Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 109373 March 20, 1995

PACIFIC BANKING CORPORATION EMPLOYEES ORGANIZATION, PAULA S.

PAUG, and its officers and members, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and VITALIANO N. NAÑAGAS II, as
Liquidator of Pacific Banking Corporation, respondents.

G.R. No. 112991 March 20, 1995

THE PRESIDENT OF THE PHILIPPINE DEPOSIT INSURANCE CORPORATION, as

Liquidator of the Pacific Banking Corporation , petitioner,
vs.
COURT OF APPEALS, HON. JUDGE REGINO T. VERIDIANO II, DEPUTY SHERIFF
RAMON ENRIQUEZ and ANG ENG JOO, ANG KEONG LAN and E.J ANG INT'L.
LTD., represented by their Attorney-in-fact, GONZALO C. SY, respondents.

RESOLUTION
MENDOZA, J.:

These cases have been consolidated because the principal question involved is the
same: whether a petition for liquidation under §29 of Rep. Act No. 265, otherwise known
as the Central Bank Act, is a special proceeding or an ordinary civil action. The Fifth and
the Fourteenth Divisions of the Court of Appeals reached opposite results on this
question and consequently applied different periods for appealing.

The facts are as follows:

I.

Proceedings in the CB and the RTC

On July 5, 1985, the Pacific Banking Corporation (PaBC) was placed under receivership
by the Central Bank of the Philippines pursuant to Resolution No. 699 of its Monetary
Board. A few months later, it was placed under liquidation1 and a Liquidator was
appointed.2
On April 7, 1986, the Central Bank filed with the Regional Trial Court of Manila Branch 31,
a petition entitled "Petition for Assistance in the Liquidation of Pacific Banking
Corporation." 3 The petition was approved, after which creditors filed their claims with the
court.

On May 17, 1991, a new Liquidator, Vitaliano N. Nañagas,4 President of the Philippine
Deposit Insurance Corporation (PDIC), was appointed by the Central Bank.

On March 13, 1989 the Pacific Banking Corporation Employees Organization (Union for
short), petitioner in G.R. No. 109373, filed a complaint-in-intervention seeking payment
of holiday pay, 13th month pay differential, salary increase differential, Christmas bonus,
and cash equivalent of Sick Leave Benefit due its members as employees of PaBC. In its
order dated September 13, 1991, the trial court ordered payment of the principal claims
of the Union.5

The Liquidator received a copy of the order on September 16, 1991. On October 16,
1991, he filed a Motion for Reconsideration and Clarification of the order. In his order of
December 6, 1991, the judge modified his September 13, 19916 but in effect denied the
Liquidator's motion for reconsideration. This order was received by the Liquidator on
December 9, 1991. The following day, December 10, 1991, he filed a Notice of Appeal
and a Motion for Additional Time to Submit Record on Appeal. On December 23, 1991,
another Notice of Appeal was filed by the Office of the Solicitor General in behalf of
Nañagas.

In his order of February 10, 1992, respondent judge disallowed the Liquidator's Notice of
Appeal on the ground that it was late, i.e., more than 15 days after receipt of the decision.
The judge declared his September 13, 1991 order and subsequent orders to be final and
executory and denied reconsideration. On March 27, 1992, he granted the Union's
Motion for issuance of a writ of Execution.

Ang Keong Lan and E.J. Ang Int'l., private respondents in G.R. No. 112991, 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 stocks, consisting of 154,462
common shares, constituted 11% of the total subscribed capital stock of the PaBC. They
alleged that their claim constituted foreign exchange capital investment entitled to
preference in payment under the Foreign Investments Law.

In his order dated September 11, 1992, respondent judge of the RTC directed the
Liquidator to pay private respondents the total amount of their claim as preferred
creditors.7

The Liquidator received the order on September 16, 1992. On September 30, 1992 he
moved for reconsideration, but his motion was denied by the court on October 2, 1992.
He received the order denying his Motion for 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 the case of the Union, however, the judge ordered the Notice of
Appeal 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 judge directed
the execution of his September 11, 1992 order granting the Stockholders/ Investors'
claim.
 II.

Proceedings in the Court of Appeals

The Liquidator filed separate Petitions for Certiorari, Prohibition and Mandamus in the
Court of Appeals to set aside the orders of the trial court denying his appeal from the
orders granting the claims of Union and of the Stockholders/Investors. The two Divisions
of the Court of Appeals, to which the cases were separately raffled, rendered conflicting
rulings.

In its decision of November 17, 1992 in CA-G.R. SP No. 27751 (now G.R. No. 09373)
the Fifth Division8 held in the case of the Union that the proceeding before the trial court
was a special proceeding and, therefore, the period for appealing from any decision or
final order rendered therein is 30 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 brought on time. The Fifth Division, therefore, set aside the orders of the lower court
and directed the latter to give due course to the appeal of the Liquidator and set the
Record on Appeal he had filed for hearing.

On the other hand, on December 16, 1993, the Fourteenth Division9 ruled in CA-G.R. SP
No. 29351 (now G.R. No. 112991) in the case of the Stockholders/Investors that a
liquidation proceeding is an ordinary action. Therefore, the period for appealing from any
decision or final order rendered therein is 15 days and that since the Liquidator's appeal
notice was filed on the 23rd day of his receipt of the order appealed from, deducting the
period during which his motion for reconsideration was pending, the notice of appeal was
filed late. Accordingly, the Fourteenth Division dismissed the Liquidator's petition.

III.

Present Proceedings

The Union and the Liquidator then separately filed petitions before this Court.

In G.R. No. 109373 the Union contends that:

1. The Court of Appeals acted without jurisdiction over the subject matter or nature of the
suit.

2. The Court of Appeals gravely erred in taking cognizance of the petition

for certiorari filed by Nañagas who was without any legal authority to file it.

3. The Court of Appeals erred in concluding that the case is a special proceeding
governed by Rules 72 to 109 of the Revised Rules of Court.

4. The Court of Appeals erred seriously in concluding that the notice of appeal filed by
Nañagas was filed on time.

5. The Court of Appeals erred seriously in declaring that the second notice of appeal filed
on December 23, 1991 by the Solicitor General is a superfluity.
On the other hand, in G.R. No. 112991 the Liquidator contends that:

1. The Petition for Assistance in the Liquidation of the Pacific Banking Corporation s a
Special Proceeding case and/or one which allows multiple appeals, in which case the
period of appeal is 30 days and not 15 days from receipt of the order/judgment appealed
from.

2. Private respondents are not creditors of PaBC but are plain stockholders whose right
to receive payment as such would accrue only after all the creditors of the insolvent bank
have been paid.

3. The claim of private respondents in the amount of US$22,531,632.18 is not in the

nature of foreign investment as it is understood in law.

4. The claim of private respondents has not been clearly established and proved.

5. The issuance of a writ of execution against the assets of PaBC was made with grave
abuse of discretion.

The petitions in these cases must be dismissed.

First. As stated in the beginning, the principal question in these cases is whether a
petition for liquidation under §29 of Rep. Act No. 265 is in the nature of a special
proceeding. If it is, then the period of appeal is 30 days and the party appealing must, in
addition to a notice of appeal, file with the trial court a 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 of the decision or final order appealed from.

BP Blg. 129 provides:

§39. Appeals. — The period for appeal from final orders, resolutions, awards,
judgments, or decisions of any court in all cases shall be fifteen (15) days
counted from the notice of the final order, resolution, award, judgment or
decision appealed from: Provided, however, that in habeas corpus cases the
period for appeal shall be forty-eight (48) hours from the notice of the judgment
appealed from.

No record on appeal shall be required to take an appeal. In lieu thereof, the

entire record shall be transmitted with all the pages prominently numbered
consecutively, together with an index of the contents thereof.

This section shall not apply in appeals in special proceedings and in other cases
wherein multiple appeals are allowed under applicable provisions of the Rules of
Court.

The Interim Rules and Guidelines to implement BP Blg. 129 provides:

 19. Period of Appeals. —

(a) All appeals, except in habeas corpus cases and in the cases referred to in
paragraph (b) hereof, must be taken within fifteen (15) days from notice of the
judgment, order, resolution or award appealed from.

(b) In appeals in special proceedings in accordance with Rule 109 of the Rules of
Court and other cases wherein multiple appeals are allowed, the period of appeals
shall be thirty (30) days, a record on appeal being required.

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 Fourteenth Division
stated:

The petition filed is akin to an interpleader under Rule 63 of the Rules of 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 interpleader to compel the claimants
to "interplead" and litigate their several claims among themselves. (Section I Rule 63).

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 from notice of the
judgment or order appealed from. Under Rule 62, the preceding rules covering ordinary
civil actions which are not inconsistent with or may serve to supplement the provisions of
the rule relating to such civil actions are applicable to special civil actions. This embraces
Rule 41 covering appeals from the regional trial court to the Court of Appeals.

xxx xxx xxx

Thus, under Section 1 Rule 2 of the Rules of Court, an action is defined as "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 wrong." On the other hand, Section
2 of the same Rule states that "every other remedy including one to establish the status
or right of a party or a particular fact shall be by special proceeding."

To our mind, from the aforequoted definitions of an action and a special proceeding, the
petition for assistance of the court in the liquidation of an 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 intended to establish the fact of insolvency of the bank.
The insolvency of the bank had already been previously determined by the Central Bank
in 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 assistance of the respondent
court is sought for that purpose.

It should be pointed out that this petition filed is not among the cases categorized as a
special proceeding under Section 1, Rule 72 of the Rules of Court, nor among the
special proceedings that may be appealed under Section 1, Rule 109 of the Rules.

We disagree with the foregoing view of the Fourteenth Division. Rule 2 of the Rules of
Court provide:
 §1. Action defined. — Action means an ordinary suit in a court of justice, by which
the party prosecutes another for the enforcement or protection of a right, or the
prevention or redress of a wrong.

§2. Special Proceeding Distinguished. — Every other remedy, including one to

establish the status or right of a party or a particular fact, shall be by special
proceeding.

Elucidating the crucial distinction between an ordinary action and a special proceeding,
Chief Justice Moran states:" 11

Action is the act by which one sues another in a court of justice for the enforcement or
protection of a right, or the prevention or redress of a wrong while special proceeding is
the act by which one seeks to establish the status or right of a party, or a particular fact.
Hence, action is distinguished from special proceeding in that the former is a formal
demand of a right by one against another, while the latter is but a petition for a
declaration of a status, right or fact. Where a party litigant seeks to recover property from
another, his remedy is to file an action. Where his purpose is to seek the appointment of
a guardian for an insane, his remedy is a special proceeding to establish the fact or
status of insanity calling for an appointment of guardianship.

Considering this distinction, a petition for liquidation of an insolvent corporation should be

classified a special proceeding and not an ordinary action. Such petition does not seek
the enforcement or protection of a right nor the prevention or redress of a wrong against
a party. It does not pray for 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.

What it seeks is merely a declaration by the trial court of the corporation's insolvency so
that its creditors may be able to file their claims in the settlement of the corporation's
debts and obligations. Put in another way, the petition only seeks a declaration of the
corporation's debts and obligations. Put in another way, the petition only seeks a
declaration of the corporation's state of insolvency and the concomitant right of creditors
and the order of payment of their claims in the disposition of the corporation's assets.

Contrary to the rulings of the Fourteenth Division, liquidation proceedings do not

resemble petitions for interpleader. For one, an action for interpleader involves claims on
a subject matter against a person who has no interest therein. 12 This is not the case in a
liquidation proceeding where the Liquidator, as representative of the corporation, takes
charge of its assets and liabilities for the benefit of the creditors.13 He is thus charged with
insuring that the assets of the corporation are paid only to rightful claimants and in the
order of payment provided by law.

Rather, a liquidation proceeding resembles the proceeding for the settlement of state of
deceased persons under Rules 73 to 91 of the Rules of Court. The two have a common
purpose: the determination of all the assets and the payment of all the debts and
liabilities of the insolvent corporation or the estate. The Liquidator and the administrator
or executor are both charged with the assets for the benefit of the claimants. In both
instances, the liability 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
order of payment.
Furthermore, as in the settlement of estates, multiple appeals are allowed in proceedings
for liquidation of an insolvent corporation. As the Fifth Division of the Court of Appeals,
quoting the Liquidator, correctly noted:

A liquidation proceeding is a single proceeding which consists of a number of cases

properly classified as "claims." It is basically a two-phased proceeding. The first phase is
concerned with the approval and disapproval of claims. Upon the approval of the petition
seeking the assistance of the proper court in the liquidation of a close entity, all money
claims against the bank are required to be filed with the liquidation court. This phase may
end with the 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 the claim. In
the latter case, the claim shall be classified whether it is ordinary or preferred, and
thereafter included Liquidator. In either case, the order allowing or disallowing a
particular claim is final order, and may be appealed by the party aggrieved thereby.

The second phase involves the approval by the Court of the distribution plan prepared by
the duly appointed liquidator. The distribution plan specifies in detail the total amount
available for distribution to creditors whose claim were earlier allowed. The Order finally
disposes of the issue of how much property is available for disposal. Moreover, it ushers
in the final phase of the liquidation proceeding — payment of all allowed claims in
accordance with the order of legal priority and the approved distribution plan.

Verily, the import of the final character of an Order of allowance or disallowance of a

particular claim cannot be overemphasized. It is the operative fact that constitutes a
liquidation proceeding a "case where multiple appeals are allowed by law." The issuance
of an Order which, by its nature, affects only the particular claims involved, and which
may assume finality if no appeal is made therefrom, ipso factocreates a situation where
multiple appeals are allowed.

A liquidation proceeding is commenced by the filing of a single petition by the Solicitor

General with a court of competent jurisdiction entitled, "Petition for Assistance in the
Liquidation of e.g., Pacific Banking Corporation. All claims against the insolvent are
required to be filed with the liquidation court. Although the claims are litigated in the
same proceeding, the treatment is individual. Each claim is heard separately. And the
Order issued relative to a particular claim applies only to said claim, leaving the other
claims unaffected, as each claim is considered separate and distinct from the others.
Obviously, in the event that an appeal from an Order allowing or disallowing a particular
claim is made, only said claim is affected, leaving the others to proceed with their
ordinary course. In such case, the original records of the proceeding are not elevated to
the appellate court. They remain with the liquidation court. In lieu of the original record, a
record of appeal is instead required to be prepared and transmitted to the appellate
court.

Inevitably, multiple appeals are allowed in liquidation proceedings. Consequently, a

record on appeal is necessary in each and every appeal made. Hence, the period to
appeal therefrom should be thirty (30) days, a record on appeal being required. (Record
pp. 162-164).

In G.R. No. 112991 (the case of the Stockholders/Investors), the Liquidator's notice of
appeal was filed on time, having been filed on the 23rd day of 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 failed to perfect his appeal. As already stated a
record on appeal is required under the Interim Rules and Guidelines in special
proceedings and for cases where multiple appeals are allowed. The reason for this is
that the several claims are actually separate ones and a decision or final order with
respect to any claim can be appealed. Necessarily the original record on appeal must
remain in the trial court where other claims may still be pending.

Because of the Liquidator's failure to perfect his appeal, the order granting the claims of
the Stockholders/Investors became final. Consequently. the Fourteenth Division's
decision dismissing the Liquidator's Petition for Certiorari,Prohibition
and Mandamus must be affirmed albeit for a different reason.

On the other hand, in G.R. No. 109373 (case of the Labor Union), we find that the Fifth
Division correctly granted the Liquidator's Petition for Certiorari. Prohibition
and Mandamus. As already noted, the Liquidator filed a notice of appeal and a motion for
extension to file a record on appeal on December 10, 1991, i.e., within 30 days of his
receipt of the order granting the Union's claim. Without waiting for the resolution of his
motion for extension, he filed on December 20, 1991 within the extension sought a
record on appeal. Respondent judge thus erred in disallowing the notice on appeal and
denying the Liquidator's motion for extension to file a record on appeal.

The Fifth Division of the Court of Appeals correctly granted the Liquidator's Petition
for Certiorari, Prohibition and Mandamus and its decision should, therefore, be affirmed.

Second. In G.R. No. 109373, The Union claims that under §29 of Rep. Act No. 265, the
court merely assists in adjudicating the claims of creditors, preserves the assets of the
institution, and implements the liquidation plan approved by the Monetary Board and that,
therefore, as representative of the Monetary Board, the Liquidator cannot question the
order of the court or appeal from it. It contends that since the Monetary Board had
previously admitted PaBC's liability to the laborers by in fact setting aside the amount of
P112,234,292.44 for the payment of their claims, there was nothing else for the
Liquidator to do except to comply with the order of the court.

The Union's contention is untenable. In liquidation proceedings, the function of the trial
court is not limited to assisting in the implementation of the orders of the Monetary Board.
Under the same section (§29) of the law invoked by 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 made in bad faith." 14 As this Court held in Rural Bank of Buhi,
Inc. v. Court of Appeals: 15

There is no question, that the action of the monetary Board in this regard may be subject
to judicial review. Thus, it has been held that the Court's may interfere with the Central
Bank's exercise of discretion in determining whether or not a distressed bank shall be
supported or liquidated. Discretion has its limits and has never been held to include
arbitrariness, discrimination or bad faith (Ramos v. Central Bank of the Philippines, 41
SCRA 567 [1971]).

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 behalf of the bank
"personally or through counsel as he may retain, in all actions or proceedings or against
the corporation" and he has authority "to do 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. 16 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. 17

WHEREFORE, in G.R. No. 109373 and G.R. No 112991, the decisions appealed from
are AFFIRMED.

SO ORDERED.

Narvasa, C.J., Bidin, Regalado and Puno, JJ. concur.

Footnotes

1 MB Resolution No. 1233 issued on November 22, 1995.

2 Renan v. Santos, Special Assistant to the Governor of the Central Bank of the Philippines.

3 Docketed as SP Proc. No. 86-35313.

4 MB Resolution No. 537.

5 The dispositive portion of the order, dated September 13, 1991, reads:

WHEREFORE, the Court hereby directs the Liquidator to immediately compute and pay the
following monetary claims of the plaintiffs/intervenors:

a) Holiday pay covering the period from November 1, 1974 to October 31, 1985;

b) 13th month pay in 1985 and salary differential pay to employees with permanent appointments
as of January 1982 including the 28% salary increase under the 982 CBA, and

c) 1985 Christmas bonus;

d) Commutation and payment of all unused sick leave credits; and

e) The payment of 10% of the total claims as computed, due and paid to the plaintiffs/intervenors'
counsel, Atty. Potenciano A. Flores, as attorney's fees through the Branch Clerk of Court.
The Monetary Claims of the plaintiffs/intervenors for the Emergency Leave Credits, Hospital
Assistance Funds, and Anniversary Increase are DENIED unless supporting documents are
presented by claimants/intervenors as attested by PaBC's physician and/or responsible officers of
the PaBC that they are entitled to said claims.

SO ORDERED.

6 The dispositive portion of the order, dated December 6, 1991, reads:

WHEREFORE, the Order of this Court dated September 13,1991 is hereby codified and the
Liquidator is ordered to immediately compute and pay the following monetary claims of the
plaintiffs/intervenors:

a) The claim for holiday pay covering the period from November 1, 1974 to October 31, 1985;

b) The claim for 28% salary differential pursuant to the CBA increase;

c) The claim for Christmas Bonus which should be pro rated based on the employees length of
service rendered up to 1985 when the Pacific Banking Corporation was placed under liquidation;
and

d) The claim for unused sick leave benefits which should be computed and paid accordingly.

Furthermore, this Court orders:

a) The prorata payment of 13th month pay in accordance with the position taken by the Liquidator
provided in the Implementing Rules of the Department of Labor; and

b) Consistent with the previous orders of this Court payment of 10% attorneys fees should be
deducted from the total claims afforded to the plaintiffs/intervenors and other employees of the
bank (PaBC).

7 The dispositive portion of the trial court's order, dated September 11, 1992, reads:

WHEREFORE, premises considered, the Liquidator of PaBC is ordered to pay claimants, through
their Attorney-In-Fact Gonzalo C. Sy, their total investment of US$2,531,632.18 as preferred
creditors. Dividends and/or interest that accrued in favor of claimants is hereby deferred pending
study by the Liquidator who is hereby ordered to submit his report and recommendation within
thirty (30) days from receipt of this Order.

8 Justice Serafin E. Camilon, Chairman and ponente, Justices Serafin V.C. Guingona and Cancio
C. Garcia, Members, concurring.

9 Justice Antonio M. Martinez, Chairman and ponente, Justices Artemon D. Luna and Alicia
Austria-Martinez, Members, concurring.

10 §1. Interpleader when proper. — Whenever conflicting claims upon the same subject matter
are or may be made against a person, who claims no interest whatever in the subject matter, or
an interest which in whole or in part is not disputed by the claimants, he may bring an action
against the conflicting claimants to compel them to interplead and litigate their several claims
among themselves.
11 1 MORAN COMMENTS ON THE RULES OF COURT 119-120 (1979), citing Hagans v.
Wislizenus, 42 Phil. 880, 882, (1922).

12 Alvarez v. Commonwealth, 65 Phil. 302 (1938).

13 Rep. Act No. 265, §29, as amended.

14 Salud v. Central Bank of the Philippines, 143 SCRA 590 (1986).

15 162 SCRA 288 (1988).

16 Rollo, p. 41, G.R. No. 112991.

17 Annex "H" and "I", Rollo, CA-G.R. SP No. 27751.