemental petition, along with the Veterans Federation of the Philippines. A writ of preliminary injunction was issued, enjoining the liquidation of the Bank. Simeon Medalla et al. filed a petition for restitution and equitable writs, seeking ownership and control of the Bank. Various orders were issued regarding employee claims and retirement benefits. Motions were later filed for the payment of backwages and withdrawal of deposits. The Court decided to finally resolve the cases due to the lack of progress in Bank rehabilitation.

The case involves the power of the Central Bank to liquidate the Philippine Veterans Bank. The petitioners argue that the bank's creation by a special law establishes a contractual relationship and creates vested rights that cannot be withdrawn without their consent. They assert that if the benefits can be revoked, it should be done by the legislature and not the Central Bank. On the other hand, the respondents argue that being created by a special law does not grant extraordinary privileges, and the Central Bank has regulatory power over banking institutions. The Central Bank Act provides for the supervision and examination of banking institutions, allowing for periodic or special examinations and the examination of deposits in cases of suspected bank fraud or serious irregularity.

The case also deals with the provisions of the New Central Bank Act and the possible liquidation of a bank or non-bank financial intermediary performing quasi-banking functions. The Act provides for the appointment of a conservator to take charge of an institution in a state of continuing inability or unwillingness to maintain adequate liquidity. The conservator has the power to overrule or revoke previous actions and implement measures to restore viability. If an institution is found to be insolvent or continuation in business would result in probable loss to depositors or creditors, a receiver may be designated to take charge of assets and administer them for the benefit of creditors. The Monetary Board determines if liquidation is necessary and approves a liquidation plan involving the disposition of assets. A liquidator would file a petition in court to adjudicate disputed claims and enforce individual liabilities of stockholders.

ISSUES:

  1. Whether the Monetary Board has the authority to order the liquidation of a bank or non-bank financial intermediary performing quasi-banking functions.

  2. Whether the actions of the Monetary Board under Section 25 of the Act can be set aside by a court.

  3. Whether the Philippine Veterans Bank is exempt from the jurisdiction of the Central Bank.

  4. Whether the government can modify or revoke the charter of the Philippine Veterans Bank without violating the impairment clause.

  5. Whether or not a quo warranto proceeding can be filed against the Bank by the Solicitor General on behalf of the Republic of the Philippines.

  6. Whether or not the Bank is a government-owned or controlled corporation.

  7. Whether or not the employees of the Bank are entitled to back wages.

  8. Whether or not the claims for retirement benefits by certain retirees of the Bank are valid.

  9. Whether or not the directors of the Bank should be considered managerial employees or officers for the purpose of the application of Article 110 of the Labor Code.

  10. Whether the court has jurisdiction to entertain G.R. No. 82337.

  11. Whether the petitioners in G.R. No. 82337 should be granted ownership and management of the Bank.

RULING:

  1. Yes, the Monetary Board has the authority to order the liquidation of a bank or non-bank financial intermediary performing quasi-banking functions. This authority is granted under Section 30 of the Act, which states that if the Monetary Board determines that an institution is insolvent or cannot resume business with safety to its depositors, creditors, and the general public, it may order its liquidation.

  2. No, the actions of the Monetary Board under Section 25 of the Act cannot be set aside by a court unless there is convincing proof, after hearing, that the action is plainly arbitrary and made in bad faith. The provisions of Section 25 and other related provisions of the Act explicitly state that the actions of the Monetary Board are final and executory, and can only be set aside by a court under certain circumstances.

  3. The Philippine Veterans Bank is not exempt from the jurisdiction of the Central Bank. Despite being owned or controlled by the government, the Bank is expressly placed under the jurisdiction of the Central Bank. Section 14 of R.A. No. 3518 provides that the Bank shall be subject to the authority of the Department of Supervision and Examination of the Central Bank. This is to enable the Central Bank to take necessary steps against any banking institution whose continued operation may cause prejudice to its depositors, creditors, and the general public.

  4. The government can modify or revoke the charter of the Philippine Veterans Bank without violating the impairment clause. The relationship between the government and the stockholders of the Bank, even if it can be considered a contract, can be altered when the public interest demands its exercise. The public interest of maintaining the stability and integrity of the banking system justifies the modification or revocation of the charter. Contractual agreements involving public interest are susceptible to change to meet the great public needs. The police power can be validly asserted to make such changes.

  5. Yes, quo warranto proceedings may be filed against the Bank by the Solicitor General on behalf of the Republic of the Philippines pursuant to the Rules of Court on any of the grounds enumerated in Rule 66 thereof.

  6. No, the Bank is not a government-owned or controlled corporation. It is an ordinary commercial corporation with an original charter in the form of R.A. No. 3518. Its ownership is vested in the veterans, their widows, orphans, or compulsory heirs.

  7. No, the employees of the Bank are not entitled to back wages. They were not illegally dismissed but were lawfully separated as a result of the liquidation of the Bank.

  8. Yes, the claims for retirement benefits by certain retirees of the Bank are valid. They are covered by the Retirement Plan of the Bank and meet the eligibility criteria.

  9. The directors of the Bank should be considered managerial employees or officers for the purpose of the application of Article 110 of the Labor Code. Their claims for retirement benefits do not have priority over the claims of workers in general or rank-and-file employees.

  10. The court does not have jurisdiction to entertain G.R. No. 82337. The petition does not fall under any of the special civil actions enumerated in the Rules of Court, Judiciary Reorganization Act of 1980, or the Interim Rules of Court. The petition is an original petition for restitution, which is not within the jurisdiction of the Supreme Court.

  11. The petitioners in G.R. No. 82337 are not granted ownership and management of the Bank. The affairs of the Bank are best entrusted to the liquidator court and the Central Bank, considering their expertise and familiarity with the problem at hand. The Central Bank has the power to liquidate the Bank under existing laws, and rehabilitation may still be ordered by the President of the Philippines if deemed appropriate.

PRINCIPLES:

  • The Monetary Board has the authority to order the liquidation of a bank or non-bank financial intermediary performing quasi-banking functions under Section 30 of the Act.

  • The actions of the Monetary Board under Section 25 and other related provisions of the Act are final and executory, and can only be set aside by a court if there is convincing proof that the action is plainly arbitrary and made in bad faith.

  • The assets of an institution under receivership or liquidation are deemed in custodia legis and are exempt from any order of garnishment, levy, attachment, or execution.

  • The appointment of a conservator, receiver, or liquidator under the Act is vested exclusively with the Monetary Board, regardless of any contrary provision in other laws.

  • The Department of Supervision and Examination is responsible for the supervision and periodic examination of all banking institutions, including government credit institutions, as stated in Section 25 of the Act.

  • Public interest justifies the modification or revocation of contracts.

  • Contracts involving public interest have a congenital infirmity, making them susceptible to change whenever required by the public interest.

  • The police power can be used to make changes to contracts involving public interest.

  • The government has the duty to protect and preserve the integrity and stability of the banking system.

  • Stockholdings in the Philippine Veterans Bank are not immune from the fluctuations of business and do not have a fixed value.

  • The Philippine Veterans Bank charter can be subject to revocation or modification by the Central Bank and other relevant authorities.

  • Quo warranto proceedings can be filed against a corporation on the grounds enumerated in Rule 66 of the Rules of Court.

  • The ownership of a corporation can determine its classification as a government-owned or controlled corporation or an ordinary commercial corporation.

  • Employees who are lawfully separated as a result of the liquidation of a corporation are not entitled to back wages.

  • Retirement benefits may be awarded to eligible employees as defined by the retirement plan of a corporation.

  • The classification of employees as managerial employees or officers can affect their entitlement to certain benefits and preferences under labor laws.

  • Workers enjoy first preference as regards their unpaid wages and other monetary claims in the event of bankruptcy or liquidation of an employer's business.

  • The jurisdiction of the Supreme Court in civil cases encompasses a review on appeal only on questions of law and original petitions in certain special civil actions.

  • The Central Bank has the power to regulate commercial banks and order their liquidation when warranted.

  • Rehabilitation of a bank may still be ordered by the President of the Philippines if deemed appropriate, without violating applicable laws.