Cu vs. Small Business Guarantee and Finance Corporation

When a bank is placed under receivership by the Monetary Board and the PDIC takes over its assets and closes its accounts, the bank's officers cannot be held criminally liable under B.P. 22 for dishonored postdated checks deposited after the bank's closure, because the supervening closure suspends the demandability of the underlying obligation and makes it legally impossible for the officers to fund the checks.

Small Business Guarantee and Finance Corporation (SBGFC) is a government financial institution organized pursuant to Republic Act No. 6977, as amended by R.A. Nos. 8289 and 9501, mandated to provide easy access credit to qualified micro, small, and medium enterprises. Golden 7 Bank (G7 Bank) was a banking institution that availed of an omnibus credit line from SBGFC. Petitioners Allan S. Cu and Norma B. Cueto were officers of G7 Bank authorized as signatories for drawdowns from the credit line. The dispute arose from postdated checks issued by G7 Bank's officers in payment of its obligations to SBGFC, which were dishonored after the BSP placed G7 Bank under receivership and PDIC closed all its deposit accounts.

Small Business Guarantee and Finance Corporation (SBGFC), a government financial institution mandated by law to provide easy access credit to qualified micro, small, and medium enterprises, executed an Omnibus Credit Line Agreement in favor of Golden 7 Bank (G7 Bank) in the amount of ₱35,000,000.00, which was ultimately increased to ₱90,000,000.00. Relative to the said loan, G7 Bank authorized several of its officers — Allan S. Cu, Norma B. Cueto, Fidel L. Cu, and Lucia C. Pascual — as signatories. G7 Bank made several drawdowns from the credit line, and through Cu, Pascual, and Cueto, issued several postdated Land Bank of the Philippines (LBP) checks in payment therefor. These checks were eventually dishonored upon deposit with LBP Makati City for the reason "Account Closed."

On July 31, 2008, the Bangko Sentral ng Pilipinas (BSP), pursuant to Section 53 of R.A. No. 8791 (General Banking Law of 2000) and Section 30 of R.A. No. 7653 (New Central Bank Act), issued a resolution prohibiting G7 Bank from doing business in the Philippines, placing its assets and affairs under receivership, and designating the Philippine Deposit Insurance Corporation (PDIC) as receiver. PDIC took over G7 Bank on August 1, 2008, issued a cease and desist order against the members of the Board of Directors and officers of G7 Bank, and closed all its deposit accounts with other banks, including its checking account with LBP against which the disputed checks had been issued.

SBGFC thereafter deposited the subject postdated checks in October 2008, after the closure of G7 Bank and the PDIC takeover, and the checks were dishonored for "Account Closed." On October 15, 2009, PDIC filed a Petition for Assistance in the Liquidation of G7 Bank with RTC Branch 21 of Naga City (the liquidation court). SBGFC thereafter filed in said liquidation court, on January 28, 2010, its Notice of Appearance with Notice of Claims.

SBGFC filed before the Prosecutor's Office of Makati City several complaints for violation of Batas Pambansa Bilang 22 (B.P. 22) against the responsible officers of G7 Bank for issuing the dishonored postdated checks. After probable cause was found, Informations for violation of B.P. 22, involving thirty-five (35) of the one hundred three (103) checks, were filed before Branch 64, Metropolitan Trial Court of Makati City (MeTC Makati City). The petitioners filed an Omnibus Motion seeking determination of probable cause, dismissal on jurisdictional grounds, deferment of arraignment on the ground of prejudicial question, and dismissal for lack of probable cause. The MeTC dismissed the cases on August 9, 2010, opining that it was impossible for the officers of G7 Bank to fund checks with maturity dates after the bank had been placed under receivership. The RTC Makati City affirmed the MeTC dismissal in toto, and denied SBGFC's motion for reconsideration.

• Authority to Appeal: Petitioners asserted that SBGFC by itself has no authority to appeal the case before the CA and the Supreme Court.
• Absence of Second Element of B.P. 22: Petitioners argued that the second element of B.P. 22 is absent in the criminal cases.
• Effect of Receivership: Petitioners maintained that they cannot be convicted for violation of B.P. 22 due to the fact that G7 Bank had been placed by the Monetary Board of the BSP under receivership, which would operate to suspend the payment of all claims monetary or otherwise.

• Authority to Appeal: Respondent, through the OSG, countered that the CA did not err in giving due course to the petition for review because the OSG ratified and adopted as its own the petition filed by SBGFC for the People of the Philippines.
• Reversal Was Proper: Respondent argued that the CA did not err in granting SBGFC's petition for review, setting aside the orders of the RTC and the MeTC, and directing the reinstatement of the criminal cases.
• Procedural Bar: Respondent maintained that the MeTC exceeded its authority when it entertained the Omnibus Motion filed by the petitioners, as this is prohibited under the Rules on Summary Procedure.

• Authority to Appeal: Whether SBGFC, as private complainant, had the authority to appeal the dismissal of the criminal cases before the CA.
• B.P. 22 Liability After Receivership: Whether the petitioners can be held criminally liable under B.P. 22 for issuing dishonored postdated checks that were deposited after G7 Bank had been placed under receivership and PDIC had taken over and closed all its accounts.
• Stare Decisis: Whether the doctrine of stare decisis bars re-litigation of the same issue previously decided in G.R. No. 211222 involving the same parties and substantially the same facts.

• Authority to Appeal: Rendered moot by the OSG's ratification. The OSG expressly prayed, ratified, and adopted as its own the petition filed by SBGFC for the People of the Philippines, curing any defect in SBGFC's standing to appeal.
• B.P. 22 Liability After Receivership: No. After the BSP placed G7 Bank under receivership and PDIC took over its assets and closed all its accounts, it became legally impossible for the petitioners to fund the subject checks, and the underlying obligation was suspended, precluding criminal liability under B.P. 22.
• Stare Decisis: Yes. The doctrine of stare decisis et non quieta movere bars re-litigation of the same issue where the same questions relating to the same event have been put forward by parties similarly situated as in a previous case already decided by a competent court.

• Authority to Appeal: The CA initially dismissed SBGFC's petition for review on the ground that only the OSG can represent the People in appeals of criminal cases before appellate courts, and that a private complainant's capacity to question a dismissal is limited to the civil aspect. However, the OSG subsequently submitted a comment stating that while the bare invocation of "the interest of substantial justice" is not a magic wand, it can in certain instances ratify and adopt as its own the petition filed by a private complainant. The OSG expressly prayed, ratified, and adopted SBGFC's petition for the People of the Philippines. This ratification cured the procedural defect, and the CA properly gave due course to the petition on reconsideration. The issue thus became academic, and the Court's resolution focused on the substantive question of B.P. 22 liability.

• B.P. 22 Liability After Receivership: The Court applied its prior ruling in G.R. No. 211222 (Cu vs. Small Business Guarantee and Finance Corporation, 815 Phil. 617 [2017]), which involved the same parties and substantially the same facts. In that case, the Court applied Gidwani vs. People by analogy. In Gidwani, an SEC order suspending all actions and claims against a corporation had the effect of suspending the contract, creating a suspensive condition such that the payee had no right to present checks for encashment while the suspension was in effect. The Court found no reason why Gidwani could not apply here: the subject postdated checks were deposited by SBGFC in October 2008 and dishonored for "Account Closed" after the closure of G7 Bank and after PDIC had taken over the bank on August 1, 2008, issued a cease and desist order against the officers, and closed all deposit accounts including the LBP checking account against which the checks were drawn. The closure of G7 Bank by the Monetary Board, the appointment of PDIC as receiver and its takeover, and the filing by PDIC of a petition for assistance in liquidation had the similar effect of suspending or staying the demandability of G7 Bank's loan obligation to SBGFC, with the concomitant cessation of the obligation to pay interest upon closure. The exact amount SBGFC was entitled to collect was subject to PDIC's distribution plan and the liquidation court's adjudication under the Rules on Concurrence and Preference of Credits. At the time SBGFC presented the checks for deposit, it had no right to demand payment because the underlying obligation was not yet due and demandable, and the petitioners could not be held liable for the civil obligations of G7 Bank covered by the dishonored checks. SBGFC acted in clear bad faith because it knew G7 Bank was already under receivership and all accounts had been closed by PDIC, making it legally impossible for Cu or any officer to fund the checks. There was also no way for the petitioners to pay the amount due or make arrangements for payment within five banking days after receiving notice of dishonor, because the exact amount due was uncertain and subject to liquidation proceedings. The right of SBGFC to pursue its claim before the liquidation court remained undiminished.

• Stare Decisis: The Court invoked the time-honored principle of stare decisis et non quieta movere — "stand by the decisions and disturb not what is settled." The principle is anchored on giving stability to judicial pronouncements: when a court has laid down a principle of law applicable to a certain state of facts, it will adhere to that principle and apply it to all future cases in which the facts are substantially the same. The effect of G7 Bank being placed under receivership by the Monetary Board and the subsequent liquidation proceedings on the criminal liability of its officers for violation of B.P. 22 had already been ruled upon in G.R. No. 211222, which involved the same parties and substantially the same facts. The Court found no reason to depart from that ruling and applied it to the remaining criminal cases.

• Stare decisis et non quieta movere — The doctrine that when a court has laid down a principle of law applicable to a certain state of facts, it will adhere to that principle and apply it to all future cases in which the facts are substantially the same, even though the parties may be different. It proceeds from the first principle of justice that, absent any powerful countervailing considerations, like cases ought to be decided alike. The Court applied this doctrine to bar re-litigation of the same issue previously decided in G.R. No. 211222, which involved the same parties and substantially the same facts regarding the effect of G7 Bank's receivership on B.P. 22 liability.

• Suspensive condition in the context of bank closure — When a bank is placed under receivership by the Monetary Board and PDIC takes over its assets, the right of the creditor to demand payment is suspended because the exact amount due has not been determined or liquidated, as it is subject to PDIC's distribution plan and the liquidation court's adjudication. Until then, the debtor's obligation to pay is likewise suspended. This doctrine was derived from Gidwani vs. People and applied by analogy to bank receivership and liquidation proceedings. What is suspended is not the birth of the loan obligation (since the debtor had availed of the loan proceeds) but the right of the creditor to demand payment, the exact amount due not having been determined.

• Liquidation court's exclusive jurisdiction — Under Section 30 of R.A. No. 7653, the liquidation court has exclusive jurisdiction to adjudicate disputed claims against a closed bank, assist in the enforcement of individual liabilities of stockholders, directors, and officers, and decide on all other issues material to implement the distribution plan adopted by PDIC. All claims against the bank must be filed in the liquidation proceeding, regardless of whether the claim was initially disputed in another court or agency. The petition for assistance in liquidation of a closed bank is a special proceeding in rem, and the provisions of the Securities Regulation Code and the Rules of Procedure on Corporate Rehabilitation do not apply.

• "it was legally impossible for Cu to fund those checks on the dates indicated therein, which were all past G7 Bank's closure because all the bank accounts of G7 Bank were closed by PDIC." — This passage articulates the core ratio decidendi: the supervening closure of the bank and PDIC's takeover made it legally impossible for the officers to fund the postdated checks, precluding criminal liability under B.P. 22.

• "What is subject to a suspensive condition is the right of the creditor to demand the payment or performance of the loan — the exact amount due not having been determined or liquidated as the same is subject to PDIC's distribution plan. In the same vein, until then the debtor's obligation to pay or perform is likewise suspended." — This clarifies the precise scope of what is suspended in the context of bank closure: not the existence of the obligation but the right to demand payment, pending liquidation court adjudication.

• "Stand by the decisions and disturb not what is settled. Stare decisis simply means that for the sake of certainty, a conclusion reached in one case should be applied to those that follow if the facts are substantially the same, even though the parties may be different." — This is the canonical formulation of the stare decisis doctrine as applied in Philippine jurisprudence, frequently cited in subsequent cases.

• "To hold otherwise would result in giving preferential treatment to creditors whose credits are secured by checks and who may resort to filing a criminal action to recover the money owed." — This passage explains the policy rationale for treating claims arising from dishonored checks as claims within the ambit of the liquidation proceeding, preventing circumvention of the liquidation court's exclusive jurisdiction.

• Cu vs. Small Business Guarantee and Finance Corporation, 815 Phil. 617 (2017) (G.R. No. 211222) — Controlling precedent applied via stare decisis. This case involved the same parties and substantially the same facts. The Court ruled that the closure of G7 Bank, PDIC's takeover, and the filing of the liquidation petition suspended the demandability of the loan obligation, making it legally impossible for the officers to fund the checks and precluding B.P. 22 liability.

• Gidwani vs. People — Applied by analogy. The Court held in Gidwani that an SEC order suspending all actions and claims against a corporation created a suspensive condition, such that the payee had no right to present checks for encashment while the suspension was in effect. The Court found no reason why this ruling could not apply to bank receivership and liquidation.

• Rosario vs. Co — Distinguished. In Rosario, the presentment and dishonor of checks occurred before the petition for suspension of payments was filed, so the obligation was already due and the accused was not excused from honoring the checks. In the present case, the checks were deposited after the bank's closure.

• Fil-Agro Rural Bank, Inc. Through PDIC vs. Villaseñor, G.R. Nos. 226761 & 226889, July 28, 2020 — Cited for the principle that if there is a judicial liquidation of an insolvent bank, all claims against the bank should be filed in the liquidation proceeding, regardless of whether the claim was initially disputed in another court or agency.

• Tala Realty Services Corp. vs. Banco Filipino Savings & Mortgage Bank, 788 Phil. 19 (2016) — Cited for the formulation of the stare decisis doctrine.

• Ty vs. Banco Filipino Savings & Mortgage Bank, 511 Phil. 510 (2005) — Cited for the formulation of the stare decisis doctrine.

• Section 30, R.A. No. 7653 (New Central Bank Act) — Governs proceedings in receivership and liquidation of banks and quasi-banks. The Court relied on this provision to establish that the liquidation court has exclusive jurisdiction to adjudicate disputed claims against a closed bank, assist in the enforcement of individual liabilities of stockholders, directors, and officers, and decide on all other issues material to implement the distribution plan. The provision was applied to hold that SBGFC's claim for payment of the checks is a claim within the ambit of R.A. No. 7653 and must be filed with the liquidation court.

• Section 2, B.P. 22 (Batas Pambansa Bilang 22) — Defines the offense of issuing checks without sufficient funds. The Court noted that there was no way for the petitioners to pay the amount due on the subject checks or make arrangements for payment in full within five banking days after receiving notice of dishonor, because the exact amount due was uncertain and subject to liquidation proceedings.

• Section 53, R.A. No. 8791 (General Banking Law of 2000) — Cited as the legal basis for the BSP's resolution prohibiting G7 Bank from doing business in the Philippines and placing it under receivership.

• Section 6(c), P.D. No. 902-A — Discussed in the context of the CA's amended decision, which held that the filing of a B.P. 22 case is not a "claim" that can be enjoined under P.D. No. 902-A. The CA reasoned that an absurdity would result if one who engaged in criminal conduct could escape prosecution by the mere filing of a corporate rehabilitation petition. The Supreme Court, however, applied the liquidation framework under R.A. No. 7653 rather than P.D. No. 902-A.

• R.A. No. 6977, as amended by R.A. Nos. 8289 and 9501 — The charter under which SBGFC was organized as a government financial institution mandated to provide easy access credit to qualified micro, small, and medium enterprises.

Leonen (Chairperson), Hernando, Inting, and Rosario, JJ., concurred. No separate concurring opinions were noted.