Spouses Chugani vs. Philippine Deposit Insurance Corporation

PDIC's grant or denial of deposit insurance claims is a quasi-judicial function, so a Rule 65 petition against its denial must be filed with the CA, not the RTC; no grave abuse of discretion exists where the claimed deposits were not recorded as bank liabilities, the CTDs were not validly issued, and the funds were credited to the bank president's personal account.

RBMI was a bank whose deposits were insured by PDIC, and petitioners were claimants of time deposit insurance arising from accounts they maintained with RBMI. PDIC is a government corporation created by R.A. No. 3591 to insure deposits in banks entitled to insurance and to grant or deny claims for deposit insurance under its charter.

Petitioners signified their intention to open Time Deposits with Rural Bank of Mawab (Davao), Inc. (RBMI) after Raymundo Garan, RBMI's President, invited them to do so. RBMI sent petitioners, through courier, the Time Deposit Specimen Signature Cards and Personal Information Sheet, with the instruction that petitioners send them back, through mail, to RBMI. Petitioners then opened Time Deposit Accounts with RBMI through inter-branch deposits to the accounts of RBMI maintained in Metrobank and China Bank-Tagum, Davao Branches. Thereafter, Certificates of Time Deposits (CTDs) and Official Receipts were issued to petitioners.

Sometime in September 2011, petitioners came to know that the Monetary Board of the Bangko Sentral ng Pilipinas placed RBMI under receivership and thereafter closed the bank. Petitioners filed claims for insurance of their time deposits. PDIC denied the claims on three grounds: (a) based on bank records submitted by RBMI, petitioners' deposit accounts were not part of RBMI's outstanding deposit liabilities; (b) the time deposits were fraudulent and their CTDs were not duly issued by RBMI, but were mere replicas of unissued CTDs in the inventory submitted by RBMI to PDIC; and (c) the amounts purportedly deposited by petitioners were credited to the personal account of Garan, hence they could not be construed as valid liabilities of RBMI.

Petitioners filed a request for reconsideration of PDIC's denial, but PDIC rejected it in its Letter dated May 22, 2013. Petitioners then filed a Petition for Certiorari under Rule 65 of the Rules of Court with the RTC.

• Jurisdiction: Whether the CA is correct in ruling that the RTC has no jurisdiction over the Petitions for Certiorari filed by petitioners.
• Grave Abuse of Discretion: Whether PDIC committed grave abuse of discretion in denying petitioners' claim for deposit insurance.

• Jurisdiction: Yes. The CA correctly held that the RTC had no jurisdiction. PDIC's grant or denial of deposit insurance claims is a quasi-judicial function; under Section 4, Rule 65, a petition against a quasi-judicial agency is filed with the CA, and R.A. No. 10846, Section 7 confirms the CA as the proper forum.
• Grave Abuse of Discretion: No. PDIC did not commit grave abuse of discretion. The claimed deposits were not recorded as RBMI liabilities, the CTDs were not validly issued but mere replicas of unissued CTDs, the funds were credited to Garan's personal account, and the inter-branch deposits were not in the ordinary course of business.

• Jurisdiction: PDIC was created by R.A. No. 3591 as insurer of deposits in banks entitled to insurance and has the duty to grant or deny claims for deposit insurance. Under Section 4(f) of R.A. No. 3591, as amended by R.A. No. 9576, PDIC's actions are final and executory and may not be restrained or set aside except by certiorari on excess of jurisdiction or grave abuse of discretion. The SC held that PDIC's power to grant or deny claims based on its rules and regulations partakes of a quasi-judicial function; the finality of its decisions and their review only by certiorari evince Congress's intent to make PDIC a quasi-judicial agency. Under Section 4, Rule 65, a petition involving acts or omissions of a quasi-judicial agency shall be filed with and cognizable only by the CA, unless otherwise provided by law or the rules. R.A. No. 10846, Section 7 now expressly provides that PDIC actions under Section 5(g) are final and may only be set aside by the CA via certiorari within 30 days from notice of denial. Thus the RTC had no jurisdiction over the petitions, and the CA correctly dismissed the appeal.
• Grave Abuse of Discretion: Grave abuse of discretion is the capricious and whimsical exercise of judgment equivalent to lack of jurisdiction; it must be so grave that the power was exercised in an arbitrary or despotic manner by reason of passion or personal hostility. Section 4(f) of R.A. No. 3591, as amended, defines deposit as the unpaid balance of money or its equivalent received by a bank in the usual course of business and for which it has given or is obliged to give credit to a commercial, checking, savings, time or thrift account, or issued in accordance with BSP rules and regulations and other applicable laws, together with such other obligations of a bank which, consistent with banking usage and practices, the Board of Directors shall determine and prescribe by regulations to be deposit liabilities. Section 2(d) of PDIC Regulatory Issuance No. 2011-02 requires for a legitimate deposit that it be (1) received by a bank as a deposit in the usual course of business; (2) recorded in the books of the bank as such; and (3) opened in accordance with established forms and requirements of the BSP and/or PDIC. Phil. Deposit Insurance Corp. vs. CA held that a claim for deposit insurance may prosper only if the corresponding deposit was placed in the insured bank. Here PDIC's investigation showed that the money allegedly placed by petitioners was credited to Garan's personal account and could not be valid liabilities of RBMI; bank records and the certified list of outstanding deposit liabilities showed petitioners' alleged deposits were not part of RBMI's outstanding liabilities; the CTDs were not validly issued by RBMI but mere replicas of unissued and unused CTDs in RBMI's inventory; and petitioners' opening of time deposits through inter-branch deposits to RBMI's accounts with Metrobank and China Bank could hardly be considered as in the ordinary course of business. These grounds were based on facts, law, and PDIC regulations, so PDIC did not commit grave abuse of discretion.

• Quasi-judicial agency; PDIC decisions reviewable by CA — PDIC's power to grant or deny deposit insurance claims based on its rules and regulations is quasi-judicial; its decisions are final and executory and may be set aside only by certiorari on excess of jurisdiction or grave abuse of discretion. Under Section 4, Rule 65, the petition against a quasi-judicial agency is filed with the CA, and R.A. No. 10846, Section 7 confirms the CA as the proper forum. The SC applied this to hold the RTC lacked jurisdiction.
• Requisites for a legitimate deposit under PDIC rules — Section 2(d) of PDIC Regulatory Issuance No. 2011-02 requires: (1) receipt by the bank as a deposit in the usual course of business; (2) recording in the bank's books as such; and (3) opening in accordance with established forms and requirements of the BSP and/or PDIC. A claim for deposit insurance prospers only if the corresponding deposit was placed in the insured bank. The SC applied these requisites to deny the claim because the funds were credited to Garan's personal account, were not recorded as RBMI liabilities, and the CTDs were not validly issued.
• Grave abuse of discretion — Defined as capricious and whimsical exercise of judgment equivalent to lack of jurisdiction, so grave that the power was exercised arbitrarily or despotically by reason of passion or personal hostility. The SC found no grave abuse because PDIC's denial rested on facts, law, and regulations.

• "The power of the PDIC as to whether it will deny or grant the claim for deposit insurance based on its rules and regulations partakes of a quasi-judicial function." — The SC characterizes PDIC's claim adjudication as quasi-judicial, which is the basis for holding that the CA, not the RTC, has jurisdiction over a Rule 65 petition.
• "As it now stands, the remedy to question the decisions of the PDIC is through a Petition for Certiorari under Rule 65 and filed before the CA." — The SC states the remedy and the proper forum for questioning PDIC decisions on deposit insurance claims.
• "Section 2(d) of PDIC Regulatory Issuance No. 2011-02 states that for deposit to be considered as legitimate, it should be 1) received by a bank as a deposit in the usual course of business; 2) recorded in the books of the bank as such; 3) opened in accordance with established forms and requirements of the BSP and/or the PDIC." — The SC lays out the requisites for a legitimate deposit and applies them to deny the insurance claim.
• "Grave abuse of discretion is the capricious and whimsical exercise of the judgment of a court, tribunal or quasi-judicial agency that is equivalent to lack of jurisdiction. It must be so grave such that the power was exercised in an arbitrary or despotic manner by reason of passion or personal hostility." — The SC states the standard for grave abuse of discretion and concludes that PDIC's denial did not meet it.

• Monetary Board, et al. vs. Philippine Veterans Bank, 751 Phil. 176 (2015) — Relied on for the definition of a quasi-judicial agency and quasi-judicial function.
• Pascual vs. Burgos, et al., 776 Phil. 167 (2016) citing United Coconut Planters Bank vs. Looyuko, 560 Phil. 581, 591-592 (2007) — Relied on for the definition of grave abuse of discretion.
• Phil. Deposit Insurance Corp. vs. CA, 347 Phil. 741 (1997) — Relied on for the rule that a claim for deposit insurance may prosper only if the corresponding deposit was placed in the insured bank.

• Section 4(f), R.A. No. 3591, as amended by R.A. No. 9576 — Defines deposit and excludes unfunded, fictitious, or fraudulent deposit accounts or transactions; provides that PDIC actions are final and executory and may be set aside only by certiorari on excess of jurisdiction or grave abuse of discretion. Applied to support PDIC's denial and the limited review of its actions.
• Section 4, Rule 65, Rules of Court — Provides that a petition involving the acts or omissions of a quasi-judicial agency shall be filed with and cognizable only by the CA, unless otherwise provided by law or the rules. Applied to hold that the RTC had no jurisdiction.
• Section 7, R.A. No. 10846 — Provides that PDIC actions under Section 5(g) are final and may only be restrained or set aside by the CA via certiorari within 30 days from notice of denial of claim. Applied as the current express rule on the proper forum.
• Section 2(d), PDIC Regulatory Issuance No. 2011-02 — Sets the requisites for a legitimate deposit: receipt by the bank as a deposit in the usual course of business, recording in the bank's books as such, and opening in accordance with established forms and requirements of the BSP and/or PDIC. Applied to deny the claim.
• Section 2(1), R.A. No. 3591 — Vests PDIC with the power to prepare and issue rules and regulations to effectively discharge its responsibilities. Applied to support the quasi-judicial character of PDIC's claim adjudication.