Case on receivership

Alfeo Vivas, on his behalf and on behalf of the Shareholders of the Eurocredit Community Bank, Petitioner, vs. The Monetary Board of the BSP and the PDIC, Respondents.

GR No. 191424; August 7, 2013

Facts: The Monetary Board placed the Eurocredit Community Bank under Prompt Corrective Action framework on account of the findings of serious findings and supervisory concerns. Vivas moved for the reconsideration of such action. ECBI also unjustly refused to allow the BSP examiners from inspecting its books and records. The MB issued Resolution No. 276 placing ECBI under receivership, because of its inability to pay its liabilities, insufficient realizable assets and violation of cease and desist order of the MB for acts constituting unsound banking practices. Vivas argued that the MB committed grave abuse of discretion for placing ECBI under receivership without prior notice and hearing, pursuant to RA 7353, Sec. 11.

Issue:  Whether or not the MB committed grave abuse of discretion in placing ECBI under receivership without notice and hearing.

Ruling:     No, the MB did not gravely abuse its discretion. The ECBI was given every chance to be heard and improve its financial standing. Moreover, the MB has the power to forbid a bank from doing business and place it under receivership without prior notice and hearing, when the circumstances warrant it. Under RA 7653, the MB was given with more power of closure and placement of a bank in receivership for insolvency or if the continuance in the business would result in the loss of depositors or creditors. The ‘close now, hear later” doctrine was justified on practical and legal considerations to preclude unwarranted dissipation of the bank’s assets and as valid exercise of police power to protect creditors, depositors, stockholders and the general public.