Case 1

BUSUEGO, BANEZ & LIM v. CA

G.R. No. 95326. March 11, 1999

FACTS: The 16th regular examination of the books and records of the PAL Employees Savings and Loan Association !nc"

#PESALA$ %as conducted from &arch 1' to April 16 1()) by a team of *entral +ank examiners" Several anomalies and irregularities committed by PESALA,s directors and officers %ere uncovered among %hich are- 1. Questionable investment In a multi-million peso real estate project (Pesalaville); 2. Conflict of interest in the conduct of business; . !n"arranted declaration and pa#ment of dividends; and $. Commission of unsound and unsafe business practices. .n /uly 1( 1()) *entral +ank Supervision and Examination Section 0epartment !1 0irector 2icardo" 3" Lirio sent a letter to the +oard of 0irectors of PESALA inviting them to a conference on /uly 41 1()) to discuss sub5ect findings noted in the said examination but petitioners did not attend such conference" .n /uly 4) 1()) petitioner 2enato Lim %rote the PESALA,s +oard of 0irectors explaining his side on the said examination and re6uesting that a copy of his letter be furnished the *+ %hich %as forth%ith made by the +oard" .n /uly 4( 1()) PESALA,s +oard of 0irectors sent to 0irector Lirio a letter concerning the examination of PESALA,s records" .n September ( 1()) the &onetary +oard adopted and issued &+ 2esolution 7o" )89 the pertinent provisions of %hich are as follo%s%%%%%%% &. 'o include the names of (r. Catalino )ane*+ (r. ,omeo )usue-o and (r. ,enato .im in the /ector0s "atchlist to prevent them from holdin- responsible positions in an# institution under Central )an1 supervision;c %%%%%%% 2. 'o re3uire the board of directors of P4/5.5 to file civil and criminal cases a-ainst (essrs. Catalino )ane*+ ,omeo )usue-o and ,enato .im for all the misfeasance and malfeasance committed b# them+ as "arranted b# the evidence; %%%%%%% .n /anuary 4: 1()( petitioners filed a Petition for !n5unction %ith Prayer for the !mmediate !ssuance of a Temporary 2estraining .rder before +ranch 18' of the 2T* of ;ue<on *ity" .n /anuary 46 1()( the said court issued a temporary restraining order en5oining the defendant the &onetary +oard of the *entral +ank from including the names of petitioners in the %atchlist" .n 3ebruary 18 1()( the same trial court issued a %rit of preliminary in5unction" The &onetary +oard presented a &otion for 2econsideration of the said .rder but the same %as denied" .n September 11 1()( the trial court handed do%n its decision declaring that +oard 2esolution 7o" )89 as void and inexistent" The &onetary +oard appealed the aforesaid decision to the *ourt of Appeals %hich came out %ith a decision of reversal on September 1' 1((8" =ence this petition for revie% on certiorari. "
ISSUES:

1" >hether or not the petitioners %ere deprived of their right to a notice and the opportunity to be heard by the &onetary +oard
prior to its issuance of &+ 2esolution 7o" )89"

4" >hether or not the &+ is legally bound to observe the essential re6uirements of due process of a valid charge notice and
opportunity to be heard in so far as the petitioner?s sub5ect case is concerned"

:" >hether or not &+ 2esolution 7o" )89 is null and void for being violative of the petitioner?s right to due process"
RULING: >ith respect to the first issue it appears that the re6uisites of procedural due process %ere complied %ith by the &onetary

+oard before it issued the 6uestioned &+ 2esolution 7o" )89" 3irstly the petitioners %ere invited to a conference to discuss the findings gathered during the examination of records" #The re6uirement of a hearing is complied %ith as long as there %as an opportunity to be heard and not necessarily that an actual hearing %as conducted"$ Secondly the &onetary +oard considered the evidence presented" Thirdly fourthly and fifthly &+ 2esolution 7o" )89 %as adopted on the basis of said findings unearthed during the examination of PESALA,s records and derived from the letter@comments submitted by the parties" Sixthly the members of the &onetary +oard acted independently on their o%n in issuing sub5ect 2esolution placing reliance on the said findings made during the examination" Lastly the reason for the issuance of &+ 2esolution 7o" )89 is readily apparent %hich is to prevent further irregularities from being committed and to prosecute the officials responsible therefore" >ith respect to the second issue there is tenability in petitioners, contention that the &onetary +oard as an administrative agency is legally bound to observe due process although they are free from the rigidity of certain procedural re6uirements" Even Section 4) #c$ and #d$ of 2epublic Act 7o" :AA( #B2A :AA(B$ delineating the po%ers of the &onetary +oard over savings and loan associations re6uire observance of due process in the exercise of its po%ers%%%%%%% #c$ To conduct at least once every year and %henever necessary any inspection examination or investigation of the books and records business affairs administration and financial condition of any savings and loan association %ith or %ithout prior notice but al"a#s "ith fairness and reasonable opportunit# for the association or an# of its officials to -ive their side of the case. %%%%%%% #d$ 5fter proper notice and hearin-+ to suspend a savings and loan association for violation of la% for unsafe and unsound practices or for reason of insolvency" %%%%%%% =ence there is no denial of due process" Anent the third issue petitioners theori<e that &+ 2esolution 7o" )89 is null and void for being violative of their right to due process" According to them the &onetary +oard is not vested %ith Bthe authority to dis6ualify persons from occupying positions in institutions under the supervision of the *entral +ank %ithout proper notice and hearingB nor is it vested %ith authority Bto file civil and criminal cases against its officersCdirectors for suspected fraudulent acts"BThe S* ruled that petitioners, contentions are untenable" !t must be remembered that the *entral +ank of the Philippines through the &onetary +oard is the government agency charged %ith the responsibility of administering the monetary banking and credit system of the country and is granted the po%er of supervision and examination over banks and non@bank financial institutions performing 6uasi@banking functions of %hich savings and loan associations such as PESALA form part of" The special la% governing savings and loan association is 2epublic Act 7o" :AA( as amended other%ise kno%n as the BSavings and Loan Association Act"B Said la% authori<es the &onetary +oard to conduct regular yearly examinations of the books and records of savings and loan associations to suspend a savings and loan association for violation of la% to decide any controversy over the obligations and duties of directors and officers and to take remedial measures among others" The re6uirement of prior notice is also relaxed under Section 4) #c$ of 2A :AA( as investigations or examinations may be conducted %ith or %ithout prior notice Bbut al%ays %ith fairness and reasonable opportunity for the association or any of its officials to give their side"B As may be gathered from the records the said re6uirement %as properly complied %ith by the respondent

&onetary +oard" All things studiedly considered the S* upholds the validity of &onetary +oard 2esolution 7o" )89 and affirms the decision of the *ourt of Appeals"