PDIC vs. Judge Dumayas

A judge who repeatedly reverses his rulings on a basic matter of jurisdiction — relying on a superseded statute and disregarding the exclusive authority of the Monetary Board over bank closure and liquidation under Section 30 of RA No. 7653 — is guilty of gross ignorance of the law, notwithstanding the inherent power of a court to amend and control its processes and orders under Rule 135.

The Philippine Deposit Insurance Corporation (PDIC) is the statutory receiver and liquidator of closed banks designated by the Monetary Board (MB) of the Bangko Sentral ng Pilipinas (BSP) under the New Central Bank Act (RA No. 7653). Unitrust Development Bank (UDB) was a banking institution whose operations the MB prohibited via Resolution No. 19 on 04 January 2002, placing its assets and affairs under PDIC receivership pursuant to Section 30 of RA No. 7653. Francis R. Yuseco, Jr., Tooru Nagasawa, Leopoldo Valcarcel, and Pedro Montanez claimed to be stockholders of UDB and opposed its liquidation. Judge Winlove M. Dumayas was the Presiding Judge of Branch 59, RTC Makati City, to whom PDIC's liquidation petition was raffled. Section 30 of RA No. 7653 governs receivership and liquidation proceedings, granting the MB exclusive authority to determine whether a closed bank should be placed under receivership or liquidation, and limiting the liquidation court's role to adjudicating disputed claims, assisting enforcement of individual liabilities, and deciding issues material to implementing the liquidation plan. RA No. 265, the old Central Bank Act, including its Section 29, was expressly repealed by RA No. 7653, which took effect in 1993.

On 04 January 2002, the Monetary Board (MB) of the Bangko Sentral ng Pilipinas (BSP) passed Resolution No. 19 prohibiting Unitrust Development Bank (UDB) from doing business in the Philippines. Pursuant to Section 30 of RA No. 7653, the assets and affairs of UDB were placed under the receivership of the Philippine Deposit Insurance Corporation (PDIC). Claiming to be stockholders of UDB, Francisco Yuseco, Jr., Tooru Nagasawa, Leopoldo Valcarcel, and Pedro Montanez filed a class suit for injunction on 31 July 2002 to challenge MB Resolution No. 19, docketed as Civil Case No. 02-894 before RTC Branch 136, Makati City. On 05 November 2002, then Presiding Judge Rebecca Mariano issued a writ of preliminary injunction, but the Court of Appeals annulled that order on 19 January 2004 in CA-G.R. No. 76801, and that ruling became final and executory.

Thereafter, the MB passed Resolution No. 64 on 20 January 2005, directing PDIC to proceed with the liquidation of UDB. PDIC filed a Petition for Assistance in the Liquidation of UDB before the RTC of Makati City, which was raffled to Judge Winlove M. Dumayas of Branch 59. On 06 July 2005, Judge Dumayas issued an Order giving due course to the petition, constituting his court as a liquidation court and directing UDB's creditors to file their claims. On 19 March 2007, he approved the Project for Distribution (POD) of the Assets of UDB, after PDIC represented that all depositors and creditors, except itself and PLOT, would be paid in cash because sufficient funds were on hand. The oppositors filed a series of motions attempting to suspend or stop the liquidation, all of which Judge Dumayas denied in Orders dated 14 January 2009, 03 May 2011, and 16 May 2011.

The pivotal turn came when Yuseco filed a Motion for Reconsideration of the Orders dated 03 May 2011 and 16 May 2011, relying on Banco Filipino Savings and Mortgage Bank vs. The Monetary Board, decided under Section 29 of RA No. 265 (the old Central Bank Act). Yuseco argued that the MB acted with arbitrariness and bad faith in ordering the closure of UDB without first fully complying with the mandatory requirements of RA No. 265. On 25 August 2011, Judge Dumayas partially granted the motion, set aside the 03 May 2011 Order, and directed PDIC to cease and desist from further liquidating UDB, reasoning that the MB's action was "plainly arbitrary and made in bad faith" and that UDB's combined capital assets were more than sufficient to answer for all its liabilities. PDIC filed a Motion for Partial Reconsideration, arguing that under Section 30 of RA No. 7653, the liquidation court's jurisdiction was limited to adjudicating claims and assisting liquidation efforts. Judge Dumayas initially granted the motion, but upon Yuseco's Motion for Partial Reconsideration, he reversed himself again and reinstated the cease-and-desist order on 19 June 2012. PDIC pointed out the incongruity of being required to cease liquidation while simultaneously being compelled under penalty of contempt to pay all depositors and creditors. Judge Dumayas nevertheless stood firm on 17 December 2012, upholding the cease-and-desist order while compelling PDIC to pay all UDB depositors and creditors under penalty of contempt.

PDIC filed a Petition for Certiorari before the CA, docketed as CA-GR SP No. 128241. In the interim, Judge Dumayas issued an Omnibus Order on 10 July 2014 reiterating his 17 December 2012 Order, then reversed himself anew on 01 October 2014 by authorizing the payment of Receivership and Liquidation Expenses. On 28 November 2014, the CA granted PDIC's petition, annulling the assailed Orders dated 19 June 2012 and 17 December 2012 and directing the RTC to proceed with and assist PDIC in the liquidation of UDB. Yuseco and Nagasawa's petition for review before the Supreme Court (G.R. No. 217899) was denied on 29 July 2015 on procedural grounds, and their motion for reconsideration was denied on 02 September 2015. PDIC filed an administrative complaint against Judge Dumayas for gross ignorance of the law on 20 November 2013, and Yuseco filed a separate complaint charging gross ignorance of the law, gross incompetence, and grave abuse of authority, received by the OCA on 24 March 2015. The OCA, in its Report dated 20 November 2017, found Judge Dumayas guilty of gross ignorance of the law in the first complaint, noting his "constant flip-flopping" and "blatant disregard of a matter as basic and as important as jurisdiction." In its Report dated 01 March 2018, the OCA absolved Judge Dumayas in the second complaint, finding that the questioned orders were issued to comply with the CA's ruling as affirmed by the Supreme Court.

• Gross Ignorance of the Law (PDIC): PDIC maintained that Judge Dumayas committed gross ignorance of the law by issuing orders that effectively divested the MB of its exclusive authority to determine whether a closed bank should be placed under receivership or liquidation, a power expressly granted to the MB under Section 30 of RA No. 7653.
• Jurisdictional Limits of the Liquidation Court (PDIC): PDIC argued that under Section 30 of RA No. 7653, the liquidation court's jurisdiction is limited to the adjudication of claims of depositors and creditors and to assisting liquidation efforts, and that it was not within Judge Dumayas' authority to determine whether UDB could still be rehabilitated.
• Incongruity of Contradictory Orders (PDIC): PDIC pointed out the incongruity of being required by Judge Dumayas to cease and desist from further liquidating the assets of UDB, while at the same time being compelled under penalty of contempt to pay all of UDB's depositors and creditors.
• Gross Ignorance, Gross Incompetence, and Grave Abuse of Authority (Yuseco): Yuseco charged Judge Dumayas with gross ignorance of the law, gross incompetence, and grave abuse of authority, premised on the flip-flopping orders and specifically on the Resolution dated 01 October 2014 and the Omnibus Order dated 26 January 2015.
• Arbitrariness and Bad Faith of the MB (Yuseco): In the underlying liquidation proceedings, Yuseco argued that the MB acted with arbitrariness and bad faith in ordering the closure of UDB without first fully complying with the mandatory requirements of RA No. 265, relying on the Banco Filipino case decided under the old Central Bank Act.

• Gross Ignorance of the Law (A.M. No. RTJ-21-015): Whether Judge Dumayas is guilty of gross ignorance of the law or procedure for repeatedly flip-flopping on the liquidation of UDB, relying on a repealed statute, and exceeding the jurisdiction of a liquidation court.
• Gross Ignorance, Gross Incompetence, and Grave Abuse of Authority (OCA IPI No. 15-4381-RTJ): Whether Judge Dumayas is guilty of gross ignorance of the law, gross incompetence, and grave abuse of authority for issuing the Resolution dated 01 October 2014 and the Omnibus Order dated 26 January 2015.

• Gross Ignorance of the Law (A.M. No. RTJ-21-015): Yes. Judge Dumayas exhibited gross ignorance of the law by favoring the oppositors' argument based on an already superseded law (RA No. 265) and by encroaching on the MB's exclusive jurisdiction over bank closure and liquidation under Section 30 of RA No. 7653. A fine of Php40,000 was imposed in view of his prior dismissal from service in A.M. No. RTJ-15-2435.
• Gross Ignorance, Gross Incompetence, and Grave Abuse of Authority (OCA IPI No. 15-4381-RTJ): No. The complaint was dismissed for lack of merit, Judge Dumayas having acted within his authority in issuing both the Resolution dated 01 October 2014 and the Omnibus Order dated 26 January 2015, without any taint of ignorance of the law or procedure.

• Gross Ignorance of the Law (A.M. No. RTJ-21-015): While a court has the inherent power under Section 5(g) of Rule 135 to amend and control its processes and orders, and while judicial errors unattended by fraud, dishonesty, bad faith, or deliberate intent to do injustice are not administratively sanctioned, judges have a concomitant duty to be familiar with statutes and procedural rules at all times. When the law is so elementary, not to know it or to act as if one does not know it constitutes gross ignorance of the law. Judge Dumayas originally gave due course to PDIC's petition and correctly recognized his limited role as a liquidation court. His series of flip-flopping began only after he inexplicably considered Yuseco's motion for reconsideration anchored on misplaced reliance on Banco Filipino, which was decided under RA No. 265 — a law expressly repealed by RA No. 7653 as far back as 1993. In Rural Bank of San Miguel, Inc. vs. Monetary Board, the Court had already clarified that reliance on Banco Filipino was misplaced because RA No. 265, including Section 29, was repealed by RA No. 7653. Judge Dumayas ought to have known that the MB's power to close banks and liquidate them is an exercise of State police power, that MB actions are final and executory and may not be restrained except through certiorari on grounds of excess of jurisdiction or grave abuse of discretion, and that the liquidation court's role is limited to declaring creditors and their rights and determining their order of payment — not to determining whether a bank could still be rehabilitated. Even granting an honest initial mistake, his subsequent actions taken together could only be considered gross ignorance of the law. Under the doctrine of res ipsa loquitur, the Court may impose disciplinary authority upon erring judges whose actuations on their face show gross incompetence or ignorance of the law. Gross ignorance of the law or procedure is classified as a serious charge under Section 8(9), Rule 140 of the Rules of Court, and Section 11(A) provides sanctions ranging from dismissal to suspension to a fine. In light of Judge Dumayas' prior dismissal in A.M. No. RTJ-15-2435, a fine of Php40,000 was deemed appropriate.

• Gross Ignorance, Gross Incompetence, and Grave Abuse of Authority (OCA IPI No. 15-4381-RTJ): Yuseco based his complaint on the flip-flopping orders but was impelled to file only when Judge Dumayas issued the Resolution dated 01 October 2014 and the Omnibus Order dated 26 January 2015. The OCA found that Judge Dumayas could not be faulted for issuing them, as they were issued to comply with the CA ruling in CA-GR SP No. 128241 as affirmed by the Supreme Court. However, this was only true with respect to the 26 January 2015 Omnibus Order, since the CA Decision was promulgated on 28 November 2014 — almost two months after the 01 October 2014 Resolution. The Court also disagreed with the OCA that Yuseco failed to avail of legal remedies, as Yuseco had filed a Joint Motion for Partial Reconsideration of the 01 October 2014 Resolution and moved for reconsideration of the 26 January 2015 Omnibus Order with an additional prayer for inhibition. Notwithstanding these points, the complaint was dismissed for lack of merit because Judge Dumayas acted well within his authority, without any taint of ignorance of the law or procedure, in issuing both the Resolution dated 01 October 2014 and the Omnibus Order dated 26 January 2015.

• Gross Ignorance of the Law — When the law is so elementary, not to know it or to act as if one does not know it constitutes gross ignorance of the law. Judges have a concomitant duty to be well-informed and familiar with statutes and procedural rules at all times. A judge's failure to interpret the law or properly appreciate evidence does not necessarily render him administratively liable; only judicial errors tainted with fraud, dishonesty, gross ignorance, bad faith, or deliberate intent to do an injustice are administratively sanctioned. In this case, Judge Dumayas' reliance on a repealed statute (RA No. 265) and his encroachment on the MB's exclusive jurisdiction — a matter so basic that all magistrates are presumed to know it — constituted gross ignorance of the law.

• Jurisdiction of the Liquidation Court — Under Section 30 of RA No. 7653, when PDIC institutes liquidation proceedings, the liquidation court's role is limited to: (1) adjudicating disputed claims against the institution; (2) assisting the enforcement of individual liabilities of stockholders, directors, and officers; and (3) deciding other issues material to implementing the liquidation plan. It is not within the liquidation court's authority to determine whether a bank may still be rehabilitated or to review the propriety of the MB's closure order, which may be challenged only through a petition for certiorari on the ground that the MB acted in excess of jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction.

• Finality of Monetary Board Actions — The actions of the MB taken under Section 30 of RA No. 7653 (or Section 29) are final and executory and may not be restrained or set aside by the court except through a petition for certiorari on the ground that the action was in excess of jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction. The MB's power to close banks and liquidate them when public interest requires is an exercise of the police power of the State.

• Res Ipsa Loquitur in Judicial Discipline — Under the doctrine of res ipsa loquitur, the Court may impose its disciplinary authority upon erring judges whose actuations, on their face, show gross incompetence, ignorance of the law, or misconduct. The constant flip-flopping in rulings, betraying a lack of understanding of existing jurisprudence and applicable provisions of law, is sufficient on its face to warrant disciplinary action.

• Inherent Power to Reverse Judicial Orders — Under Section 5(g) of Rule 135, every court has the inherent power to amend and control its processes and orders so as to make them conformable to law and justice, including the right to reverse itself when, in its honest opinion, it has committed an error or mistake in judgment. This power, however, does not shield a judge from administrative liability when the reversals stem from gross ignorance of basic legal provisions.

• "When the law is so elementary, not to know it or to act as if one does not know it, constitutes gross ignorance of the law." — This passage states the controlling standard for gross ignorance of the law: the test is not merely whether the judge erred, but whether the law disregarded is so basic and elemental that ignorance of it is inexcusable.

• "Judge Dumayas indubitably exhibited gross ignorance of the law and prevailing jurisprudence by favoring the oppositors' argument based on an already superseded law and jurisprudence. It was his obligation to know that RA No. 265 had already been expressly repealed by RA No. 7653 as far back as 1993." — This is the ratio decidendi of the Court's finding of guilt, identifying the specific legal error — reliance on a repealed statute — that constituted gross ignorance.

• "Considering the PDIC instituted liquidation proceedings, Judge Dumayas' actions should have been limited to the declaration of creditors and their rights, and the determination of their order of payment. It was not within his authority to determine whether or not UDB could still be rehabilitated." — This passage defines the jurisdictional boundaries of a liquidation court under Section 30 of RA No. 7653 and explains why Judge Dumayas' orders exceeded his authority.

• "Even granting that he made an honest mistake at first, his subsequent actions, taken together, can only be considered as gross ignorance of the law." — This passage establishes that a pattern of repeated errors, even if individually attributable to honest mistake, can collectively constitute gross ignorance warranting administrative sanction.

• Banco Filipino Savings and Mortgage Bank vs. The Monetary Board, G.R. No. 70054, Dec. 11, 1991 — Distinguished. This case was decided under Section 29 of RA No. 265 (the old Central Bank Act), which was expressly repealed by RA No. 7653 in 1993. The Court held that reliance on this case was misplaced and that Judge Dumayas' reliance on it constituted gross ignorance of the law.

• Rural Bank of San Miguel, Inc. vs. Monetary Board, 545 Phil. 62 (2007) — Followed. The Court cited this case as having already clarified that Banco Filipino and similar cases were decided under the old law and no longer apply after RA No. 7653 took effect. Judge Dumayas' failure to heed this clarification was part of his gross ignorance.

• Judge Marcos vs. Hon. Cabrera-Faller, 804 Phil. 45 (2017) — Followed. The Court reiterated the principle that when inefficiency springs from failure to consider so basic and elemental a rule, law, or principle, the judge is either insufferably incompetent or acted in bad faith and grave abuse of judicial authority.

• Marcos vs. Judge Pamintuan, 654 Phil. 626 (2011) — Followed. Cited for the principle that when the law is so elementary, not to know it or to act as if one does not know it constitutes gross ignorance of the law.

• Apex Bancrights Holdings, Inc. vs. Bangko Sentral ng Pilipinas, 819 Phil. 127 (2017) — Cited for the proposition that the MB's actions are final and executory and may not be restrained except through certiorari on grounds of excess of jurisdiction or grave abuse of discretion.

• In re: Petition for Assistance in the Liquidation of the Rural Bank of Bokod (Benguet), Inc., 540 Phil. 142 (2006) — Cited for the principle that once liquidation proceedings are instituted, the liquidation court's actions should be limited to the declaration of creditors and their rights and the determination of their order of payment.

• Delos Santos vs. Judge Mangino, 435 Phil. 467 (2003) — Cited for the doctrine of res ipsa loquitur in judicial discipline, allowing the Court to impose disciplinary authority when a judge's actuations on their face show gross incompetence or ignorance of the law.

• Section 30, RA No. 7653 (The New Central Bank Act) — Governs proceedings in receivership and liquidation. It grants the MB the authority to summarily forbid a bank from doing business and designate PDIC as receiver. It provides that the receiver shall file a petition for assistance in the liquidation with the proper RTC, and that upon acquiring jurisdiction, the court shall adjudicate disputed claims, assist enforcement of individual liabilities, and decide other issues material to implementing the liquidation plan. It also provides that MB actions are final and executory and may not be restrained except through certiorari. Judge Dumayas was found to have violated this provision by exceeding the liquidation court's limited jurisdiction and by ordering PDIC to cease and desist from liquidation, effectively encroaching on the MB's exclusive authority.

• Section 29, RA No. 265 (The Old Central Bank Act) — The predecessor provision governing insolvency proceedings of banks. This section was expressly repealed by RA No. 7653, which took effect in 1993. Yuseco's and Judge Dumayas' reliance on Banco Filipino, decided under this section, was misplaced and constituted a fundamental legal error.

• Section 5(g), Rule 135, Rules of Court — Grants every court the inherent power to amend and control its processes and orders so as to make them conformable to law and justice, including the right to reverse itself when it has committed an error. The Court acknowledged this power but held that it does not excuse gross ignorance of basic legal provisions.

• Section 8(9), Rule 140, Rules of Court (as amended by A.M. No. 01-8-10-SC) — Classifies gross ignorance of the law or procedure as a serious charge in judicial discipline proceedings.

• Section 11(A), Rule 140, Rules of Court — Provides the sanctions for serious charges: (1) dismissal from service with forfeiture of benefits and disqualification from reinstatement; (2) suspension without salary for more than three but not exceeding six months; or (3) a fine of more than Php20,000 but not exceeding Php40,000. The Court imposed a fine of Php40,000, the maximum under this provision, in view of Judge Dumayas' prior dismissal in A.M. No. RTJ-15-2435.

Peralta, C.J., Perlas-Bernabe, Leonen, Caguioa, Gesmundo, Hernando, Inting, M. Lopez, Delos Santos, Gaerlan, and Rosario, JJ., concurred. Carandang and Lazaro-Javier, JJ., were on official leave.