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Conservatorship and Receivership Digest

Conservatorship and Receivership Digest

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Published by Melanie Mejia

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Published by: Melanie Mejia on May 28, 2014
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In 1983, Phil Veterans Bank (PVB) was placed under receivership by BSP by virtue of a resolution issued by the Monetary Board. Petitioner bank was subsequently placed under liquidation in 1985. 1.
Consequently, the bank’s employees including private respondent
Molina were terminated from work and given their respective separation pay and other benefits. 2.
To assist in the liquidation, Molina and other former employees of PVB were rehired. 3.
Molina filed an action against petitioner bank’s liquidation team
arguing that he was entitled an increase in his salary by virtue of Work Order 1 (P17 increase in the daily wage in 1990) and Work Order 2 (P12 increase in 1991) 4.
Petitioner bank argued that when it was placed under liquidation, it lost its juridical personality, as such it could no longer enter into contracts or transact business, since all its assets and liabilities
were turned over to the Central Bank. Since Molina’s complaint
pertained to acts committed during the liquidation, the substitution of PVB as party-respondent was erroneous
WON the bank is liable to pay Molina’s claims
Yes. When a bank is declared insolvent and placed under receivership, the Monetary Board determines whether to proceed with the liquidation or reorganization of the financially distressed bank. A receiver takes control and possession of the assets of the bank for the benefit of its creditors and concurrently represents the bank. On the other hand, a liquidator assumes the role of the receiver upon the determination by the Monetary Board that the bank can no longer
resume business. The liquidator’s task is to dispose all of the assets of
the bank and effect partial payments of its obligations in accordance with their legal priority. In both receivership and liquidation proceedings, the bank retains its juridical personality despite the closure of its business; in fact, the bank may be even sued. Its corporate existence is assumed by the receiver or liquidator. The latter, however,
acts not only for the benefit of the bank, but for the bank’s creditors as
well. CAB: PVB was initially closed and put under receivership and liquidation. Upon its rehabilitation, petitioner assumed the rights and obligations of
the receiver and liquidator. This includes Molina’s claim for unpaid
wages. It must be borne in mind that all the acts of the receiver and
liquidator pertain to the petitioner, having assumed petitioner’s
corporate existence. Petitioner cannot disclaim liability by arguing that the non-
payment of Molina’s wages was committed by the liquidators
during the liquidation period.
In September 2007, the Supervision and Examination Department of BSP conducted examinations of the books of the following banks: Rural Bank of Paranaque Inc (RBPI), Rural Bank of San Jose (Batangas), Rural Bank of Carmen Cebu Inc, Pilipino Rural Bank Inc, Phil Countryside Rural Bank Inc, Rural Bank of Calatagan (Batangas), Rural Bank of Darbci Inc, Rural bank of Kananga (Leyte), Rural Bank de Bisayas Minglanilla, and San Pablo City Development Bank Inc 1.
After the examinations, SED officers provided the banks with copies of Lists of Findings. These banks were then required to comment and undertake the remedial measures within 30 days from their receipt of the lists, including the infusion of additional capital. However, according to SED, said banks failed to carry out the required remedial measures 2.
In response, the banks requested that the basis for the capital infusion be disclosed and noted that none of them received the Report of Examination (ROE) which finalizes the audit findings. 3.
RBPI then filed an action to nullify the BSP ROE with an application for a TRO and a writ of preliminary injunction. RBPI prayed that petitioners be enjoined from submitting the ROE or any similar report to the Monetary Board; or if the ROE had already been submitted, that the Monetary Board be enjoined them from acting on the basis of the said ROE (due process). The other banks filed a similar suit. 4.
SED and BSP filed an opposition to the application for a TRO and writ of preliminary injunction. However, respondent judge granted RB
PI’s prayer for the issuance of a TRO. When the cases were
consolidated, respondent judge issued an order granting the issuance of TROs 5.
RTC ruled that the banks were entitled to writs of preliminary injunction. It ruled that it had been the practice of SED to provide ROES to the banks before the submission to the Monetary Board. And since the banks are the subject of said examinations, they are entitled to the copies of the ROEs and denial of such constitute a denial of their right to due process. 6.
CA affirmed the same, ruling that the principles fairness and transparency dictate that the respondent banks are entitled to copies of ROE
WON the issuance of a writ of preliminary injunction is proper
No. The requisites for preliminary injunctive relief are: (a) the invasion of right sought to be protected is material and substantial; (b) the right of the complainant is clear and unmistakable; and (c) there is an urgent and paramount necessity for the writ to prevent serious damage. Such requirements are absent in the present case. The respondent banks failed to show that they are entitled to the copies of ROEs. There is no provision of law, no section in the procedures of BSP that shows that BSP is required to give them copies of ROEs. Sec 28 NCBA, which governs the examinations of banking institutions, provides that the ROE shall be submitted to the Monetary Board; the bank examined is not mentioned as a recipient of the ROE. The issuance by the RTC of writs of preliminary injunction is an unwarranted interference with the powers of the Monetary Board. Sec 29 and 30 NCBA refer to the appointment of a conservator or a receiver for a bank, which is a power of the Monetary Board for which they need the ROEs done by the supervising or examining department. The writs of preliminary injunction issued by the RTC hinder the Monetary Board
from fulfilling its function under the law. The actions of the Monetary Board under Sec 29 and 30 NCBA may not be restrained or set aside except on petition for certiorari on the ground that the action taken was in excess of jurisdiction, or with such grave abuse of discretion tantamount to lack or excess of jurisdiction. Therefore, the writs of preliminary injunction cannot enjoin the Monetary Board from taking action under the provisions of NCBA. As to the third requirement, the banks have shown no necessity for the preliminary injunctive relief to prevent serious damage. The serious damage contemplated by the RTC was the possibility of imposition of sanctions upon respondent bank, even the imposition of closure. However, under the law, the sanction of closure could be imposed by
BSP even without notice and hearing. The ―close now, 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 depositors, creditors, stockholders and the general public.
In May 2005, the Board of Directors of PDIC adopted a resolution approving the conduct of an investigation in accordance with Sec 9(b-1) RA 3591, on the basis of the ROE of BSP on 10 banks. The notice of investigation as then served on the president of respondent Phil Countryside Rural Bank Inc (PCRBI). 1.
In the course of its investigation, PDIC found that PCRBI granted loans to certain individuals, which were settled by way of dacion of properties. These properties, however, had already been previously foreclosed and consolidated. A similar investigation was sought against PRBI, RBCI and BEAI because said banks were
among the 10 banks collectively known as the ―legacy banks‖
(Legacy scam) 2.
However, PRBI, RBCI and BEAI refused access to their records and documents. 3.
The banks then filed an action against PDIC and prayed for a  judgment interpreting Sec 9(b-1) PDIC charter to require prior Monetary Board approval before PDIC could exercise investigation/examination power over the banks 4.
PDIC filed a motion to dismiss alleging that RTC had no  jurisdiction over said petition since a breach had already been committed by the banks when they received the notices of investigation and because PDIC need not secure prior MB approval sin
ce ―examination‖ and ―investigation‖ are two different terms.
Later, the banks withdrew their application for TRO reasoning that the lower courts cannot issue injunctions against PDIC. The banks then filed a petition for injunction and TRO with CA-Manila 6.
But before CA-Manila could rule on the petition, RTC Makati dismissed the petition on the ground that there already existed a breach of law that isolated the case from the jurisdiction of the

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