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Supreme Court Dismisses RBSM Case; Clears BSP Officials

04.16.2004

The Supreme Court has dismissed the administrative complaint filed by the Rural Bank of San Miguel (Bulacan), Inc. against Bangko Sentral ng Pilipinas Deputy Governor AlbertoV. Reyes, BSP Director Wilfredo B. Domo-ong and BSP examiner Herminio Principio.

The Supreme Court declared that “the BSP is an independent body corporate bestowed under its charter with fiscal and administrative autonomy.” It said BSP “Officials should be granted a certain degree of flexibility in the performance of their duties and provided insulation from interference and vexatious suits, especially when moves of the kind are resorted to as counterfoil to the exercise of their regulatory mandate.” Otherwise, “the institutional independence and autonomy of the BSP as the central monetary authority would be rendered illusory.”

The decision was promulgated February 27, 2004 by the Special Second Division of the Supreme Court which includes Associate Justices Reynato Puno, Leonardo Quisumbing, Ma. Alicia Austria Martinez, Romeo Callejo, Sr. and Dante O. Tinga who wrote the resolution.

The Supreme Court declared that "All told, there is neither legal nor factual support for holding Reyes and Dom-ong liable.” As such, it set aside the earlier decision which imposed fines equivalent to two months’ salary for DG Reyes and one month salary for Director Domo-ong. The SC also dismissed the Motion for Partial Reconsideration of RBSM for Principio to be administratively penalized.

RBSM claimed in its complaint that the BSP officials should be held liable for “brokering” its sale and for using its financial condition as the subject of a case study in one of the seminars held at the BSP seminars.

The SC said: “…it is indeed the policy of the BSP to promote mergers and consolidations by providing incentives to banks that would undergo such corporate combinations. To effectively implement the policy, it was necessary that the banks be advised and assisted by a person knowledgeable about the transactions like Reyes…” It appears to the Court that in keeping with the standards of professionalism and heeding the mandate of his position, he (DG Reyes) made the telephone introductions (to two banks) for no other purpose but to pave the way for a possible consolidation or merger of RBSM with interested banks… “The benefits which may ultimately arise out of any preliminary facilitation step such as what Reyes undertook will not accrue to the facilitator but to the parties to the transaction themselves and, of course, the institutions whose policy initiative is being carried out.”

The Supreme Court added that from the evidence, all that Reyes did was to introduce RBSM’s President to the presidents of other banks. Nothing more. On his part, Soriano who is RBSM’s President himself admitted that the talks never got past the exploratory stage. “This is an indelible indication that Reyes was not personally involved in the transaction… Indeed, RBSM miserably failed to establish that Reyes had breached the standard of professional conduct required of a public servant.”

In the matter of using the rural bank as a case study, the SC said, “there was absolutely paucity of proof that they exercised supervision and control over the persons responsible in organizing the seminar.”

“In Arias v. Sandiganbayan, this Court held that all heads of offices have to rely to a reasonable extent on the good faith oftheir subordinates…In the same fashion, petitioners in this case owing to their high ranks cannot be expected to acquaint themselves with such minutiae as the flow of files and documents which leave their desks. Myriad details such as those are, by office practice, left to subalterns and minor employees. Delegation of function is part of sound management.

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