INTING, J.:
BOC, as former trustee bank, for quite a time did not pay the interest or did not consider the payment of interest due on these preferred shares. Thus, BOC is hereby ordered to remit now to the new trustee bank, Philippine Veterans Bank, the value of the preferred shares not later than 10 days from receipt of this order, otherwise, BOC shall pay the legal rate of interest of 12% per annum for every day of delay.BOC thereafter filed a Motion for Partial Reconsideration[11] manifesting that before it could declare dividends, it must first seek the approval of the BSP pursuant to BSP Circular No. 241, Series of 2000,[12] which provides that "no dividend shall be declared or paid on redeemable shares in the absence of sufficient undivided profits, free surplus and approval of the BSP."[13]
The trustee fee of BOC shall be paid out of the interest due and payable from said preferred shares, which had been long overdue and payable to CAP. The payment of the net interest due and payable to the preferred shares shall be paid and remitted to the trustee bank not later than 30 days from receipt of this order; otherwise, the same shall earn interest at 12% per annum.
SO ORDERED.[10]
[CAP] had preferred shares in the [BOC] amounting to P150,000,000.00, which was held-in-trust to BOC. Considering the appointment of a new trustee bank of [CAP], the said preferred shares were ordered transferred to the new trustee bank. BOC however had already paid said preferred shares. However, it appears that BOC did not pay any interest on said preferred shares from date of purchase to date of redemption. Thus, this Court would like to request your good office to comment on the matter and enlighten this Court with respect to the procedure of payment of said interest on preferred shares. BOC has already computed the interest due therein in the sum of P174,271,495.00 as of February 2008 before BOC redeemed the preferred shares; but BOC is now saying that payment of interest shall be subject to BSP prior approval.[16]
The BSP Letter dated September 9, 2008. |
We refer to your letter dated 29 May 2008, x x x, requesting comments on the procedure of payment of interest on Bank of Commerce's preferred shares formerly owned by College Assurance Plan Inc.
Please be informed that Section X136.4 of the Manual of Regulations for Banks provides the reporting and verification of dividend declaration, as follows:1. Declaration of dividends shall be reported by the bank concerned to the Bangko Sentral ng Pilipinas (BSP) for verification;In addition, before the bank concerned may declare dividends, it shall meet the requirements prescribed by law and banking rules and regulations. x x x[18]
2. Pending verification, the bank concerned shall not make any announcement or communication on the declaration of dividends nor shall any payment be made thereon; and
3. In any case, the declaration may be announced and the dividend paid, if after thirty (30) banking days from the date the report herein shall have been received by the BSP, no advice against such declaration has been received by the bank concerned;
The Order dated September 24, 2008. |
It appears from the letter/comment of BSP that under Section X136.4 of the Manual of Regulations for Banks, only a report on declaration of dividends is required and not approval by the BSP. If after thirty (30) banking days from the date the report required shall have been received by the BSP and no advice against such declaration was received by the bank, the latter may announce and pay the dividend.In compliance with the Rehabilitation Court's Order, the BOC's Board of Directors issued on December 16, 2008 a Board Resolution setting up a new Sinking Fund for the payment of the dividends.[22]
In view of the foregoing, the motion for partial reconsideration (of the Order dated 24 April 2008) filed by Bank of Commerce is hereby DENIED for lack of merit. The Order dated April 24, 2008 is hereby reiterated.
x x x x
SO ORDERED.[21]
The BSP letter-Denial dated November 14, 2011 |
This refers to Bank of Commerce's (BOC) letter dated September 28, 2009 x x x; requesting approval to pay out the outstanding amount in the sinking fund, representing dividends declared on previously redeemed shares, to its preferred shareholders.In a Letter[30] dated January 5, 2012, the BSP informed the Rehabilitation Court that it denied BOC's application to pay accrued dividends. It also clarified that in its reply to the court's inquiry (dated September 9, 2008), it referred to simple dividend declaration not related to redemption of preferred shares; and that the payment of dividends for redeemable preferred shares requires prior BSP approval pursuant to Section X126.5 of the Manual of Regulations for Banks (MORB).[31]
Section 57 of R.A. No. 8791 as Implemented by Sections X136 and X126.5 of the Manual of Regulations for Banks (MORB), provide, among others, that a bank shall only declare or pay dividends if it has adequate accumulated profits, sufficient net amounts available for dividends and has not committed major violations.
Since 2008, BOC had been reporting negative surplus/retained earnings due to the huge amount of losses it incurred from its holdings of structured products, among others. Moreover, Bank had been cited for unsafe and unsound practices for its holdings in unauthorized structured investments and in the accounting and credit areas in the last 2 most recent examinations. While we recognize that there are on-going efforts to address these concerns, the results of the on-site examination as of 31 October 2010 showed no substantive evidence that these reforms have substantially improved the operations and risk management systems of the Bank. Hence, these supervisory concerns remain.
In this regard, we regret to inform you that the Bank's request to declare and pay out dividends has been denied, pursuant to Section 57 of R.A. 8791 as implemented by Sections X136 and X126.5 of the MORB.[29]
WHEREFORE, premises considered, the Trustee Bank is hereby ordered to segregate the necessary amount equivalent to the interest of CAP on the said Escrow Account for payment of the interest due and payable on the redeemed preferred shares; and same segregated amount be credited to the trust account of the petitioner to meet its payment obligations due and payable to its plan holders as enrollment is forthcoming. The Trustee Bank is hereby further ordered to make the report to this Court within ten (10) days from the receipt of this order of the exact amount they have removed from the Escrow Account, as payment of the interest due and payable on the redeemed preferred shares, as partial payment of the interest due and payable on the said redeemed preferred shares.On May 20, 2013, PVB filed a Manifestation and Compliance[36] informing the Rehabilitation Court that the PVB Trust Management Group already transferred from Escrow Account No. 229 the amount of P90,703,943.92 shares of CAP and credited it to CAP's Trust Fund No. 81 on May 14, 2013.[37] The amount, in turn, had been released to CAP's planholders.[38]
The Receiver shall make a report to whom the amount segregated by the Trustee Bank and credit to the Trust Account of Petitioner, was actually paid.
SO ORDERED.[35]
FOR THESE REASONS, the petition is GRANTED. The order of the Regional Trial Court, Branch 149, Makati City dated May 9, 2013 is hereby SET ASIDE. College Assurance Plan Philippines, Inc. is hereby directed to return to the Escrow Account the funds credited to its trust account.The CA held that the BSP's (1) denial of BOC's application to pay dividends and (2) subsequent advice regarding the need for BSP approval, as respectively embodied in the letters dated November 14, 2011 and January 5, 2012, were supervening events that would justify the Rehabilitation Court's nullification of the execution of a final and executory judgment. According to the CA, these supervening circumstances affected the substance of the decision and render its execution impossible and inequitable. Taking into account BOC's negative surplus, the CA found that the payment of the dividends using BOC's funds in the Escrow Account not only violated the General Banking Law and the MORB but might also prejudice BOC's creditors and subject the bank and its officers to criminal and administrative sanctions.[46]
SO ORDERED.[45]
ACCORDINGLY, the separate motions filed by Philippine Veterans Bank and College Assurance Plan Philippines, Inc. are both DENIED for lack of merit.PVB is now before the Court asserting that:
SO ORDERED.[47]
THE COURT OF APPEALS ERRED IN SETTING ASIDE THE ORDER, DATED 9 MAY 2013, OF THE REHABILITATION COURT AND DIRECTING THE RETURN OF THE ESCROW ACCOUNT THE FUNDS CREDITED TO [CAP], CONSIDERING THAT:PVB avers that BOC is estopped from questioning the orders issued by the Rehabilitation Court in 2008 which were immediately executory. It argues that BOC may not question these orders after already having partially performed them when it set up a Sinking Fund on December 16, 2008 and entered into a Settlement Agreement and an Escrow Agreement with PVB.[49]
- THE BACKDOOR ATTEMPT TO ANNUL THE EXECUTORY ORDERS, DATED 24 APRIL 2008 AND 24 SEPTEMBER 2008, SHOULD NOT BE ALLOWED NOT ONLY FOR BEING IN GROSS BREACH OF THE RULES OF PROCEDURE, BUT ALSO FOR BEING UNJUST, UNFAIR AND CONTRARY TO PUBLIC POLICY AND SOUND PRACTICE.
- THE PRESENT CASE IS AN EXCEPTION TO THE RULE THAT THERE IS NO VESTED RIGHT IN THE PURPORTED ERRONEOUS BSP LETTER, 9 SEPTEMBER 2008, ANNEX "H" HEREOF, RELIED UPON BY THE REHABILITATION COURT AND THE PARTIES HEREIN CONSIDERING THAT THE NON-EXECUTION OF THE ORDERS, DATED 24 APRIL 2008 AND 24 SEPTEMBER 2008, IS UNJUST AND INEQUITABLE TO [CAP]'S PLANHOLDERS.
- IN ITS LETTER DATED 2 JULY 2008, ANNEX "G" HEREOF, RESPONDENT BOC HAD ALREADY ADMITTED THAT IT HAD SET ASIDE AN AMOUNT MORE THAN WHAT IS BEING CLAIMED BY [CAP] BUT FOR NO JUSTIFIABLE REASON, REFUSED TO PAY THE INTERESTS DUE TO [CAP] EVEN AFTER THE BSP HAD ISSUED ITS LETTER DATED 9 SEPTEMBER 2008 WHICH DID NOT ADVISE AGAINST SUCH DECLARATION.
- THE MONEY ALREADY IN THE SINKING FUND AND PLACED IN ESCROW WILL NO LONGER BE COVERED BY THE LETTER OF THE BSP DATED 14 NOVEMBER 2011 BECAUSE IT HAD BEEN SET ASIDE LONG BEFORE THE ALLEGED CONDITIONS STATED IN THE SAID LETTER EXISTED.[48]
CAP also argues as follows:
- The Rehabilitation Court's order directing BOC to pay the Accrued Dividends is already final, executory and immutable. The 14 November 2011 BSP letter does not constitute a supervening event.
- The subject fund in the Escrow Account had already been released to planholders. This produced a permanent and irrevocable discharge of the judgment.
- There is no risk that the payment of the Accrued Dividends would subject BOC and its officers to criminal and/or administrative sanction.
- It would be the height of injustice for BOC to benefit from its own contumacious and brazen conduct, at the expense of innocent planholders.[54]
x x x the BSP's denial letter is premised on the claim that BOC "had been reporting negative surplus/retained earnings due to the huge losses it incurred from its holdings of structured products, among others." However, no evidence was submitted to substantiate this allegation. Worse, BOC had previously admitted in July 2008 that it had "sufficient surplus and profits to pay the subject x x x interest." x x x [T]he mere statement of BOC's alleged poor financial condition, without any proof whatsoever—and further coupled with an earlier admission to the contrary—negate any supposed deviation from the time-honored immutability rule. To reiterate, case law requires that "the party who alleges a supervening event to stay the execution should necessarily establish the facts by competent evidence; otherwise, it would become all too easy to frustrate the conclusive effects of a final and immutable judgment."[76]BSP's Authority
Section 1. Declaration of Policy. — The State shall maintain a central monetary authority that shall function and operate as an independent and accountable body corporate in the discharge of its mandated responsibilities concerning money, banking and credit x x x.The BSP's supervisory powers under the General Banking Law of 2000 include issuing rules, establishing standards for the operation of financial institutions based on sound business practice, and examining the institutions for compliance and irregularities, to wit:x x x x
Section 3. Responsibility and Primary Objective. — The Bangko Sentral shall provide policy directions in the areas of money, banking, and credit. It shall have supervision over the operations of banks and exercise such regulatory powers as provided in this Act and other pertinent laws over the operations of finance companies and non-bank financial institutions performing quasi-banking functions, hereafter referred to as quasi-banks, and institutions performing similar functions.
Section 4. Supervisory Powers. - The operations and activities of banks shall be subject to supervision of the Bangko Sentral. "Supervision" shall include the following:In line with its supervisory powers, the BSP codified the rules, regulations, and policies in 1996 to implement the General Banking Law and other banking laws. The codification resulted in the MORB which serves as "the principal source of banking regulations issued by the Monetary Board and the Governor of the BSP and shall be cited as the authority for enjoining compliance with the rules and regulations embodied therein."[78]4.1. The issuance of rules of conduct or the establishment of standards of operation for uniform application to all institutions or functions covered, taking into consideration the distinctive character of the operations of institutions and the substantive similarities of specific functions to which such rules, modes or standards are to be applied;
4.2. The conduct of examination to determine compliance with laws and regulations if the circumstances so warrant as determined by the Monetary Board;
4.3. Overseeing to ascertain that laws and regulations are complied with;
4.4 Regular investigation which shall not be oftener than once a year from the last date of examination to determine whether an institution is conducting its business on a safe or sound basis: Provided, That the deficiencies/irregularities found by or discovered by an audit shall be immediately addressed;
4.5. Inquiring into the solvency and liquidity of the institution (2-D); or
4.6. Enforcing prompt corrective action.
No exceptional circumstance in this case. |
x x x The trust fund x x x is established with a trustee under a trust agreement approved by the Securities and Exchange Commission to pay the benefits as provided in the pre-need plans.[87]The term "benefits," refers to the money or services which the pre-need company undertakes to deliver in the future to the plan holder or his beneficiary. In other words, the benefits refer to the payment made to the plan holders as stipulated in their pre-need plans.[88]
PERLAS-BERNABE, J.:
I concur.
As correctly ruled by the ponencia, the Court of Appeals (CA) committed a reversible error when it treated the Bangko Sentral ng Pilipinas' (BSP) belated issuance of its letter[1] dated November 14, 2011 (denial letter) as a supervening event which would render the execution of the final and executory Orders dated April 24, 2008[2] and September 24, 2008[3] of the Regional Trial Court of Makati City, Branch 149 (Rehabilitation Court) "unjust, impossible, or inequitable," Accordingly, the immutability of the final judgment which was already executed in this case must remain undisturbed.
It is well-settled that the "principle of immutability of final judgments demands that once a judgment has become final, the winning party should not, through a mere subterfuge, be deprived of the fruits of the verdict. There are, however, recognized exceptions to the execution as a matter of right of a final and immutable judgment, one of which is the existence of a supervening event. 'A supervening event is a fact which transpires or a new circumstance which develops after a judgment has become final and executory. This includes matters which the parties were unaware of prior to or during trial because they were not yet in existence at that time.' To be sufficient to stay or stop the execution, a supervening event must create a substantial change in the rights or relations of the parties which would render execution of a final judgment unjust, impossible or inequitable making it imperative to stay immediate execution in the interest of justice."[4]
Thus, to properly invoke the exception on supervening events, two things must be shown: (a) the fact constituting the supervening event must have transpired after the judgment has become final and executory, and should not have existed prior to such finality; and (b) such event affects or changes the substance of the judgment and renders its execution inequitable.[5]
In this regard, case law further instructs that the party who alleges a supervening event to stay the execution should necessarily establish the facts by competent evidence; otherwise, it would become all too easy to frustrate the conclusive effects of a final and immutable judgment.[6]
In this case, while the BSP's issuance of the denial letter indeed occurred after the Rehabilitation Court's assailed Orders had become final and executory and hence, "supervening" on this limited score, the said event does not affect nor change the substance of the judgment so as to render its execution inequitable. In fact, it is the reverse – to undo the already executed judgment in this case would result into an unjust and inequitable scenario, for the following reasons:
First, the execution of the Rehabilitation Court's final judgment was premised upon the guidance of the BSP itself that should it not issue any advice against the payment of accrued interest within 30 days from the bank's request for clearance, then the same shall be deemed approved.[7] As records disclose, it was roughly two (2) years from the time Bank of Commerce (BOC) requested BSP for clearance that the latter only issued the denial letter. Hence, during the interim, the parties already set up a Sinking Fund and signed an Escrow Agreement to facilitate the payment of such accrued interests. All of these incidents were clearly undertaken upon a reliance on the BSP's own effective representation (through its non-reply) that the release of the interests had no issues and hence, deemed approved.
Second, the BSP's denial letter is premised on the claim that BOC "had been reporting negative surplus/retained earnings due to the huge losses it incurred from its holdings of structured products, among others." However, no evidence was submitted to substantiate this allegation. Worse, BOC had previously admitted in July 2008 that it had "sufficient surplus and profits to pay the subject x x x interest."[8] The mere statement of BOC's alleged poor financial condition, without any proof whatsoever – and further coupled with an earlier admission to the contrary – negate any supposed deviation from the time-honored immutability rule. To reiterate, case law requires that "the party who alleges a supervening event to stay the execution should necessarily establish the facts by competent evidence; otherwise, it would become all too easy to frustrate the conclusive effects of a final and immutable judgment."[9]
Third, it is undisputed that the funds placed in escrow subject of BOC's appeal to the CA (i.e., the P90,703,943.92, which, in turn, is the sole amount subject of the present petition) were already released to College Assurance Plan Philippines, Inc. (CAP), which in turn, distributed the same to its policyholders. The Court must not lose sight of the fact that CAP's policyholders availed of CAP's pre-need plans in order to fund their children's educational expenses. Logically, these amounts would have already been expended for the payment of tuition fees and other enrollment costs. As such, to affirm the CA's ruling is to punish the policyholders, who are parents that have entrusted their precious savings to CAP in the hopes of securing their children's future through education. Despite CAP's widely publicized downfall, CAP underwent Rehabilitation proceedings and, together with Philippine Veterans Bank, sought to recover as much as they could for the benefit of these individuals. These efforts bore fruit in the tune of P90,703,943.92 which were already released to the policyholders.
In view of the foregoing considerations, I vote to GRANT the instant petitions, and accordingly, REVERSE and SET ASIDE
the Decision dated September 30, 2014 and the Resolution dated April
16, 2015 of the Court of Appeals in CA-G.R. SP No. 130076.
[2] See id. at 2-3.
[3] See id. at 5.
[4] Remington Industrial Sales Corporation v. Maricalum Mining Corporation, 761 Phil. 284, 294 (2015); citations omitted.
[5] See Mercury Drug Corporation v. Spouses Huang, 817 Phil. 434, 454 (2017); citations omitted.
[6] Lomondot v. Balindong, 763 Phil. 617 (2015), citing Abrigo v. Flores, 711 Phil. 251 (2013).
[7] In a letter dated September 9, 2008 to the Rehabilitation Court, the BSP expressly stated that the proper procedure for the payment of such interest is as follows: first, the bank concerned must submit a report to the BSP requesting for clearance; and second, if the BSP does not issue any advice against such payment within 30 banking days from submission of the report, then the bank may already announce, and thereafter, proceed with said payment. (See ponencia, pp. 4-5)
[8] Rollo, p. 95.
[9] Lomondot v. Balindong, 763 Phil. 617 (2015), citing Abrigo v. Flores, 711 Phil. 251 (2013).