SC rules TRO for 10 Legacy banks wrong

THE Supreme Court (SC) has overruled a judge of  a Regional Trial Court (RTC) in Manila City who ordered the Bangko Sentral ng Pilipinas (BSP) not to compel 10 rural banks in the bankrupt Legacy Group of Companies to infuse additional capital.

The Court said Judge Nina Antonio-Valenzuela’s writ of preliminary injunction is a grave abuse of discretion, being an “unwarranted interference” with the powers of the Monetary Board (MB). The decision was written by Associate Justice Presbitero Velasco of the Court’s Third Division.

The Court thus declared null and void the June 4, 2008, writ issued by the judge and affirmed by the Court of Appeals.

The 10 banks included the Rural Bank of Parañaque Inc., Rural Bank of San Jose (Batangas) Inc., Rural Bank of Carmen (Cebu) Inc., Pilipino Rural Bank Inc., Philippine Countryside Rural Bank Inc., Rural Bank of Calatagan Inc. now Dynamic Rural Bank (Batangas), Rural Bank of DARBCI Inc., Rural Bank of Kananga Inc. now First Interstate Rural Bank (Leyte), Rural Bank of Bisayas Minglanilla now Bank of East Asia, and San Pablo City Development Bank Inc.

“No invasion of the rights of respondent banks has been shown, nor is their right to copies of the ROEs [report of examinations] clear and unmistakable. There is also no necessity for the writ to prevent serious damage. . .In the absence of a clear legal right, the issuance of an injunctive writ constitutes grave abuse of discretion,” the SC said.

The trial court had held that the banks’ right to due process would be violated by the submission of the ROE made by the BSP-Supervision Examination Department (SED) to the Monetary Board before the respondent banks get a copy.

BSP-SED officer in charge Chuchi Fonacier had examined the books of the banks in 2007 and discovered some deficiencies and ordered them to take remedial measures, including the infusion of additional capital.

Though the banks claimed they complied with the order, BSP-SED still sent separate letters to the board of directors of each bank, informing them that it found that they have yet to carry out the required remedial measures.

In response, the banks sought more time to obtain BSP approval to amend their Articles of Incorporation; and asked for a copy of the ROE and a meeting with the BSP audit teams to reconcile figures.

Fonacier insisted, however, that the banks comply with the BSP’s order, prompting them to elevate the case to the trial court.

The SC, in a resolution dated November 24, 2008, issued a temporary restraining order enjoining the Manila RTC and the CA from implementing the writ of preliminary injunction enabling the BSP-SED to submit their ROEs to the MB, which, in turn, prohibited the banks from transacting business and placed them under receivership.