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CASE TITLE: CENTRAL BANK OF THE PHILIPPINES as liquidators custody in excess of the creditors more

Liquidator of the FIDELITY SAVINGS BANK, petitioner, vs. preferred.
HONORABLE JUDGE JESUS P. MORFE, as Presiding Judge of 7. The Central bank appealed, contending that the Elizes
Branch XIII, Court of First Instance of Manila, Spouses and Padilla spouses do not enjoy any preference
AUGUSTO and ADELAIDA PADILLA and Spouses MARCELA and because: (a) they were rendered after the fidelity
JOB ELIZES, respondents. savings bank was declared insolvent, and (2) under
G.R. No. L-38427 March 12, 1975 the charter of the central bank and the general
banking law, no final judgment can be validly obtained
FACTS: against an insolvent bank.
This case involves the question of whether a final judgment 8. Liquidation Court noted that there is no provision in
for the payment of a time deposit in a savings bank which the charter of the Central Bank in the General Banking
judgment was obtained after the bank was declared Law (Republic Acts Nos. 265 and 337, respectively)
insolvent, is a preferred claim against the bank. which suspends or abates civil actions against an
insolvent bank pending in courts other than the
1. On February 18, 1969 the monetary board found the liquidation court. It reasoned out that, because such
fidelity savings bank to be insolvent. actions are not suspended, judgments against
2. The Board Directed the superintendent of bank to take insolvent banks could be considered as preferred
charge of its assets and forbade it to do business. On credits under article 2244(14)(b) of the Civil Code.
December 9, 1969, the board resolved to seek the 9. It further noted that, in contrast with the Central Act,
court’s assistance and supervision in the liquidation of section 18 of the Insolvency Law provides that upon
the bank. the issuance by the court of an order declaring a
3. The resolution was implemented only on January 25, person insolvent "all civil proceedings against the said
1972 when the central bank of the Philippines filed the insolvent shall be stayed."
corresponding petition for assistance and supervision 10.Liquidation Court: directed the Central Bank to honor
in the CFI of manila. the writs of execution issued by Branches I and XXX for
4. Prior to the institution of the liquidation proceedings the enforcement of the judgments obtained by the
but after the declaration of insolvency, the spouses job Elizes and Padilla spouses.
Elizes and Marecla Elizes filed a complaint in the CFI on o It suggested that, after satisfaction of the
Manila against the fidelity savings bank for the judgment the Central Bank, as liquidator, should
recovery of the balance of their time share deposits include said judgments in the list of preferred
which was granted by the court. credits contained in the "Project of Distribution"
5. In another case, the spouses Augusto Padilla and "with the notation "already paid" "
Adelaida Padilla Secured a judgment against the 11.Argument of Central Bank: That after the Monetary
Fidelity Savings Bank for the Balance of their time Board has declared that a bank is insolvent and has
deposits plus interests. ordered it to cease operations, the Board becomes the
6. The lower court, upon motion of the Elizes and Padilla trustee of its assets "for the equal benefit of all the
spouses and over the opposition of the central bank, creditors, including the depositors".
directed the latter, as liquidator to pay their time o The Central Bank cites the ruling that "the
deposits as preferred credits evidenced by the final assets of an insolvent banking institution are
judgments within the meaning of Art 2244 (14) (b) of held in trust for the equal benefit of all creditors,
the Civil Code, if there are enough funds in the and after its insolvency, one cannot obtain an
advantage or a preference over another by an

It cites the ruling that "a doing business. or allows bank is insolvent as shown by the fact that it can no disbursement. would rush to the courts to secure creditor of an insolvent state bank in the hands of a judgments for the payment of their deposits. be rendered for the payment of their deposits and then having stopped operations since February 19. with the liquidation court. which judgment was obtained after the bank inequitable situation could not have been was declared insolvent. as such.  SC said that such judgment cannot be considered Stanton Trust & Savings Bank. or has been enjoined by the Monetary Board from Republic Act No. execution or otherwise" (Rohr vs. suits by some payment of the deposits. General Banking Act. mischief and confusion. preferred and that Art. judgments as entitled to priority would mean that 13. such judgments for the payment of the deposits in an 12. taking advantage of the long interval RATIO: between the declaration of insolvency and the filling of  It should noted that fixed. Depositors armed with such judgments would pester the liquidation court with ISSUE: claims for preference on the basis of article 2244(14) WON a final judgment for the payment of a time deposit in a (b). Some of the judgments is a judgment creditor" would be default judgments. 1956). payable to the depositors. That savings bank.  Considering that the deposits in questions.The stand of the Central Bank is that all depositors and insolvent savings bank which were obtained after the creditors of the insolvent bank should file their actions declaration of insolvency. after learning that the officer of a bank who disburses. such judgments would be considered preferred credits was forbidden to do business (and that ban would under Art. after litigation expenses in securing a judgment for the the bank is declared insolvent. 2244 (14) (b) does not apply to 245 Pac. 248. sec. contemplated by the framers of section 29. depositors could be maintained and judgment would  The circumstance that the Fidelity Savings Bank. 1969. 76 Mont. inception. 2244 (14) (b) of the civil code. 52 of Act No. are not  The judicial declaration that the said deposits were preferred credits. of the funds of the bank after it longer pay withdrawals or that it has closed its doors becomes insolvent (Sec. In support of that view it  A contrary rule or practice would be productive of cites the provision that the Insolvency Law does not injustice. To recognize such apply to banks (last sentence. were not preferred credit simple because the depositors. Less alert depositors would be prejudiced. from the insolvent bank but who did not want to incur  That purpose would be nullified if. the courts would be swamped entitled to a preference for (by) the mere fact that he with suits of that character. 947). attachment. could not have given the Elizes and Padilla doing business is to prevent some depositors from spouses a priority over the other depositors whose having an undue or fraudulent preference over other deposits were likewise indisputably due and owing creditors and depositors. their time deposits. include the payment of time deposits) implies that . as indisputably they were  One purpose in prohibiting the insolvent bank from due. deposits of money in banks and similar institutions are were able to secure judgments for the payment of not true deposits. liquidator who recovered a judgment against it is not  In such an eventuality. as in this case. savings.  They are considered simple plans and. in their HELD: NO. 337). and current the petition for judicial assistance and supervision. is a preferred claim against the bank.It also invokes the provision penalizing a director depositors in insolvent banks. 85.

suits for the payment of such deposits were prohibited. the lower court's orders of liquidator. 2243. which contains the Bank Liquidation  There is no cogent reason why the Elizes and Padilla Rules and Regulations. it indicated in step III the spouses should not adhere to the procedure outlined in procedure for processing the claims against the the said rules and regulations. 1972. to submit a Project of Distribution which August 20. October 3. 2246 and 2247" of the Civil Code  It is noteworthy that in the trial court's order of (note that article 2244 was not mentioned). 2242. 1974 are reversed and set aside. No costs. .  In Step IV. the court directed the Central Bank. should include "a list of the preferred credits to be paid What was directly prohibited should not be in full in the order of priorities established in Articles encompassed indirectly. 1973 and February 25. as DISPOSITIVE: WHEREFORE. 2241. insolvent bank.