THIRD DIVISION

[G.R. No. 126911. April 30, 2003.]

PHILIPPINE DEPOSIT INSURANCE CORPORATION , petitioner, vs . THE

HONORABLE COURT OF APPEALS and JOSE ABAD, LEONOR ABAD,
SABINA ABAD, JOSEPHINE "JOSIE" BEATA ABAD-ORLINA, CECILIA
ABAD, PIO ABAD, DOMINIC ABAD, TEODORA ABAD , respondents.

The Chief Legal Counsel for petitioner.

Dolores P. Abad and Leonora P. Abad for private respondents.

SYNOPSIS

Respondents led claims with the Philippine Deposit Insurance Corporation (PDIC)
for the payment of the twenty insured golden time deposits (GTDs) at the Manila Banking
Corporation (MBC), Iloilo Branch. PDIC paid respondents the value of three claims;
however, it withheld the payment of the seventeen remaining claims. Subsequently, PDIC
led a petition for declaratory relief against respondents for a judicial declaration of the
insurability of respondents' GTDs. The trial court declared the GTDs of respondents to be
deposit liabilities of MBC, hence, are liabilities of PDIC as statutory insurer. The Court of
Appeals (CA) a rmed the decision of the trial court, except as to the award of legal
interest which it deleted. Hence, this petition.
In a rming the decision of the CA, the Supreme Court ruled that PDIC is liable only
for deposits received by a bank in the usual course of business. That no actual money in
bills and/or coins was handed by respondents to MBC does not mean that the
transactions on the new GTDs did not involve money and that there was no consideration
therefor, for the outstanding balance of respondents' 71 GTDs in MBC prior to May 26,
1987 was re-deposited by respondents under 28 new GTDs, eight of which were pre-
terminated and withdrawn by respondent Abad. MBC had cash on hand — more than
double the outstanding balance of respondents' 71 GTDs — at the start of the banking day
on May 25, 1987. Since respondent Abad was at MBC soon after it opened at 9:00 a.m. of
that day, petitioner should not presume that MBC had no cash to cover the new GTDs of
respondents and conclude that there was no consideration for said GTDs. Petitioner
having failed to overcome the presumption that the ordinary course of business was
followed, the Court found that the 28 new GTDs were deposited in the usual course of
business of MBC.

SYLLABUS

1. COMMERCIAL LAW; INSURANCE LAW; PHILIPPINE DEPOSIT INSURANCE

CORPORATION; LIABLE ONLY FOR DEPOSITS RECEIVED BY A BANK IN THE USUAL
COURSE OF BUSINESS; CASE AT BAR. — Under its charter, PDIC (hereafter petitioner) is
liable only for deposits received by a bank "in the usual course of business." . . . That no
actual money in bills and/or coins was handed by respondents to MBC does not mean that
the transactions on the new GTDs did not involve money and that there was no
consideration therefor. For the outstanding balance of respondents' 71 GTDs in MBC prior
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 to May 26, 1987 in the amount of P1,115,889.15 as earlier mentioned was re-deposited by
respondents under 28 new GTDs. Admittedly, MBC had P2,841,711.90 cash on hand —
more than double the outstanding balance of respondents' 71 GTDs — at the start of the
banking day on May 25, 1987. Since respondent Jose Abad was at MBC soon after it
opened at 9:00 a.m. of that day, petitioner should not presume that MBC had no cash to
cover the new GTDs of respondents and conclude that there was no consideration for said
GTDs. Petitioner having failed to overcome the presumption that the ordinary course of
business was followed, this Court nds that the 28 new GTDs were deposited "in the usual
course of business" of MBC. THCSEA

2. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; DECLARATORY RELIEF; DOES NOT

PROSCRIBE THE FILING OF COUNTERCLAIM BASED ON THE SAME TRANSACTION, DEED
OR CONTRACT SUBJECT OF THE COMPLAINT. — [A] petition for declaratory relief does
not essentially entail an executory process. There is nothing in its nature, however, that
prohibits a counterclaim from being set-up in the same action. "Now, there is nothing in the
nature of a special civil action for declaratory relief that proscribes the ling of a
counterclaim based on the same transaction, deed or contract subject of the complaint. A
special civil action is after all not essentially different from an ordinary civil action, which is
generally governed by Rules 1 to 56 of the Rules of Court, except that the former deals with
a special subject matter which makes necessary some special regulation. But the identity
between their fundamental nature is such that the same rules governing ordinary civil suits
may and do apply to special civil actions if not inconsistent with or if they may serve to
supplement the provisions of the peculiar rules governing special civil actions."

DECISION

CARPIO MORALES , J : p

The present petition for review assails the decision of the Court of Appeals
a rming that of the Regional Trial Court of Iloilo City, Branch 30, nding petitioner
Philippine Deposit Insurance Corporation (PDIC) liable, as statutory insurer, for the value of
20 Golden Time Deposits belonging to respondents Jose Abad, Leonor Abad, Sabina
Abad, Josephine "Josie" Beata Abad-Orlina, Cecilia Abad, Pio Abad, Dominic Abad, and
Teodora Abad at the Manila Banking Corporation (MBC), Iloilo Branch. cDCEIA

Prior to May 22, 1997, respondents had, individually or jointly with each other, 71
certi cates of time deposits denominated as "Golden Time Deposits" (GTD) with an
aggregate face value of P1,115,889.96. 1
On May 22, 1987, a Friday, the Monetary Board (MB) of the Central Bank of the
Philippines, now Bangko Sentral ng Pilipinas, issued Resolution 505 2 prohibiting MBC to
do business in the Philippines, and placing its assets and affairs under receivership. The
Resolution, however, was not served on MBC until Tuesday the following week, or on May
26, 1987, when the designated Receiver took over. 3
On May 25, 1987, the next banking day following the issuance of the MB Resolution,
respondent Jose Abad was at the MBC at 9:00 a.m. for the purpose of pre-terminating the
71 aforementioned GTDs and re-depositing the fund represented thereby into 28 new
GTDs in denominations of P40,000.00 or less under the names of herein respondents
individually or jointly with each other. 4 Of the 28 new GTDs, Jose Abad pre-terminated 8
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 and withdrew the value thereof in the total amount of P320,000.00. 5
Respondents thereafter led their claims with the PDIC for the payment of the
remaining 20 insured GTDs. 6
On February 11, 1988, PDIC paid respondents the value of 3 claims in the total
amount of P120,000.00. PDIC, however, withheld payment of the 17 remaining claims after
Washington Solidum, Deputy Receiver of MBC-Iloilo, submitted a report to the PDIC 7 that
there was massive conversion and substitution of trust and deposit accounts on May 25,
1987 at MBC-Iloilo. 8 The pertinent portions of the report stated:
xxx xxx xxx

On May 25, 1987 (Monday) or a day prior to the o cial announcement

and take-over by CB of the assets and liabilities of The Manila Banking
Corporation, the Iloilo Branch was found to have recorded an unusually heavy
movements in terms of volume and amount for all types of deposits and trust
accounts. It appears that the impending receivership of TMBC was somehow
already known to many depositors on account of the massive withdrawals paid
on this day which practically wiped out the branch's entire cash position. . . .

xxx xxx xxx

. . . The intention was to maximize the availment of PDIC coverage limited

to P40,000 by spreading out big accounts to as many certi cates under various
nominees. . . . 9
xxx xxx xxx

Because of the report, PDIC entertained serious reservation in recognizing

respondents' GTDs as deposit liabilities of MBC-Iloilo. Thus, on August 30, 1991, it led a
petition for declaratory relief against respondents with the Regional Trial Court (RTC) of
Iloilo City, for a judicial declaration determination of the insurability of respondents' GTDs
at MBC-Iloilo. 1 0
In their Answer led on October 24, 1991 and Amended Answer 1 1 led on January
9, 1992, respondents set up a counterclaim against PDIC whereby they asked for payment
of their insured deposits. 1 2
In its Decision of February 22, 1994, 1 3 Branch 30 of the Iloilo RTC declared the 20
GTDs of respondents to be deposit liabilities of MBC, hence, are liabilities of PDIC as
statutory insurer. It accordingly disposed as follows:
WHEREFORE, premises considered, judgment is hereby rendered:
1. Declaring the 28 GTDs of the Abads which were issued by the
TMBC-Iloilo on May 25, 1987 as deposits or deposit liabilities of the bank
as the term is defined under Section 3 (f) of R.A. No. 3591, as amended;

2. Declaring PDIC, being the statutory insurer of bank deposits,

liable to the Abads for the value of the remaining 20 GTDs, the other 8
having been paid already by TMBC Iloilo on May 25,1987;

3. Ordering PDIC to pay the Abads the value of said 20 GTDs

less the value of 3 GTDs it paid on February 11, 1988, and the amounts it
may have paid the Abads pursuant to the Order of this Court dated
September 8, 1992;
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 4. Ordering PDIC to pay immediately the Abads the balance of
its admitted liability as contained in the aforesaid Order of September 8,
1992, should there be any, subject to liquidation when this case shall have
been finally decide; and

5. Ordering PDIC to pay legal interest on the remaining insured

deposits of the Abads from February 11, 1988 until they are fully paid.

SO ORDERED.

On appeal, the Court of Appeals, by the assailed Decision of October 21, 1996, 1 4
affirmed the trial court's decision except as to the award of legal interest which it deleted.
Hence, PDIC's present Petition for Review which sets forth this lone assignment of
error:
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE HOLDING OF
THE TRIAL COURT THAT THE AMOUNT REPRESENTED IN THE FACES OF THE
SO CALLED "GOLDEN TIME DEPOSITS" WERE INSURED DEPOSITS EVEN AS
THEY WERE MERE DERIVATIVES OF RESPONDENTS' PREVIOUS ACCOUNT
BALANCES WHICH WERE PRE-TERMINATED/TERMINATED AT THE TIME THE
MANILA BANKING CORPORATION WAS ALREADY IN SERIOUS FINANCIAL
DISTRESS.

In its supplement to the petition, PDIC adds the following assignment of error:
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE HOLDING OF
THE TRIAL COURT ORDERING PETITIONER TO PAY RESPONDENTS' CLAIMS
FOR PAYMENT OF INSURED DEPOSITS FOR THE REASON THAT AN ACTION
FOR DECLARATORY RELIEF DOES NOT ESSENTIALLY ENTAIL AN EXECUTORY
PROCESS AS THE ONLY RELIEF THAT SHOULD HAVE BEEN GRANTED BY THE
TRIAL COURT IS A DECLARATION OF THE RIGHTS AND DUTIES OF PETITIONER
UNDER R.A. 3591, AS AMENDED, PARTICULARLY SECTION 3(F) THEREOF AS
CONSIDERED AGAINST THE SURROUNDING CIRCUMSTANCES OF THE MATTER
IN ISSUE SOUGHT TO BE CONSTRUED WITHOUT PREJUDICE TO OTHER
MATTERS THAT NEED TO BE CONSIDERED BY PETITIONER IN THE
PROCESSING OF RESPONDENTS' CLAIMS. TcHDIA

Under its charter, 1 5 PDIC (hereafter petitioner) is liable only for deposits received by
a bank "in the usual course of business." 1 6 Being of the rm conviction that, as the
reported May 25, 1987 bank transactions were so massive, hence, irregular, petitioner
essentially seeks a judicial declaration that such transactions were not made "in the usual
course of business" and, therefore, it cannot be made liable for deposits subject thereof.
17

Petitioner points that as MBC was prohibited from doing further business by MB
Resolution 505 as of May 22, 1987, all transactions subsequent to such date were not
done "in the usual course of business."
Petitioner further posits that there was no consideration for the 20 GTDs subject of
respondents' claim. In support of this submission, it states that prior to March 25, 1987,
when the 20 GTDs were made, MBC had been experiencing liquidity problems, e.g., at the
start of banking operations on March 25, 1987, it had only P2,841,711.90 cash on hand
and at the end of the day it was left with P27,805.81 consisting mostly of mutilated bills
and coins. 1 8 Hence, even if respondents had wanted to convert the face amounts of the
GTDs to cash, MBC could not have complied with it.
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 Petitioner theorizes that after MBC had exhausted its cash and could no longer
sustain further withdrawal transactions, it instead issued new GTDs as "payment" for the
pre-terminated GTDs of respondents to make sure that all the newly-issued GTDs have
face amounts which are within the statutory coverage of deposit insurance. DHATcE

Petitioner concludes that since no cash was given by respondents and none was
received by MBC when the new GTDs were transacted, there was no consideration therefor
and, thus, they were not validly transacted "in the usual course of business" and no liability
for deposit insurance was created. 1 9
Petitioner's position does not persuade.
While the MB issued Resolution 505 on May 22, 1987, a copy thereof was served on
MBC only on May 26, 1987. MBC and its clients could be given the bene t of the doubt
that they were not aware that the MB resolution had been passed, given the necessity of
confidentiality of placing a banking institution under receivership. 2 0
The evident implication of the law, therefore, is that the appointment of a
receiver may be made by the Monetary Board without notice and hearing but its
action is subject to judicial inquiry to insure the protection of the banking
institution. Stated otherwise, due process does not necessarily require a prior
hearing; a hearing or an opportunity to be heard may be subsequent to the
closure. One can just imagine the dire consequences of a prior hearing: bank runs
would be the order of the day, resulting in panic and hysteria. In the process,
fortunes may be wiped out, and disillusionment will run the gamut of the entire
banking community. (Italics supplied). 2 1
Mere conjectures that MBC had actual knowledge of its impending closure do not
su ce. The MB resolution could not thus have nulli ed respondents' transactions which
occurred prior to May 26, 1987.
That no actual money in bills and/or coins was handed by respondents to MBC does
not mean that the transactions on the new GTDs did not involve money and that there was
no consideration therefor. For the outstanding balance of respondents' 71 GTDs in MBC
prior to May 26, 1987 2 2 in the amount of P1,115,889.15 as earlier mentioned was re-
deposited by respondents under 28 new GTDs. Admittedly, MBC had P2,841,711.90 cash
on hand — more than double the outstanding balance of respondent's 71 GTDs — at the
start of the banking day on May 25, 1987. Since respondent Jose Abad was at MBC soon
after it opened at 9:00 a.m. of that day, petitioner should not presume that MBC had no
cash to cover the new GTDs of respondents and conclude that there was no consideration
for said GTDs.
Petitioner having failed to overcome the presumption that the ordinary course of
business was followed, 2 3 this Court nds that the 28 new GTDs were deposited "in the
usual course of business" of MBC.
In its second assignment of error, petitioner posits that the trial court erred in
ordering it to pay the balance of the deposit insurance to respondents, maintaining that the
instant petition stemmed from a petition for declaratory relief which does not essentially
entail an executory process, and the only relief that should have been granted by the trial
court is a declaration of the parties' rights and duties. As such, petitioner continues, no
order of payment may arise from the case as this is beyond the o ce of declaratory relief
proceedings. 2 4

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 Without doubt, a petition for declaratory relief does not essentially entail an
executory process. There is nothing in its nature, however, that prohibits a counterclaim
from being set-up in the same action. 2 5
Now, there is nothing in the nature of a special civil action for declaratory
relief that proscribes the ling of a counterclaim based on the same transaction,
deed or contract subject of the complaint. A special civil action is after all not
essentially different from an ordinary civil action, which is generally governed by
Rules 1 to 56 of the Rules of Court, except that the former deals with a special
subject matter which makes necessary some special regulation. But the identity
between their fundamental nature is such that the same rules governing ordinary
civil suits may and do apply to special civil actions if not inconsistent with or if
they may serve to supplement the provisions of the peculiar rules governing
special civil actions. 2 6

Petitioner additionally submits that the issue of determining the amount of deposit
insurance due respondents was never tried on the merits since the trial dwelt only on the
"determination of the viability or validity of the deposits" and no evidence on record
sustains the holding that the amount of deposit due respondents had been nally
determined. 2 7 This issue was not raised in the court a quo, however, hence, it cannot be
raised for the first time in the petition at bar. 28
Finally, petitioner faults respondents for availing of the statutory limits of the PDIC
law, presupposing that, based on the conduct of respondent Jose Abad on March 25,
1987, he and his co-respondents "somehow knew" of the impending closure of MBC.
Petitioner ascribes bad faith to respondent Jose Abad in transacting the questioned
deposits, and seeks to disqualify him from availing the benefits under the law. 2 9
Good faith is presumed. This, petitioner failed to overcome since it offered mere
presumptions as evidence of bad faith.
WHEREFORE, the assailed decision of the Court of Appeals is hereby AFFIRMED. HSaEAD

SO ORDERED.
Puno, Panganiban, Sandoval-Gutierrez and Corona, JJ., concur.

Footnotes
1. Records at 210–211.

2. Id. at 208–209.
3. Rollo at 13.
4. Id. at 12.
5. Ibid.
6. Id. at 13.
7. Records at 214–218; Exhibit "D".
8. Rollo at 23.
9. Records at 214–215.
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 10. Rollo at 13–14.
11. Records at 26–31.
12. Records at 100–101.
13. Rollo at 22–34.
14. Id. at 37–44.
15. RA 3591, as amended.

16. Section 3, R.A. 3591, provides: "(f) The term "deposit" means 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 which is evidenced by its certificate of deposit, and trust funds held by such
bank whether retained or deposited in any department of such bank or deposited in
another bank, together with such other obligations of a bank as the Board of Directors
shall find and shall prescribe by regulations to be deposit liabilities of the Bank . . ."
17. Records at 8–9.
18. Rollo at 17–18; Records at 59.
19. Rollo at 18, 122–123.
20. Vide Rural Bank of Buhi v. Court of Appeals, 162 SCRA 288 (1988).
21. Ibid. at 303.
22. Rollo at 18, 122–123.
23. Section 3(q), Rule 131, Rules of Court.

24. Rollo at 82, 125.

25. Visayan Packing Corp. vs Reparations Commission, 155 SCRA 542 (1987).
26. Id. at 546.
27. Supplement to Petition for Review and Reply to Respondents' Comment, Rollo at 82–83
& 108, respectively.
28. Philippine Basketball Association v. Court of Appeals, 337 SCRA 358, 370 (2000) citing
Ruby Industrial Corporation v. Court of Appeals, 284 SCRA 445; Salao v. Court of
Appeals, 284 SCRA 493; Heirs of Pascasio Uriarte v. Court of Appeals, 284 SCRA 511.
29. CA Rollo at 49–51.

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