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MONETARY BOARD v. PHILIPPINE VETERANS BANK

FACTS:

The respondent, Veterans Bank, established a pension loan product for veterans and their surviving spouses, as well as a salary loan product for teachers and low-salaried employees. Due to the lack of real estate or security, the bank charged a higher fee known as the Credit Redemption Fund (CRF) from borrowers to guarantee payment of outstanding loans. These fees were credited to trust funds managed by the bank's Trust and Investment Department. In 2002, the Bangko Sentral ng Pilipinas (BSP) found that the collection of premiums violated a provision in the General Banking Law prohibiting banks from directly engaging in insurance business. The BSP directed the bank to discontinue the collection of fees for CRF in 2004. In 2005, the Monetary Board of the BSP ordered the bank to return the balances of the CRF to borrowers. The bank filed a Petition for Declaratory Relief with the RTC of Makati City, which was dismissed in 2007. However, the bank filed a Motion for Reconsideration, which was granted by the RTC in 2009. Petitioners filed a motion for reconsideration against the RTC's decision, but it was denied. Hence, the present petition for review before the Supreme Court.

ISSUES:

  1. Whether the petition for declaratory relief is the proper remedy to resolve the issue of whether petitioner violated Section 54 of RA No. 8791.

  2. Whether the RTC erred in allowing respondent's motion for reconsideration despite the certification that an official copy of the RTC's order was duly served and received by respondent.

RULING:

  1. The Court held that an ordinary civil action, and not a petition for declaratory relief, is the proper remedy to resolve the issue of whether petitioner violated Section 54 of RA No. 8791. The Court dismissed the petition for declaratory relief and stated that the violation can only be resolved through an ordinary action.

  2. The Court did not discuss the issue of whether the RTC erred in allowing respondent's motion for reconsideration despite the certification of service on October 17, 2007. No ruling was made regarding this matter.

PRINCIPLES:

  • An ordinary civil action is the proper remedy to resolve disputes involving violations of specific provisions of a law. A petition for declaratory relief may not be the appropriate remedy in such cases.

  • A violation of Section 54 of RA No. 8791, which prohibits banks from directly engaging in insurance business as insurer, can only be resolved through an ordinary action.