Begay vs. Office of the Special Investigation - Bangko Sentral ng Pilipinas

A dismissal by the Office of the Special Investigation of an administrative complaint against bank directors and officers for lack of a prima facie case is a dismissal without prejudice under Section 2, Rule III of BSP Circular No. 477; the complainant's immediate and adequate remedy is to refile the complaint, not to file a petition for certiorari under Rule 65.

Petitioner Willy Fred U. Begay, engaged in the real estate business in Benguet and Tarlac, was a borrower of respondent Rural Bank of San Luis (Pamp), Inc., which extended to him a series of loans secured by real estate mortgages over his properties. Administrative complaints against bank directors and officers are governed by Bangko Sentral ng Pilipinas Circular No. 477, Series of 2005, which lays down the Rules of Procedure on Administrative Cases Involving Directors and Officers of Banks, Quasi-Banks and Trust Entities, and which vests in the Office of the Special Investigation the conduct of the preliminary investigation to determine the existence of a prima facie case, while reserving adjudication to the Monetary Board upon the report of a Hearing Panel or Hearing Officer. Begay's complaint invoked, among others, Republic Act No. 8791 (General Banking Law of 2000) and Republic Act No. 7653 (New Central Bank Act).

Petitioner Willy Fred U. Begay was engaged in the real estate business in Benguet and Tarlac, and respondent Rural Bank of San Luis (Pamp), Inc. (the Bank) was his creditor. On January 30, 2009, Begay obtained a loan of P6,000,000.00 from the Bank, secured by a real estate mortgage over two properties covered by Transfer Certificates of Title (TCT) Nos. T-70270 and T-70271 located in Ambiong, La Trinidad, Benguet. By November 2009, the loan had escalated to P8,000,000.00, and the mortgaged properties had been subdivided into eight lots covered by TCT Nos. T-72632 to T-72639.

Begay allegedly also obtained another loan of P1,800,000.00 through one Corazon A. Magallano, his attorney-in-fact, secured by a mortgage over a Baguio property covered by TCT No. T-94973. On February 24, 2010, he applied for an additional loan of P2,000,000.00 with the same Benguet properties as collateral. When the loans matured, Begay was unable to fully settle his obligations. To prevent foreclosure, the Bank allegedly proposed that he present additional collaterals so that it could release additional loans to be used as working capital and to pay off his maturing obligations. When Begay presented his Baguio property as collateral, the Bank allegedly asked him to look for individuals who could represent him for the additional loans, since the Bank could exceed the rule on the Single Borrower's Limit. Thereafter, Begay obtained two more loans from the Bank through Magallano and one Jimmy M. Sy, amounting to P1,000,000.00 and P2,500,000.00, respectively.

In November 2010, Begay was asked to update his loan obligations and settle his maturing loans. The Bank allegedly asked him to execute another real estate mortgage in the amount of P2,000,000.00 over his Benguet properties, to which he agreed, and an additional loan of P500,000.00 was extended to Magallano. Consequently, Begay's loans ballooned to P17,800,000.00, most of the proceeds allegedly applied as payment for the renewal of his initial loan and the charges imposed by the Bank. The Bank later informed Begay that his mortgage over the Benguet properties would be foreclosed due to his failure to pay the balance of his loans. Around this time, Begay needed financing for his 30,000-square-meter memorial park project in Estacion, Paniqui, Tarlac. The Bank allegedly offered to release his previously mortgaged properties and to extend an additional loan for the development of the memorial park if he would offer the project as new collateral. Begay agreed and was granted an additional loan of P12,000,000.00 through another attorney-in-fact, Jocelyn M. Salvado.

In early 2011, Begay applied for another loan of P7,000,000.00, but the Bank required him to present new representatives. Begay then presented Arthur Bernal and Marilou Miranda, and the Bank purportedly extended P3,000,000.00 and P4,000,000.00 to them, respectively. When Begay sought another loan, the Bank's officers purportedly invited him to a meeting in Hacienda Luisita to discuss his new loan application, but informed him that the Bank was being audited by the Bangko Sentral ng Pilipinas (BSP) and had already exceeded the Single Borrower's Limit. On April 15, 2011, Begay sent the Bank a letter proposing that the titles of his properties be transferred to the names of his clients, guaranteeing that the transfer could be done within 30 days or less. Pursuant to this proposal, Begay allegedly executed a simulated sale of the memorial park project to Alejandro P. Bautista, Edmundo P. Gumangan, and Arner I. Novero. The Deed of Absolute Sale stated that the property was sold for P500,000.00. The property was subdivided and new certificates of title were issued in the names of the purported buyers. To facilitate the transfer, the Bank allegedly extended to Begay the advanced releases of his loan even though these were not covered by any mortgage contract.

On June 16, 2011, the Bank allegedly compelled Bautista, Gumangan, and Novero to sign a real estate mortgage contract for P33,000,000.00, or P11,000,000.00 each, and the mortgages were annotated on the respective titles on even date. The purported buyers did not receive the proceeds of the loan. Upon the annotation of the mortgages, Begay sought the release of his previously mortgaged properties, but because the Bank was undergoing an audit, a Cancellation and Discharge of Mortgage signed by Ramon C. Ricafort Jr., Chairman of the Board and President, and Rodolfo N. Reyes, Director, Vice President, and General Manager, was issued instead, purportedly guaranteeing the release of his previously mortgaged properties. The Bank allegedly failed to honor its commitment to release the properties and to extend the promised additional credit, and also failed to apply as payments for his previous loans the proceeds of the loans granted to the alleged transferees. On May 31, 2012, upon Begay's request, the Bank purportedly issued a Statement of Account showing that his total obligation had reached P57,500,000.00.

According to the Bank, the loans in the names of Begay's alleged attorneys-in-fact — Magallano, Sy, Bernal, Miranda, Salvado, Gumangan, Novero, and Bautista — were distinct and separate from Begay's loans. The Bank claimed that the respective promissory notes of these borrowers showed that they obtained the loans in their personal capacities, so there could be no violation of the rules on the Single Borrower's Limit, and that some of the loans had already been paid, such as Salvado's loan, which had been paid in full.

On August 16, 2012, the Bank commenced the filing of several Petitions for Extrajudicial Foreclosure of Real Estate Mortgages before the courts of proper jurisdiction, given that Begay had failed to settle his loan obligations. Sometime thereafter, Begay requested from the Bank a Statement of Account pertaining to the loan secured by the memorial project, but the Bank refused to issue the same on the ground that only the respective mortgagors had the authority to request such issuance. On February 11, 2013, Begay filed a Petition for Annulment of Promissory Notes, Mortgages, Public Auction Sale and Damages with Prayer for Preliminary Injunction against the Bank and its officers. On August 12, 2013, he filed an administrative complaint against the Bank and its officers before the Office of the Special Investigation (OSI) of the BSP for allegedly conducting business in an unsafe and unsound manner, in violation of Sections 35, 39, and 56 of Republic Act No. 8791, otherwise known as the General Banking Law of 2000, in relation to Section 37 of Republic Act No. 7653, or the New Central Bank Act; Republic Act No. 3765, or the Truth in Lending Act; Republic Act No. 8424, or the Tax Reform Act of 1997; Batasang Pambansa Blg. 68, or the Corporation Code of the Philippines; and other charges. After the parties presented their respective arguments and evidence, the OSI found that Begay failed to establish a prima facie case: he did not show that the Bank and its officers conducted business in an unsafe and unsound manner, that he was the sole owner of the subject loans, that his loans exceeded 25% of the Bank's net worth, or that the respondents had any participation in the alleged simulated sale between him and Gumangan, Bautista, and Novero.

• Proper Remedy: Begay argued that the Court of Appeals erred when it ruled that he should have appealed the Resolutions of the OSI pursuant to Section 4, Rule 43 of the Revised Rules of Court instead of filing a Petition for Certiorari under Rule 65 of the same Rules.
• Grave Abuse of Discretion: Begay maintained that the Court of Appeals erred when it failed to rule that the OSI committed grave abuse of discretion amounting to lack or in excess of jurisdiction in issuing the assailed Resolutions providing that he failed to establish a prima facie case against the respondents.
• Factual Issues on the Loans: Begay raised issues on the ownership of the loans extended by the Bank, the total amount of these loans, whether such amount exceeded the limit on the Single Borrower's Limit provided by law, and whether the respondents' actions constituted unsafe or unsound banking practices.

• Distinct and Separate Loans: The Bank claimed that the loans in the names of Begay's alleged attorneys-in-fact — Magallano, Sy, Bernal, Miranda, Salvado, Gumangan, Novero, and Bautista — were distinct and separate from Begay's loans, and that the respective promissory notes of these borrowers showed that they obtained such loans in their personal capacities, so that no violation of the rules on the Single Borrower's Limit could arise.
• Payment of Some Loans: The Bank claimed that some of the subject loans had already been paid, such as the loan of Salvado, which had been paid in full.

• Proper Remedy: Whether the Court of Appeals erred when it ruled that petitioner should have appealed the Resolutions of the OSI pursuant to Section 4, Rule 43 of the Revised Rules of Court instead of filing a Petition for Certiorari under Rule 65 of the same Rules.
• Grave Abuse of Discretion: Whether the Court of Appeals erred when it failed to rule that the OSI committed grave abuse of discretion amounting to lack or in excess of jurisdiction in issuing the assailed Resolutions providing that the petitioner failed to establish a prima facie case against the respondents in this case.

• Proper Remedy: No. The OSI resolution dismissing the complaint for lack of a prima facie case is a dismissal without prejudice under Section 2, Rule III of BSP Circular No. 477, so Begay's immediate and adequate remedy was to refile his complaint before the OSI, not to file a Rule 65 petition.
• Grave Abuse of Discretion: No. The OSI's conclusion that no prima facie case existed was founded on substantial evidence, and the issues Begay raised are factual questions outside the coverage of a Rule 45 petition.

• Proper Remedy: The complaint filed by Begay before the OSI is an administrative complaint against the Bank and its officers, and thus falls within the purview of BSP Circular No. 477, Series of 2005. Under Section 2, Rule III of the Circular, the OSI is mandated to conduct a preliminary investigation to determine whether there is a prima facie case against the respondent; if a prima facie case is established, the OSI shall file the formal charge with the Supervised Banks Complaints Evaluation Group ( SBCEG) of the BSP and prosecute the case before a Hearing Officer or Hearing Panel designated by the SBCEG. Rule VI of the same Circular outlines the resolution of the case and the role of the Monetary Board: a report is submitted to the Monetary Board within sixty days after the case is submitted for resolution; the Monetary Board acts on the report and causes true copies of its Resolution to be served on the parties; the Resolution becomes final after fifteen days from receipt unless a motion for reconsideration is timely filed; and only one motion for reconsideration is allowed. The function of the OSI is therefore different from that of the Monetary Board: the OSI prosecutes the case before the Hearing Panel or Hearing Officer, while the Monetary Board considers the report submitted to it. The Resolution of the OSI cannot be interpreted to be the equivalent of the Resolution of the Monetary Board, and Section 1, Rule VII of the BSP Circular — which provides that an appeal from the Resolution of the Monetary Board may be taken to the Court of Appeals within the period and in the manner provided under Rule 43 — is inapplicable, contrary to the findings of the Court of Appeals. Here, the administrative complaint never reached the proceedings before the Hearing Panel or Hearing Officer and the consequent resolution of the Monetary Board; the OSI found that Begay failed to establish a prima facie case and dismissed the case. The last sentence of Section 2, Rule III of the BSP Circular thus finds relevance: in the absence of a prima facie case, the OSI shall dismiss the complaint without prejudice or take appropriate action as may be warranted. Jurisprudence elucidates the difference between a dismissal with prejudice and one without prejudice: the former disallows and bars the refiling of the complaint, whereas the same cannot be said of a dismissal without prejudice; and where the law permits, a dismissal with prejudice is subject to the right of appeal. Hence, Begay's immediate and adequate remedy was to refile his complaint before the OSI with sufficient evidence to support his allegations, and he availed of the wrong remedy when he filed a Rule 65 Petition before the Court of Appeals. A special civil action under Rule 65 is a limited form of review and a remedy of last recourse; it is an independent action that lies only where there is no appeal nor plain, speedy, and adequate remedy in the ordinary course of law, and certiorari will issue only to correct errors of jurisdiction, not errors of procedure or mistakes in the findings or conclusions of the lower court. The fact that another remedy — to file a complaint anew — was ready, available, and at Begay's full disposal already barred his remedial refuge in certiorari. While the Court of Appeals erred in pronouncing that Begay filed the Rule 65 Petition beyond the 60-day period, the records showing that he received the denial of his Motion for Reconsideration on December 17, 2014, had until February 15, 2015 to file, and actually filed through registered mail on February 13, 2015, the Petition for Certiorari was nonetheless rightfully dismissed for the reasons explained.

• Grave Abuse of Discretion: The Court found no cogent reason to disturb the findings of the OSI. Factual findings of administrative bodies charged with their specific field of expertise are afforded great weight by the courts, and in the absence of a substantial showing that such findings were made from an erroneous estimation of the evidence presented, they are conclusive and, in the interest of stability of the governmental structure, should not be disturbed. In Haveria vs. Social Security System, the Court held that by reason of the special knowledge and expertise of administrative agencies over matters falling under their jurisdiction, they are in a better position to pass judgment thereon, and their findings of fact are generally accorded great respect, if not finality, by the courts; such findings must be respected as long as they are supported by substantial evidence, even if such evidence is not overwhelming or even preponderant, and it is not the task of the appellate court to once again weigh the evidence submitted before and passed upon by the administrative body and to substitute its own judgment regarding the sufficiency of evidence. A careful perusal of the assailed OSI Resolutions showed that the conclusion that there was no prima facie case against the respondents was founded on substantial evidence, and both Resolutions clearly expressed the grounds upon which the complaint was dismissed. The issues raised by Begay regarding the ownership of the loans extended by the Bank, the total amount of these loans, whether such amount exceeded the limit on the Single Borrower's Limit provided by law, and whether the respondents' actions constituted unsafe or unsound banking practices contain factual questions that are outside the coverage of a Rule 45 petition. Questions of fact, which would require a re-evaluation of the evidence, are inappropriate under Rule 45 of the Rules of Court; the jurisdiction of the Court under Rule 45, Section 1 is limited only to errors of law, as the Court is not a trier of facts. While Rule 45, Section 1 is not absolute, none of the recognized exceptions which allow the Court to review factual issues exists in the instant case. Thus, the Court is not duty-bound to analyze or weigh all over again evidence already considered in the proceedings before the OSI, and the dismissal of the Petition was warranted.

• Dismissal Without Prejudice vs. Dismissal With Prejudice — A dismissal with prejudice disallows and bars the refiling of the complaint, whereas a dismissal without prejudice does not; where the law permits, a dismissal with prejudice is subject to the right of appeal. The Court applied this distinction to hold that the OSI's dismissal of Begay's administrative complaint for lack of a prima facie case was a dismissal without prejudice under Section 2, Rule III of BSP Circular No. 477, such that his immediate and adequate remedy was to refile the complaint rather than to file a petition for certiorari.

• Certiorari as a Remedy of Last Recourse — A special civil action under Rule 65 of the Rules of Court is a limited form of review and a remedy of last recourse; it is an independent action that lies only where there is no appeal nor plain, speedy, and adequate remedy in the ordinary course of law, and certiorari will issue only to correct errors of jurisdiction, not errors of procedure or mistakes in the findings or conclusions of the lower court. The Court applied this rule to hold that the availability of refiling as a remedy barred Begay's recourse to certiorari.

• Distinction Between the OSI and the Monetary Board under BSP Circular No. 477 — Under the Circular, the OSI conducts the preliminary investigation and prosecutes the case before the Hearing Panel or Hearing Officer, while the Monetary Board considers the report submitted to it and renders the final Resolution. The Resolution of the OSI is not the equivalent of the Resolution of the Monetary Board, and the Rule 43 appeal provided in Section 1, Rule VII of the Circular applies only to the latter. Because Begay's complaint was dismissed at the preliminary investigation stage and never reached the Monetary Board, the Rule 43 appeal was inapplicable.

• Great Weight Accorded to Factual Findings of Administrative Bodies — Findings of fact of administrative bodies charged with a specific field of expertise are afforded great weight by the courts and are conclusive absent a substantial showing that they were made from an erroneous estimation of the evidence presented; they must be respected as long as supported by substantial evidence, even if such evidence is not overwhelming or even preponderant, and it is not the task of the appellate court to weigh the evidence anew or substitute its own judgment on the sufficiency of evidence. The Court applied this doctrine to sustain the OSI's finding of no prima facie case.

• Rule 45 Limited to Questions of Law — The jurisdiction of the Court under Rule 45, Section 1 is limited to errors of law, as the Court is not a trier of facts; questions of fact requiring a re-evaluation of the evidence are inappropriate, subject only to recognized exceptions. The Court applied this rule to decline review of Begay's factual issues on loan ownership, loan amounts, the Single Borrower's Limit, and unsafe or unsound banking practices, none of the exceptions being present.

• "in the absence of a prima facie case, the OSI shall dismiss the complaint without prejudice or take appropriate action as may be warranted." — This is the last sentence of Section 2, Rule III of BSP Circular No. 477, which the Court identified as the controlling provision. It is the textual basis for holding that the OSI dismissal was without prejudice and that refiling, not certiorari, was Begay's proper remedy.

• "The former disallows and bars the refiling of the complaint; whereas, the same cannot be said of a dismissal without prejudice. Likewise, where the law permits, a dismissal with prejudice is subject to the right of appeal." — This passage states the distinction between dismissals with and without prejudice, which supplies the ratio for the Court's holding that Begay's immediate and adequate remedy was to refile his complaint before the OSI.

• "By reason of the special knowledge and expertise of said administrative agencies over matters falling under their jurisdiction, they are in a better position to pass judgment thereon; thus, their findings of fact in that regard are generally accorded great respect, if not finality, by the courts. Such findings must be respected as long as they are supported by substantial evidence, even if such evidence is not overwhelming or even preponderant. It is not the task of the appellate court to once again weigh the evidence submitted before and passed upon by the administrative body and to substitute its own judgment regarding sufficiency of evidence." — Quoted from Haveria vs. Social Security System, this is the canonical formulation of the deference accorded to administrative findings of fact, which the Court applied to sustain the OSI's dismissal.

• "It is a well-settled rule that a special civil action under Rule 65 of the Rules of Court is a limited form of review and is a remedy of last recourse. It is an independent action that lies only where there is no appeal nor plain, speedy and adequate remedy in the ordinary course of law. Certiorari will issue only to correct errors of jurisdiction, not errors of procedure or mistakes in the findings or conclusions of the lower court." — This passage states the requisites and scope of the writ of certiorari, which the Court used to reject Begay's Rule 65 petition.

• Haveria vs. Social Security System, 839 Phil. 237 (2018) — Cited as the controlling precedent for the doctrine that findings of fact of administrative agencies possessed of special knowledge and expertise are generally accorded great respect, if not finality, and must be respected as long as supported by substantial evidence; the Court quoted the case at length in sustaining the OSI's findings.

• Pillars Property Corporation vs. Century Communities Corporation, G.R. No. 201021, March 4, 2019 — Cited, together with Strongworld Construction Corporation vs. Perello, for the distinction between a dismissal with prejudice and one without prejudice, which underpinned the holding that the OSI dismissal was without prejudice.

• Strongworld Construction Corporation vs. Hon. Perello, 528 Phil. 1080 (2006) — Cited for the same distinction between dismissals with and without prejudice.

• Albor vs. CA, 823 Phil. 901 (2018) — Cited for the rule that certiorari is a limited form of review and a remedy of last recourse, available only where there is no appeal or plain, speedy, and adequate remedy in the ordinary course of law.

• Radaza vs. Sandiganbayan, G.R. No. 201380, August 4, 2021 — Cited for the proposition that the availability of another remedy bars recourse to certiorari.

• Apbi vs. Commission on Audit, G.R. No. 252367, July 14, 2020 — Cited for the rule that factual findings of administrative bodies charged with a specific field of expertise are afforded great weight and are conclusive absent a substantial showing of erroneous estimation of the evidence.

• Catan vs. Vinarao, 820 Phil. 257 (2017) — Cited for the rule that questions of fact are inappropriate under Rule 45 and that none of the recognized exceptions to the rule against factual review exists in the case.

• Section 2, Rule III, BSP Circular No. 477, Series of 2005 — Provides that upon receipt of the sworn answer of the respondent, the OSI shall determine whether there is a prima facie case; if a prima facie case is established, the OSI shall file the formal charge with the Supervised Banks Complaints Evaluation Group of the BSP; in the absence of a prima facie case, the OSI shall dismiss the complaint without prejudice or take appropriate action as may be warranted. The Court applied this provision to hold that the OSI dismissal was without prejudice and that Begay's remedy was to refile.

• Rule VI, BSP Circular No. 477, Series of 2005 — Outlines the resolution of the case and the role of the Monetary Board: submission of a report within sixty days after the case is submitted for resolution; rendition and notice of the Monetary Board's Resolution; finality of the Resolution after fifteen days from receipt unless a motion for reconsideration is timely filed; and the allowance of only one motion for reconsideration. The Court cited this Rule to distinguish the OSI's prosecutory function from the Monetary Board's adjudicatory function.

• Section 1, Rule VII, BSP Circular No. 477, Series of 2005 — Provides that an appeal from the Resolution of the Monetary Board may be taken to the Court of Appeals within the period and in the manner provided under Rule 43 of the Revised Rules of Court. The Court held this provision inapplicable because the OSI Resolution is not the equivalent of the Monetary Board Resolution, and Begay's complaint never reached the Monetary Board.

• Rule 65, Rules of Court — Governs the special civil action for certiorari. The Court held that it is a limited form of review and a remedy of last recourse, available only where there is no appeal or plain, speedy, and adequate remedy in the ordinary course of law, and that the availability of refiling barred Begay's recourse to it.

• Section 1, Rule 45, Rules of Court — Limits the Court's jurisdiction to errors of law, the Court not being a trier of facts. The Court applied this provision to hold that Begay's factual issues on loan ownership, loan amounts, the Single Borrower's Limit, and unsafe or unsound banking practices are outside the coverage of a Rule 45 petition.

• Sections 35, 39, and 56, Republic Act No. 8791 (General Banking Law of 2000), in relation to Section 37, Republic Act No. 7653 (New Central Bank Act) — Cited as among the provisions Begay invoked in his administrative complaint for unsafe and unsound banking practices. The OSI found that Begay failed to establish violations of these provisions, and the Court declined to disturb that finding.

Gesmundo, C.J. (Chairperson), Zalameda, Rosario, and Marquez, JJ.