Banco Filipino Savings and Mortgage Bank v. Bangko Sentral ng the benefit of its creditors.

t of its creditors." The law likewise grants the receiver "the general
Pilipinas powers of a receiver under the Revised Rules of Court." Under Rule 59,
G.R. No. 200678, June 4, 2018 Section 6 of the Rules of Court, "a receiver shall have the power to bring and
defend, in such capacity, actions in his [or her] own name." Thus, Republic
Leonen, J. Act No. 7653 provides that the receiver shall also "in the name of the
institution, and with the assistance of counsel as [it] may retain, institute such
A closed bank under receivership can only sue or be sued through its actions as may be necessary to collect and recover accounts and assets of,
receiver, the Philippine Deposit Insurance Corporation (PDIC). Hence, the or defend any action against, the institution." Considering that the receiver
petition filed by the petitioner bank which has been placed under has the power to take charge of all the assets of the closed bank and to
receivership is dismissible as it did not join PDIC as a party to the case. institute for or defend any action against it, only the receiver, in its fiduciary
capacity, may sue and be sued on behalf of the closed bank.
FACTS
Petitioner bank has been placed under receivership when it filed a Petition When petitioner was placed under receivership, the powers of its Board of
for Certiorari with the Supreme Court. Said Petition was assailed by the Directors and its officers were suspended. Thus, its Board of Directors could
respondent that contended that the same should be dismissed outright for not have validly authorized its Executive Vice Presidents to file the suit on its
being led without Philippine Deposit Insurance Corporation's authority. It behalf. The Petition, not having been properly verified, is considered an
asserts that petitioner was placed under receivership on March 17, 2011, and unsigned pleading. A defect in the certification of non-forum shopping is
thus, petitioner's Executive Committee would have had no authority to sign likewise fatal to petitioner's cause. Considering that the Petition was led by
for or on behalf of petitioner absent the authority of its receiver, Philippine signatories who were not validly authorized to do so, the Petition does not
Deposit Insurance Corporation. They also point out that both the Philippine produce any legal effect. Being an unauthorized pleading, this Court never
Deposit Insurance Corporation Charter and Republic Act No. 7653 validly acquired jurisdiction over the case. The Petition, therefore, must be
categorically state that the authority to file suits or retain counsels for closed dismissed.
banks is vested in the receiver. Thus, the verification and certification of non-
forum shopping signed by petitioner's Executive Committee has no legal
effect.

Issue:
Whether or not petitioner Banco Filipino, as a closed bank under
receivership, could file this Petition for Review without joining its statutory
receiver, the Philippine Deposit Insurance Corporation, as a party to the
case.

Ruling:

A closed bank under receivership can only sue or be sued through its
receiver, the Philippine Deposit Insurance Corporation. Under Republic Act
No. 7653, when the Monetary Board finds a bank insolvent, it may
"summarily and without need for prior hearing forbid the institution from doing
business in the Philippines and designate the Philippine Deposit Insurance
Corporation as receiver of the banking institution."

The relationship between the Philippine Deposit Insurance Corporation and a

closed bank is fiduciary in nature. Section 30 of Republic Act No. 7653
directs the receiver of a closed bank to "immediately gather and take charge
of all the assets and liabilities of the institution" and "administer the same for
FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank Plaintiffs filed a suit for specific performance with damages against the bank,
of the Philippines) and MERCURIO RIVERA, petitioners, vs.COURT OF Acting Conservator Encarnacion. The basis of the suit was that the
APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO transaction had with the bank resulted in a perfected contract of sale, The
DEMETRIA, and JOSE JANOLO defendants took the position that there was no such perfected sale because
G.R. No. 115849, THIRD DIVISION, January 24, 1996 the defendant Rivera is not authorized to sell the property, and that there was
no meeting of the minds as to the price.
Panganiban, J
ISSUE
While admittedly, the Central Bank law gives vast and far-reaching powers to Whether or not the bank conservator has the unilateral power to repudiate
the conservator of a bank, it must be pointed out that such powers must be the authority of the bank officers and/or to revoke the said contract
related to the "(preservation of) the assets of the bank, (the reorganization
of) the management thereof and (the restoration of) its viability." Such RULING
powers, enormous and extensive as they are, cannot extend to the post- Section 28-A - Whenever, on the basis of a report submitted by the
facto repudiation of perfected transactions, otherwise they would infringe appropriate supervising or examining department, the Monetary Board finds
against the non-impairment clause of the Constitution. that a bank or a non-bank financial intermediary performing quasi-banking
functions is in a state of continuing inability or unwillingness to maintain a
In the case, it is not disputed that the bank was under a conservator placed state of liquidity deemed adequate to protect the interest of depositors and
by the Central Bank of the Philippines during the time that the negotiation creditors, the Monetary Board may appoint a conservator to take charge of
and perfection of the contract of sale took place. Moreover, there was the assets, liabilities, and the management of that institution, collect all
absolutely no evidence that the Conservator, at the time the contract was monies and debts due said institution and exercise all powers necessary to
perfected, actually repudiated or overruled said contract of sale. The bank preserve the assets of the institution, reorganize the management thereof,
never objected to the sale, what it unilaterally repudiated was—not the and restore its viability. He shall have the power to overrule or revoke the
contract —but the authority of Rivera to make a binding offer —and which actions of the previous management and board of directors of the bank or
unarguably came months after the perfection of the contract. non-bank financial intermediary performing quasi-banking functions, any
provision of law to the contrary notwithstanding, and such other powers as
FACTS the Monetary Board shall deem necessary.
Producer Bank of the Philippines acquired six parcels of land located at
Laguna. The property used to be owned by BYME Investment and While admittedly, the Central Bank law gives vast and far-reaching powers to
Development Corporation which had them mortgaged with the bank as the conservator of a bank, it must be pointed out that such powers must be
collateral for a loan. The original plaintiffs, Demetrio Demetria and Jose O. related to the "(preservation of) the assets of the bank, (the reorganization of)
Janolo, wanted to purchase the property and thus initiated negotiations for the management thereof and (the restoration of) its viability."
that purpose. Plaintiffs, met with defendant Mercurio Rivera, Manager of the
Property Management Department of the defendant bank. After the meeting, Such powers, enormous and extensive as they are, cannot extend to the
plaintiff Janolo made a formal purchase offer to the bank in the amount of post-facto repudiation of perfected transactions, otherwise they would
3.5M but counter offered by Rivera(Bank) with 5.5M. Janolo revised there infringe against the non-impairment clause of the Constitution.
offer to 4.25M. but received no response but Luis co and Rivera had a
meeting and in the end the offer of Mr. Rivera was accepted. Section 28-A merely gives the conservator power to revoke contracts that
are, under existing law, deemed to be defective. Hence, the conservator
The conservator of the bank was replaced by an Acting Conservator in the merely takes the place of a bank's board of directors, so what the board
person of defendant Leonida T. Encarnacion whereby they stated that cannot do; the conservator cannot do either. His power is however, not
Rivera’s proposal was under study yet as of this time by the newly created unilateral as he cannot simply repudiate valid obligations of the Bank. His
committee for submission to the newly designated Acting Conservator of the authority would be only to bring court actions to assail such contracts.
bank. Thereafter transpired was a series of demands by the plaintiffs for
compliance by the bank with what plaintiff considered as a perfected contract In the case, it is not disputed that the bank was under a conservator placed
of sale, which demands were in one form or another refused by the bank. by the Central Bank of the Philippines during the time that the negotiation
and perfection of the contract of sale took place. Moreover, there was
absolutely no evidence that the Conservator, at the time the contract was
perfected, actually repudiated or overruled said contract of sale. The bank
never objected to the sale, what it unilaterally repudiated was—not the
contract —but the authority of Rivera to make a binding offer —and which
unarguably came months after the perfection of the contract. The
conservator’s authority would be only to bring court actions to assail such
contracts —as he has already done so in the instant case.
PACIFIC BANKING CORPORATION EMPLOYEES ORGANIZATION, 1991. The following day, December 10, 1991, he filed a Notice of Appeal and
PAULA S. PAUG, and its officers and members, petitioners, vs. THE a Motion for Additional Time to Submit Record on Appeal. On December 23,
HONORABLE COURT OF APPEALS and VITALIANO N. NAÑAGAS II, as 1991, another Notice of Appeal was filed by the Office of the Solicitor
Liquidator of Pacific Banking Corporation, respondents. General in behalf of Nañagas.
G.R. No. 109373 March 20, 1995

THE PRESIDENT OF THE PHILIPPINE DEPOSIT INSURANCE In his order of February 10, 1992, respondent judge disallowed the
CORPORATION, as Liquidator of the Pacific Banking Corporation, Liquidator's Notice of Appeal on the ground that it was late, i.e., more than 15
petitioner, vs. COURT OF APPEALS, HON. JUDGE REGINO T. days after receipt of the decision. The judge declared his September 13,
VERIDIANO II, DEPUTY SHERIFF RAMON ENRIQUEZ and ANG ENG 1991 order and subsequent orders to be final and executory and denied
JOO, ANG KEONG LAN and E.J ANG INT'L. LTD., represented by their reconsideration. On March 27, 1992, he granted the Union's Motion for
Attorney-in-fact, GONZALO C. SY, respondents. issuance of a writ of Execution.
G.R. No. 112991 March 20, 1995
Ang Keong Lan and E.J. Ang Int'l., private respondents in G.R. No. 112991,
Liquidation. likewise filed claims for the payment of investment in the PaBC allegedly in
the form of shares of stocks amounting to US$2,531,632.18. The shares of
Facts: stocks, consisting of 154,462 common shares, constituted 11% of the total
subscribed capital stock of the PaBC. They alleged that their claim
Proceedings in the CB and the RTC constituted foreign exchange capital investment entitled to preference in
payment under the Foreign Investments Law.
Petitioners Pacific Banking Corporation (PaBC) was placed under
receivership by the Central Bank of the Philippines pursuant to Resolution In his order dated September 11, 1992, respondent judge of the RTC
No. 699 of its Monetary Board. A few months later, it was placed under directed the Liquidator to pay private respondents the total amount of their
liquidation and a Liquidator was appointed. claim as preferred creditors.

The Central Bank filed with the Regional Trial Court of Manila Branch 31, a The Liquidator received the order on September 16, 1992. On September 30,
petition entitled “Petition for Assistance in the Liquidation of Pacific Banking 1992 he moved for reconsideration, but his motion was denied by the court
Corporation.”3 The petition was approved, after which creditors filed their on October 2, 1992. He received the order denying his Motion for
claims with the court. Reconsideration on October 5, 1992. On October 14, 1992 he filed a Notice
of Appeal from the orders of September 16, 1992 and October 2, 1992. As in
Later a new Liquidator, Vitaliano N. Nañagas, 4 President of the Philippine the case of the Union, however, the judge ordered the Notice of Appeal
Deposit Insurance Corporation (PDIC), was appointed by the Central Bank. stricken off the record on the ground that it had been filed without authority of
the Central Bank and beyond 15 days. In his order of October 28, 1992, the
The Pacific Banking Corporation Employees Organization (Union for short), judge directed the execution of his September 11, 1992 order granting the
petitioner in G.R. No. 109373, filed a complaint-in-intervention seeking Stockholders/ Investors' claim.
payment of holiday pay, 13th month pay differential, salary increase
differential, Christmas bonus, and cash equivalent of Sick Leave Benefit due Proceedings in the Court of Appeals
its members as employees of PaBC. The trial court ordered payment of the
principal claims of the Union. The Liquidator filed separate Petitions for Certiorari, Prohibition and
Mandamus in the Court of Appeals to set aside the orders of the trial court
The Liquidator received a copy of the order on September 16, 1991. On denying his appeal from the orders granting the claims of Union and of the
October 16, 1991, he filed a Motion for Reconsideration and Clarification of Stockholders/Investors. The two Divisions of the Court of Appeals, to which
the order. In his order of December 6, 1991, the judge modified his the cases were separately raffled, rendered conflicting rulings.
September 13, 1991 6 but in effect denied the Liquidator's motion for
reconsideration. This order was received by the Liquidator on December 9,
In its decision of November 17, 1992 in CA-G.R. SP No. 27751 (now G.R.
No. 09373) the Fifth Division 8 held in the case of the Union that the No record on appeal shall be required to take an appeal. In lieu thereof, the
proceeding before the trial court was a special proceeding and, therefore, the entire record shall be transmitted with all the pages prominently numbered
period for appealing from any decision or final order rendered therein is 30 consecutively, together with an index of the contents thereof.
days. Since the notice of appeal of the Liquidator was filed on the 30th day of
his receipt of the decision granting the Union's claims, the appeal was This section shall not apply in appeals in special proceedings and in other
brought on time. The Fifth Division, therefore, set aside the orders of the cases wherein multiple appeals are allowed under applicable provisions of
lower court and directed the latter to give due course to the appeal of the the Rules of Court.
Liquidator and set the Record on Appeal he had filed for hearing.
The Interim Rules and Guidelines to implement BP Blg. 129 provides:
On the other hand, on December 16, 1993, the Fourteenth Division 9 ruled in 19. Period of Appeals. —
CA-G.R. SP No. 29351 (now G.R. No. 112991) in the case of the (a) All appeals, except in habeas corpus cases and in the cases referred to in
Stockholders/Investors that a liquidation proceeding is an ordinary action. paragraph (b) hereof, must be taken within fifteen (15) days from notice of
Therefore, the period for appealing from any decision or final order rendered the judgment, order, resolution or award appealed from.
therein is 15 days and that since the Liquidator's appeal notice was filed on (b) In appeals in special proceedings in accordance with Rule 109 of the
the 23rd day of his receipt of the order appealed from, deducting the period Rules of Court and other cases wherein multiple appeals are allowed, the
during which his motion for reconsideration was pending, the notice of appeal period of appeals shall be thirty (30) days, a record on appeal being required.
was filed late. Accordingly, the Fourteenth Division dismissed the Liquidator's
petition. The Fourteenth Division of the Court of Appeals held that the proceeding is
an ordinary action similar to an action for interpleader under Rule 63. 10 The
Present Proceedings Fourteenth Division stated:
The petition filed is akin to an interpleader under Rule 63 of the Rules of
The Union and the Liquidator then separately filed petitions before this Court. Court where there are conflicting claimants or several claims upon the same
subject matter, a person who claims no interest thereon may file an action for
Issue: interpleader to compel the claimants to “interplead” and litigate their several
Whether a petition for liquidation under §29 of Rep. Act No. 265, otherwise claims among themselves. (Section I Rule 63).
known as the Central Bank Act, is a special proceeding or an ordinary civil
action. An interpleader is in the category of a special civil action under Rule 62
which, like an ordinary action, may be appealed only within fifteen (15) days
Ruling: from notice of the judgment or order appealed from. Under Rule 62, the
As stated in the beginning, the principal question in these cases is whether a preceding rules covering ordinary civil actions which are not inconsistent with
petition for liquidation under §29 of Rep. Act No. 265 is in the nature of a or may serve to supplement the provisions of the rule relating to such civil
special proceeding. If it is, then the period of appeal is 30 days and the party actions are applicable to special civil actions. This embraces Rule 41
appealing must, in addition to a notice of appeal, file with the trial court a covering appeals from the regional trial court to the Court of Appeals.
record on appeal in order to perfect his appeal. Otherwise, if a liquidation ×××
proceeding is an ordinary action, the period of appeal is 15 days from notice Thus, under Section 1 Rule 2 of the Rules of Court, an action is defined as
of the decision or final order appealed from. “an ordinary suit in a court of justice by which one party prosecutes another
for the enforcement or protection of a right or the prevention or redress of a
BP Blg. 129 provides: wrong.” On the other hand, Section 2 of the same Rule states that “every
§39. Appeals. — The period for appeal from final orders, resolutions, awards, other remedy including one to establish the status or right of a party or a
judgments, or decisions of any court in all cases shall be fifteen (15) days particular fact shall be by special proceeding.”
counted from the notice of the final order, resolution, award, judgment or
decision appealed from: Provided, however, that in habeas corpus cases the To our mind, from the aforequoted definitions of an action and a special
period for appeal shall be forty-eight (48) hours from the notice of the proceeding, the petition for assistance of the court in the liquidation of an
judgment appealed from. asset of a bank is not “one to establish the status or right of a party or a
particular fact.” Contrary to the submission of the petitioner, the petition is not Put in another way, the petition only seeks a declaration of the corporation's
intended to establish the fact of insolvency of the bank. The insolvency of the state of insolvency and the concomitant right of creditors and the order of
bank had already been previously determined by the Central Bank in payment of their claims in the disposition of the corporation's assets.
accordance with Section 9 of the CB Act before the petition was filed. All that
needs to be done is to liquidate the assets of the bank and thus the Contrary to the rulings of the Fourteenth Division, liquidation proceedings do
assistance of the respondent court is sought for that purpose. not resemble petitions for interpleader. For one, an action for interpleader
involves claims on a subject matter against a person who has no interest
It should be pointed out that this petition filed is not among the cases therein. 12 This is not the case in a liquidation proceeding where the
categorized as a special proceeding under Section 1, Rule 72 of the Rules of Liquidator, as representative of the corporation, takes charge of its assets
Court, nor among the special proceedings that may be appealed under and liabilities for the benefit of the creditors. 13 He is thus charged with
Section 1, Rule 109 of the Rules. insuring that the assets of the corporation are paid only to rightful claimants
and in the order of payment provided by law.
We disagree with the foregoing view of the Fourteenth Division. Rule 2 of the
Rules of Court provide: Rather, a liquidation proceeding resembles the proceeding for the settlement
§1. Action defined. — Action means an ordinary suit in a court of justice, by of state of deceased persons under Rules 73 to 91 of the Rules of Court. The
which the party prosecutes another for the enforcement or protection of a two have a common purpose: the determination of all the assets and the
right, or the prevention or redress of a wrong. payment of all the debts and liabilities of the insolvent corporation or the
§2. Special Proceeding Distinguished. — Every other remedy, including one estate. The Liquidator and the administrator or executor are both charged
to establish the status or right of a party or a particular fact, shall be by with the assets for the benefit of the claimants. In both instances, the liability
special proceeding. of the corporation and the estate is not disputed. The court's concern is with
the declaration of creditors and their rights and the determination of their
Elucidating the crucial distinction between an ordinary action and a special order of payment.
proceeding, Chief Justice Moran states:
Action is the act by which one sues another in a court of justice for the Furthermore, as in the settlement of estates, multiple appeals are allowed in
enforcement or protection of a right, or the prevention or redress of a wrong proceedings for liquidation of an insolvent corporation. As the Fifth Division of
while special proceeding is the act by which one seeks to establish the status the Court of Appeals, quoting the Liquidator, correctly noted:
or right of a party, or a particular fact. Hence, action is distinguished from A liquidation proceeding is a single proceeding which consists of a number of
special proceeding in that the former is a formal demand of a right by one cases properly classified as “claims.” It is basically a two-phased proceeding.
against another, while the latter is but a petition for a declaration of a status, The first phase is concerned with the approval and disapproval of claims.
right or fact. Where a party litigant seeks to recover property from another, Upon the approval of the petition seeking the assistance of the proper court
his remedy is to file an action. Where his purpose is to seek the appointment in the liquidation of a close entity, all money claims against the bank are
of a guardian for an insane, his remedy is a special proceeding to establish required to be filed with the liquidation court. This phase may end with the
the fact or status of insanity calling for an appointment of guardianship. declaration by the liquidation court that the claim is not proper or without
basis. On the other hand, it may also end with the liquidation court allowing
Considering this distinction, a petition for liquidation of an insolvent the claim. In the latter case, the claim shall be classified whether it is ordinary
corporation should be classified a special proceeding and not an ordinary or preferred, and thereafter included Liquidator. In either case, the order
action. Such petition does not seek the enforcement or protection of a right allowing or disallowing a particular claim is final order, and may be appealed
nor the prevention or redress of a wrong against a party. It does not pray for by the party aggrieved thereby.
affirmative relief for injury arising from a party's wrongful act or omission nor
state a cause of action that can be enforced against any person. The second phase involves the approval by the Court of the distribution plan
prepared by the duly appointed liquidator. The distribution plan specifies in
What it seeks is merely a declaration by the trial court of the corporation's detail the total amount available for distribution to creditors whose claim were
insolvency so that its creditors may be able to file their claims in the earlier allowed. The Order finally disposes of the issue of how much property
settlement of the corporation's debts and obligations. Put in another way, the is available for disposal. Moreover, it ushers in the final phase of the
petition only seeks a declaration of the corporation's debts and obligations.
liquidation proceeding — payment of all allowed claims in accordance with Certiorari, Prohibition and Mandamus must be affirmed albeit for a different
the order of legal priority and the approved distribution plan. reason.
Verily, the import of the final character of an Order of allowance or On the other hand, in G.R. No. 109373 (case of the Labor Union), we find
disallowance of a particular claim cannot be overemphasized. It is the that the Fifth Division correctly granted the Liquidator's Petition for Certiorari,
operative fact that constitutes a liquidation proceeding a “case where multiple Prohibition and Mandamus. As already noted, the Liquidator filed a notice of
appeals are allowed by law.” The issuance of an Order which, by its nature, appeal and a motion for extension to file a record on appeal on December
affects only the particular claims involved, and which may assume finality if 10, 1991, i.e., within 30 days of his receipt of the order granting the Union's
no appeal is made therefrom, ipso facto creates a situation where multiple claim. Without waiting for the resolution of his motion for extension, he filed
appeals are allowed. on December 20, 1991 within the extension sought a record on appeal.
Respondent judge thus erred in disallowing the notice on appeal and denying
A liquidation proceeding is commenced by the filing of a single petition by the the Liquidator's motion for extension to file a record on appeal.
Solicitor General with a court of competent jurisdiction entitled, “Petition for
Assistance in the Liquidation of e.g., Pacific Banking Corporation. All claims The Fifth Division of the Court of Appeals correctly granted the Liquidator's
against the insolvent are required to be filed with the liquidation court. Petition for Certiorari, Prohibition and Mandamus and its decision should,
Although the claims are litigated in the same proceeding, the treatment is therefore, be affirmed.
individual. Each claim is heard separately. And the Order issued relative to a
particular claim applies only to said claim, leaving the other claims Second. In G.R. No. 109373, The Union claims that under §29 of Rep. Act
unaffected, as each claim is considered separate and distinct from the No. 265, the court merely assists in adjudicating the claims of creditors,
others. Obviously, in the event that an appeal from an Order allowing or preserves the assets of the institution, and implements the liquidation plan
disallowing a particular claim is made, only said claim is affected, leaving the approved by the Monetary Board and that, therefore, as representative of the
others to proceed with their ordinary course. In such case, the original Monetary Board, the Liquidator cannot question the order of the court or
records of the proceeding are not elevated to the appellate court. They appeal from it. It contends that since the Monetary Board had previously
remain with the liquidation court. In lieu of the original record, a record of admitted PaBC's liability to the laborers by in fact setting aside the amount of
appeal is instead required to be prepared and transmitted to the appellate P112,234,292.44 for the payment of their claims, there was nothing else for
court. the Liquidator to do except to comply with the order of the court.

Inevitably, multiple appeals are allowed in liquidation proceedings. The Union's contention is untenable. In liquidation proceedings, the function
Consequently, a record on appeal is necessary in each and every appeal of the trial court is not limited to assisting in the implementation of the orders
made. Hence, the period to appeal therefrom should be thirty (30) days, a of the Monetary Board. Under the same section (§29) of the law invoked by
record on appeal being required. (Record pp. 162-164). the Union, the court has authority to set aside the decision of the Monetary
Board “if there is a convincing proof that the action is plainly arbitrary and
In G.R. No. 112991 (the case of the Stockholders/Investors), the Liquidator's made in bad faith.” As this Court held in Rural Bank of Buhi, Inc. v. Court of
notice of appeal was filed on time, having been filed on the 23rd day of Appeals:
receipt of the order granting the claims of the Stockholders/Investors.
However, the Liquidator did not file a record on appeal with the result that he There is no question, that the action of the monetary Board in this regard
failed to perfect his appeal. As already stated a record on appeal is required may be subject to judicial review. Thus, it has been held that the Court's may
under the Interim Rules and Guidelines in special proceedings and for cases interfere with the Central Bank's exercise of discretion in determining whether
where multiple appeals are allowed. The reason for this is that the several or not a distressed bank shall be supported or liquidated. Discretion has its
claims are actually separate ones and a decision or final order with respect to limits and has never been held to include arbitrariness, discrimination or bad
any claim can be appealed. Necessarily the original record on appeal must faith (Ramos v. Central Bank of the Philippines, 41 SCRA 567 [1971]).
remain in the trial court where other claims may still be pending. In truth, the Liquidator is the representative not only of the Central Bank but
also of the insolvent bank. Under §§28A-29 of Rep. Act No. 265 he acts in
Because of the Liquidator's failure to perfect his appeal, the order granting behalf of the bank “personally or through counsel as he may retain, in all
the claims of the Stockholders/Investors became final. Consequently, the actions or proceedings or against the corporation” and he has authority “to do
Fourteenth Division's decision dismissing the Liquidator's Petition for whatever may be necessary for these purposes.” This authority includes the
power to appeal from the decisions or final orders of the court which he
believes to be contrary to the interest of the bank.
Finally the Union contends that the notice of appeal and motion for extension
of time to file the record on appeal filed in behalf of the Central Bank was not
filed by the office of the Solicitor General as counsel for the Central Bank.
This contention has no merit. On October 22, 1992, as Assistant Solicitor
General Cecilio O. Estoesta informed the trial court in March 27, 1992, the
OSG had previously authorized lawyers of the PDIC to prepare and sign
pleadings in the case. Conformably thereto the Notice of Appeal and the
Motion for Additional Time to submit Record on Appeal filed were jointly
signed by Solicitor Reynaldo I. Saludares in behalf of the OSG and by
lawyers of the PDIC.

WHEREFORE, in G.R. No. 109373 and G.R. No 112991, the decisions

appealed from are AFFIRMED.
 THE CENTRAL BANK OF THE PHILIPPINES and RAMON V. Under Sec. 29 of R.A. 265, 15 the Central Bank, through the Monetary Board,
TIAOQUI, petitioners,  vs. COURT OF APPEALS and TRIUMPH is vested with exclusive authority to assess, evaluate and determine the
SAVINGS BANK, respondents. condition of any bank, and finding such condition to be one of insolvency, or
G.R. No. 76118 March 30, 1993 that its continuance in business would involve probable loss to its depositors
or creditors, forbid the bank or non-bank financial institution to do business in
Facts: the Philippines; and shall designate an official of the CB or other competent
person as receiver to immediately take charge of its assets and liabilities.
Based on examination reports submitted by the Supervision and Examination The fourth paragraph, 16 which was then in effect at the time the action was
Sector (SES), Department II, of the Central Bank (CB) “that the financial commenced, allows the filing of a case to set aside the actions of the
condition of Triumph Savings Bank (TSB) is one of insolvency and its Monetary Board which are tainted with arbitrariness and bad faith.
continuance in business would involve probable loss to its depositors and
creditors,”3 the Monetary Board (MB) issued Resolution No. 596 ordering the Contrary to the notion of private respondent, Sec. 29 does not contemplate
closure of TSB, forbidding it from doing business in the Philippines, placing it prior notice and hearing before a bank may be directed to stop operations
under receivership, and appointing Ramon V. Tiaoqui as receiver. Tiaoqui and placed under receivership. When par. 4 (now par. 5, as amended by
assumed office on 3 June 1985. E.O. 289) provides for the filing of a case within ten (10) days after the
receiver takes charge of the assets of the bank, it is unmistakable that the
TSB then filed a complaint with the Regional Trial Court of Quezon City assailed actions should precede the filing of the case. Plainly, the legislature
against Central Bank and Ramon V. Tiaoqui to annul MB Resolution No. 596, could not have intended to authorize “no prior notice and hearing” in the
with prayer for injunction, challenging in the process the constitutionality of closure of the bank and at the same time allow a suit to annul it on the basis
Sec. 29 of R.A. 269, otherwise known as “The Central Bank Act,” as of absence thereof.
amended, insofar as it authorizes the Central Bank to take over a banking
institution even if it is not charged with violation of any law or regulation, In the early case of Rural Bank of Lucena, Inc. v. Arca [1965],  17 We held that
much less found guilty thereof. 5 a previous hearing is nowhere required in Sec. 29 nor does the
××× constitutional requirement of due process demand that the correctness
of the Monetary Board's resolution to stop operation and proceed to
Petitioners claim that it is the essence of Sec. 29 of R.A. 265 that prior notice liquidation be first adjudged before making the resolution effective. It is
and hearing in cases involving bank closures should not be required since in enough that a subsequent judicial review be provided.
all probability a hearing would not only cause unnecessary delay but also
provide bank "insiders" and stockholders the opportunity to further dissipate Even in Banco Filipino, 18 We reiterated that Sec. 29 of R.A. 265 does not
the bank's resources, create liabilities for the bank up to the insured amount require a previous hearing before the Monetary Board can implement its
of P40,000. , and even destroy evidence of fraud or irregularity in the bank's resolution closing a bank, since its action is subject to judicial scrutiny as
operations to the prejudice of its depositors and creditors. 14 Petitioners provided by law.
further argue that the legislative intent of Sec. 29 is to repose in the Monetary
Board exclusive power to determine the existence of statutory grounds for It may be emphasized that Sec. 29 does not altogether divest a bank or a
the closure and liquidation of banks, having the required expertise and non-bank financial institution placed under receivership of the opportunity to
specialized competence to do so. be heard and present evidence on arbitrariness and bad faith because within
ten (10) days from the date the receiver takes charge of the assets of the
Issue: bank, resort to judicial review may be had by filing an appropriate pleading
May a Monetary Board resolution placing a private bank under receivership with the court. Respondent TSB did in fact avail of this remedy by filing a
be annulled on the ground of lack of prior notice and hearing? complaint with the RTC of Quezon City on the 8th day following the takeover
by the receiver of the bank's assets on 3 June 1985.
Ruling:
(GR:) NO. This “close now and hear later” scheme is grounded on practical and legal
considerations to prevent unwarranted dissipation of the bank's assets and
as a valid exercise of police power to protect the depositors, creditors, . . . [u]nless adequate and determined
stockholders and the general public. efforts are taken by the government against
In Rural Bank of Buhi, Inc.  v. Court of Appeals, 19 We stated that — distressed and mismanaged banks, public
. . . due process does not necessarily require a prior hearing; faith in the banking system is certain to
a hearing or an opportunity to be heard may deteriorate to the prejudice of the national
be subsequent to the closure. One can just imagine the dire economy itself, not to mention the losses
consequences of a prior hearing: bank runs would be the suffered by the bank depositors, creditors,
order of the day, resulting in panic and hysteria. In the and stockholders, who all deserve the
process, fortunes may be wiped out and disillusionment will protection of the government. The
run the gamut of the entire banking community. government cannot simply cross its arms
while the assets of a bank are being
We stressed in Central Bank of the Philippines v. Court of Appeals 20 that — depleted through mismanagement or
. . . the banking business is properly subject to reasonable irregularities. It is the duty of the Central
regulation under the police power of the state because of its Bank in such an event to step in and
nature and relation to the fiscal affairs of the people and the salvage the remaining resources of the bank
revenues of the state (9 CJS 32). Banks are affected with so that they may not continue to be
public interest because they receive funds from the general dissipated or plundered by those entrusted
public in the form of deposits. Due to the nature of their with their management.
transactions and functions, a fiduciary relationship is created
between the banking institutions and their depositors. Section 29 of R.A. 265 should be viewed in this light; otherwise, We would be
Therefore, banks are under the obligation to treat with subscribing to a situation where the procedural rights invoked by private
meticulous care and utmost fidelity the accounts of those respondent would take precedence over the substantive interests of
who have reposed their trust and confidence in them (Simex depositors, creditors and stockholders over the assets of the bank.
International [Manila], Inc., v. Court of Appeals, 183
SCRA 360 [1990]). Admittedly, the mere filing of a case for receivership by the Central Bank can
It is then the Government's responsibility to see to it that the trigger a bank run and drain its assets in days or even hours leading to
financial interests of those who deal with the banks and insolvency even if the bank be actually solvent. The procedure prescribed in
banking institutions, as depositors or otherwise, are Sec. 29 is truly designed to protect the interest of all concerned, i.e., the
protected. In this country, that task is delegated to the depositors, creditors and stockholders, the bank itself, and the general
Central Bank which, pursuant to its Charter (R.A. 265, as public, and the summary closure pales in comparison to the protection
amended), is authorized to administer the monetary, banking afforded public interest. At any rate, the bank is given full opportunity to
and credit system of the Philippines. Under both the 1973 prove arbitrariness  and bad faith  in placing the bank under receivership, in
and 1987 Constitutions, the Central Bank is tasked with which event, the resolution may be properly nullified and the receivership
providing policy direction in the areas of money, banking and lifted as the trial court may determine.
credit; corollarily, it shall have supervision over the
operations of banks (Sec. 14, Art. XV, 1973 Constitution, The heavy reliance of respondents on the Banco Filipino case is misplaced
and Sec. 20, Art. XII, 1987 Constitution). Under its charter, in view of factual circumstances therein which are not attendant in the
the CB is further authorized to take the necessary steps present case. We ruled in Banco Filipino  that the closure of the bank was
against any banking institution if its continued operation arbitrary and attendant with grave abuse of discretion, not because of the
would cause prejudice to its depositors, creditors and the absence of prior notice and hearing, but that the Monetary Board had no
general public as well. This power has been expressly sufficient basis to arrive at a sound conclusion of insolvency to justify the
recognized by this Court. In Philippine Veterans Bank closure. In other words, the arbitrariness, bad faith and abuse of discretion
Employees Union-NUBE v. Philippine Veterans Banks (189 were determined only after the bank was placed under conservatorship and
SCRA 14 [1990], this Court held that: evidence thereon was received by the trial court. As this Court found in that
case, the Valenzuela, Aurellano and Tiaoqui Reports contained unfounded
assumptions and deductions which did not reflect the true financial condition impossible, for it cannot be expected that the master, the CB, will allow the
of the bank. For instance, the subtraction of an uncertain amount as receiver it has appointed to question that very appointment." Consequently,
valuation reserve from the assets of the bank would merely result in its net only stockholders of a bank could file an action for annulment of a Monetary
worth or the unimpaired capital and surplus; it did not reflect the total Board resolution placing the bank under receivership and prohibiting it from
financial condition of Banco Filipino. continuing operations. 22 In Central Bank v. Court of Appeals, 23 We explained
the purpose of the law —
Furthermore, the same reports showed that the total assets of Banco Filipino . . . in requiring that only the stockholders of record
far exceeded its total liabilities. Consequently, on the basis thereof, the representing the majority of the capital stock may bring the
Monetary Board had no valid reason to liquidate the bank; perhaps it could action to set aside a resolution to place a bank under
have merely ordered its reorganization or rehabilitation, if need be. Clearly, conservatorship is to ensure that it be not frustrated or
there was in that case a manifest arbitrariness, abuse of discretion and bad defeated by the incumbent Board of Directors or officers who
faith in the closure of Banco Filipino  by the Monetary Board. But, this is not may immediately resort to court action to prevent its
the case before Us. For here, what is being raised as arbitrary by private implementation or enforcement. It is presumed that such a
respondent is the denial of prior notice and hearing by the Monetary Board, a resolution is directed principally against acts of said
matter long settled in this jurisdiction, and not the arbitrariness which the Directors and officers which place the bank in a state of
conclusions of the Supervision and Examination Sector (SES), Department continuing inability to maintain a condition of liquidity
II, of the Central Bank were reached. adequate to protect the interest of depositors and creditors.
Indirectly, it is likewise intended to protect and safeguard the
Once again We refer to Rural Bank of Buhi, Inc.  v. Court of Appeals, 21 and rights and interests of the stockholders. Common sense and
reiterate Our pronouncement therein that — public policy dictate then that the authority to decide on
. . . the law is explicit as to the conditions prerequisite to whether to contest the resolution should be lodged with the
the action of the Monetary Board to forbid the institution stockholders owning a majority of the shares for they are
to do business in the Philippines and to appoint a expected to be more objective in determining whether the
receiver to immediately take charge of the bank's assets resolution is plainly arbitrary and issued in bad faith.
and liabilities. They are: (a) an examination made by the
examining department of the Central Bank; (b) report by said PREMISES considered, the Decision of the Court of Appeals in CA-G.R. SP
department to the Monetary Board; and (c)  prima facie No. 07867 is AFFIRMED, except insofar as it upholds the Order of the trial
showing that its continuance in business would involve court of 11 November 1985 directing petitioner RAMON V. TIAOQUI to
probable loss to its depositors or creditors. restore the management of TRIUMPH SAVINGS BANK to its elected Board
of Directors and Officers, which is hereby SET ASIDE.
In sum, appeal to procedural due process cannot just outweigh the evil
sought to be prevented; hence, We rule that Sec. 29 of R.A. 265 is a sound Let this case be remanded to the Regional Trial Court of Quezon City for
legislation promulgated in accordance with the Constitution in the exercise of further proceedings to determine whether the issuance of Resolution No. 596
police power of the state. Consequently, the absence of notice and hearing is of the Monetary Board was tainted with arbitrariness and bad faith and to
not a valid ground to annul a Monetary Board resolution placing a bank under decide the case accordingly.
receivership. The absence of prior notice and hearing cannot be deemed
acts of arbitrariness and bad faith. Thus, an MB resolution placing a bank
under receivership, or conservatorship for that matter, may only be
annulled after a determination has been made by the trial court that its
issuance was tainted with arbitrariness and bad faith. Until such
determination is made, the status quo shall be maintained, i.e., the bank
shall continue to be under receivership.

As regards the second ground, to rule that only the receiver may bring suit in
behalf of the bank is, to echo the respondent appellate court, "asking for the