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    Banking

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    Dustin Nitro
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    ‘SEC. 30. PROCEEDINGS IN RECEIVERSHIP AND LIQUIDATION. = Whenever, upon report of the head of the supervising or examining department, the Monetary Board finds that a bank or rot topay caused by extraordinary demands induced Inthe banking commun as determined by without Involving s or creditors; ease and desist order under ss become final, involving acts or transactions \n of the assets tippine insurance Corporation as receiver of the banking For a quasi-bank, any person of recogni banking or finance may be designated as rece lve the transfer or disposition of any asset stitution: Pr That the receiver may depo: ition in nonspeculative invest ys from take-over, whether the inst may be rehabilitated or otherwise placed in such a condi res we “secios9 19 Jurisdiction, the court ter due notice, adjudicate assist the enforcement of 2 to money, dispose of for the purpose of paying the debts of such institution In accordance ice and preference of credit under Board taken under thi be final and executory, and may the court except on petition for Certiorari on the ground that the action taken was in excess of Jurisdiction or with such grave abuse to lack or excess of j ‘only be filed by the stockholders of record representing the co cmeteR 1 ‘majority of the capital stock within ten (10) days from receipt by the board of directors of the institution of the order directing receivership, liquidation or conservatorship. ‘The designation of a conservator under Section 29 of this Act or the appointment of a recelver under this section shall be vested exclusively with the Monetary Board. Furthermore, the designation of a conservator is not a precondition to the designation of a receiver. 30.1 Legislative History This is taken from Section 29 of Republic Act No, 265,M with the following modifications: Insolvency is no longer expressly defined:*" The placement of a bank or quast-bank under receivership may be done summarily and without need for prior hearing; and (ii) The Monetary Board is mandated to designate the Philippine Deposit Insurance Corporation (PDIC) as receiver of banks. 30.1.1 Rationale @ Insolvency In Republic Act No. 265, the only test to determine insolvency \was whether the realizable assets of a bank or non-bank financial intermediary performing quasi-banking functions as determined by the then Central Bank are insufficient to meet its liabilities, This iS ‘commonly known as the balance sheet test. In Republic Act No. 7653, aside from incorporating the concept of the balance sheet test (Section 30[h]), another ground was added known as the equity test or the inability to pay 5 as they become due in the ordinary course of business (Section 30a). While the balance sheet testis an accurate gauge to determine solvency, the appraisal and valuation of assets are manifestly 27, bx Ord No, 289,086. tenet of Senator Roo), See ig, Ga nae 084 8S 1044 0479 ee I, 181 GbE SERA. conte 1 a Sosion30 subjective and often time-consuming.*® It cannot therefore be discounted that insolvency may not be detected early enough to protect the interest of depositors and creditors of the bank, not to mention the legal consequences to the examiners of the Bangko Sentral when there are errors in the appraisal of the assets of the financial institution.*® With the equity tes, the Bangko Sentra! will beable to act timely and with speed to protect the interest ofthe depositors and creditors of the bank: @® "Close Now, Hear Later" Scheme ‘The phrase “the Monetary Board may summarily and without need for prior hearing’ is an insttutionalization by Congress of, the pronouncements of the Supreme Court in the cases of Rural Bank of Lucena y. Arca**® and Rural Bank of Buhi v. Court of Appeals," Which recognized the dire consequences of requiring a prior hearing before banks are closed, The “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, stockholders and the general public. 302 ‘The Law on Receivership and Liquidation 1 law on proceedings in receivership and liquidation is outlined as follows: (Placing a bank under receivership, Powers and duties of a receiver; Courtassisted liquidation proceeding: and. (iv) Judicial review (conservatorship, recelvership and liquidation). SW. 7057, 9 Con. Congrectonal Ra. 168 Or, 1995) Gpanerhip Speech a ep Save enced Sen Cong, Beam Camm 2 iat 39 OSD, 1 7037, 9" Cong, Congressional Re. 18 Mr 1, 1293) nat. “GR, no L215, sept. 20, 196515 SCRA. 66, “canal ark. Cour of Apes CR. No, 7618, Mr 3,183 BIOSCRA 38. i ' : i i CHAPTER! Unless otherwise stated, the discussions in this Section pertaining to banks shall also be applicable to quasi-banks. 30.3. Placement under Recelvership ‘The Monetary Board of the Bangko Sentral Is vested with ‘exclusive authority to assess, evaluate and determine the con of any bank, and finding such condition to be one of insolvency, or that its continuance in business would Involve a probable loss to ts depositors or creditors, forbid the bank to do business.*® The power and authority of the Monetary Board to close banks and liquidate them thereafter, when public interest so require, I a valid exercise Of the police power of the State.*® In some foreign jurisdictions, losing and taking charge of banks are primarily acts held to be administrative and not judicial:®* 303.1 Receivership Receivership has been defined as the state or condition of 44 corporation over whom a receiver has been appointed for the Protection of its assets and for ultimate sale or distribution to creditors. The receiver Is the designated person or to’gather and take charge of all the assets an of the Institution, administer the same for the benefit of the creditors and exercise the general powers of a receiver under the Rules of Court. Section 4(@) of Reput is amended (PDIC Charter), defines a receiver to Include “a receiver, commission, person of ‘other agency charged by law with the duty to take charge of the Sch S56 > Corral tank, Cou ‘cla esas Soa 4) Cae 06,17 5108, ater tel Ca AK 770: Deparment of Sing Hedge, 18 heb 362,260 NW 279110 Ae ead, © Suc’ Lo Din 1259 (Gre 1980, {he bank officers from the property ofthe Dak court Appeass CA No. T6876 May 36, ens ods Sen aise ‘secton 33 abi been forbidden from doing business in the Philippines, as well as the duty to gather, preserve and administer such assets and llablities for the benefit f the depositors and creditors of said bank, and to continue into \uidation whenever authorized under this Actor other laws, and to ispose of the assets and to wind up the affairs of such bank ‘The appointed receiver has a personality separate and distinct from that of the Bangko Sentral. 303.2 Receiver and Conservator Distinguished ‘The designation of a conservator Is not a precondition to the designation ofa receiver . Receiver and conservator are distinguished as follows: () A receiver may be appointed based on the grounds Provided under Section 30, while a conservator may be ina state of continulng .gness to maintain a condition of liquidity deemed adequate to protect the interest of the depositors or creditors; w A recelver must determine as soon as poss! ‘not later than ninety (90) days from takeover, whether the 303.3 Requisites Receivership involves four (4) essential requisites: ( —_Repdrt of the head of the supervising department involving the bank; opined to help prepare the role bank for more src for sls Sy ane sy touesome aes Jean Mey Gr Fai & Re Sat Co, Ease Law foo Reason, Sn Sum wy at Bomanen 39 2000) cunprer’ Sexton 0 ‘et i) Finding of the Monetary Board of the existence of any of the grounds for receivership; (ill) Decision of the Monetary to forbid the institution from doing business, which decision may be done summarily and without need for prior hearing: and iv) Notice in writing to the Board of Directors informing the institution of the order of the Monetary Board directing receivership. 30.3.4 Report of the Supervising Department Under Section 29 of Republic Act No. 265, it was a mandatory requirement that an examination of the bank should first be conducted before the Monetary Board can place itunder receivership. In Republic Act No. 7653, placement of a bank under receivership Is now based on a report of the head of the supervising department. RURAL BANK OF SAN MIGUEL, INC. (RBS) v- MONETARY BOARD, BANGKO SENTRAL GR. No. 150886, February 16, 2007 (516 SCRA. 154) FACTS: On January 21, 2000, the Monetary Board Issued Resolution No. 105 placing the RBSM under receivership. RESM argued that Resolution No. 105 was bereft of any basis considering that no complete examination had been conducted before It was Issued, citing the ease of Banco Filme Savings and Mortgage Bank ¥, Monetary Board, Central Bank (C.R. No. 70054, December Tl 1991 [204 S.C..A. 767) as legal basis. HELD: RESW's contention was found to have na merit. Banco Faipine and the other cases cited were decided using Section 29 of the old law (Republic Act No. 265). Thus, in Banco Fillpino, It was ruled that an "examination [conducted] by the head of the appropriate supervising or examining department or his examiners ‘or agents into the condition of the bank’ Is necessary before the Monetary Board can order its closure. However, Republic Act No 265, including Section 29 thereof, was expressly repealed by Republic Act No. 7653, which took effect In1993,_Resal Banco Fi ‘Act NO. 265 was misplaced. In Republle Act No. 7653, head of the supervising of ‘The word “report” has a defi defined as “something that gives information account or statement” On the other hand, an examination Search, investigation or serutiny". From the wards used In Section 530, it ls clear that Republic Act Na. 7653 no longer requires that ueTeR 1 des ‘Sesion {an examination be made before the Monetary Board can Issue a closure order. The purpose ofthe law is to make the closure of & bbank summary and expeditious in order to protect public interest. This is also why prior notice and hearing are no longer required before a bank can be close. 3035 — Grounds AA bank can be placed under receivership should it be found that any of the following grounds exists: 1855, unless ‘caused by extraordinary demands induc panic in the banking community (equity tes. i) Insufficiency of realizable assets, as determined by the Bangko Sentral, to meet its lablities (balance sheet test ty to pay by financial [BANCO FILIPINO SAVINGS AND MORTGAGE BANK v, MONETARY BOARD, CENTRAL BANK. G.R. Nos. 70054, 68878, 7255-58, 78766, 78767, 78894, '51303, 61304 and 90473, December 1, 1991 (268 SCRA. 767) in this case, there can be no clearer explanation of the concept ivency than what the law itself states, Section 29 of the CCentral Bank Act provides that insolvency under the Act, shall be Understood to mean that “the realizable assets of a bank or a nore bank financial intermediary performing quas-banking functions a5 determined by the Central Bank are insuficent to meet its Hence, the contention of the Central Bank that a bank's true financial condition is synonymous with the terms “unimpaired capital and surplus" “combined capital accounts" and net worth ‘after deducting valuation reserves from the eapital, surplus and Unretained earnings, cing Section 5 of Republic Act No“ 337, Is misplaced, Firstly is clear from the law that a solvent bank is one in which its assets exceed Its llabilties. it fs a basie accounting 's are composed o ‘and capital. The includes “capital and surplus” (Exley v. Harris, 267 . 970, 973, 126 Kan. 302). On the ather hand, the term “capi Includes common and preferred stock, surplus reserves, surplus and undivided profits. (Manual of Examinations of Procedures, Report of Examination on Department of Commercial and Savings Banks, p.3-C). Ifvaluation reserves would be deducted from these. terms, the result would merely be the net worth or the unimplred connerers ‘sete 20 eed ‘aia and surplus ofthe bank appving Seton 5 of Republic Act No. 337, but not the total financial condition of the | bane. Secondly, the statement of assets and balance sheets. Banks use statements of condition to reflect the ‘amounts, nature and changes, Central Bank Manual of Examinatc for checkilst of a statement of co 5 guide in the examination of banks, The format enumerates the items which will compose the assets and Assets include cash and those due from banks, and advanc cashier's managers and certified cheek borrowings dee © head office, branches and agencies, othe ables and deferred eredits anual of Examination Procedure, p. 9) The amounts Stated inthe balance sheets or statements of cont the computation of valuation reserves wien justieg, however onthe assumption thatthe bank or company wil canta in business indefrtely and therefore. the net worth shown nthe sfatement sin no sense an indication ofthe amour ha might be fealze if the bank or company were to be hauled immesiatey (Prentice Hall Encyclopedic Dictionary of Business France: p. 40} Further, based on respondents” submission the allowance for Bobbie losses on loans and dicount represents tie amount sot up against current operations to provide for possible losses arising ‘rom non-collcion of loans and advances and ths aeaunt iso refered to as vaustion reserve (p. 9, Objections to Santiago ‘por. Clearly, the statement of condltion which contains Brovision fr recommended vlutin eserves shoud not be used as the ulimate basis to determine te solvency ofan rstion fot the purpose of termination of ts operations Respondents acknowledge that under the said Central Bank manual, Central Bank examiners must recommend. val ‘eserves, when warranted, to be set up against the corresponding asset account (p. 8, Objections to Santiago report, Tlaogui himself a5 author of the report recommending the closure of petitfone? ‘bank admits thatthe valuation reserves should stl be discussed With the petitioner bank in compliance with standard Procedure. Hence, forthe Monetary Board to un and o conclude therefrom without suff Insolvent would be torally unjust and u cuaprer Fee Sexton 0 “The test of insolvency laid down in Section 29 of Republic Act No, 265 Is measured by deter fof a bank are less fair cash value of all ts assets realizable within a reasonable time. (ould equal or exceed ts total but if such far cash value so jes within reasonable time, the bank is insolvent. Stated in other words, the Insolvency ‘of a bank occurs when the actual cash market value of Its assets Insuficent to pay ial stock and ies for such purpose (Exley v. Harris 126 kan. 302; Alexander ¥. Llewellyn, MO. App. 70 7. In arriving atthe computation of realizable assets of petitioner bank, respondents used its books which undoubtedly are not reflective of the actual eash or fair market value ofits assets. This |g not the proper procedure contemplated in Section 29 of the Central Bank Act. Even the Central Bank Manual of Examination Procedures does not confine examination of a bank solely with the determination of the books of the bank. The latter is part ‘of auditing which should not be confused with examination, Examination appraises the soundness of the institution's assets the quality and character of management and determines. the Institution’ compliance with laws, rules and regulations. Audit is 3 detailed inspection ofthe institutions bo ledgers, ete to determine the recording of Hence, ‘examination ‘concerns itself with review and. appraisal while audit concerns itself with verification (Central Bank Maral market Value shall be assigned to each ofthe assets and (of the bank to determine ther total realizable value. The proper determination of these matters by using the actual cash value triteria belongs to the field of fact sof the Central Bank and the Monetary Board. Notwithstanding the fact that the figures arrived at by the respondent Board as t0 assets and Habiities do not truly indicate ther realizable value 2s they were merely based on bock value the figures presented by the Tlaoqui Report must: however, be looked at in concluding insolvency ae ‘of uly 31, 1984 and atthe figures presented by the Central Bank authorized deputy receiver and by the Tiaogul Report which recommended the liquidation ofthe bank by reason of insolvency as of January 25, 1985 “The Tiaogul report dated January 23, 1985, which was based ‘on partial examination findings on the bank's condition as of July 1984, states that total lables of P5,282.1 millon exceeds tofal assets of 4,047.2 fter deducting from the assets valuation reserves of P612.2 milion, Since it was explained that ‘cHaPrER 1 secon et Valuation reserves can not be legally deducted as there was no Muthful and complete evaluation thereof as admitted by the Tiaoqul report isef, then an adjustment of the figures will show that the ‘of 5,282.1 milion wil not exceed the total assets which wll amount to 5,559-4 Ifthe P6I2.2 milion allotted to valuation reserves will not be deducted from the assets, There ‘an be no basis therefore for both the conclusion of for the decision ofthe respondent Board to close p and place it under receivershi Concerning the financial position of the bank as of January 25, 1985, the date of the closure of the bank, the consolidated statement of condition thereof as ofthe aforesaid date shown in the Valenzuela, Aurellano and Tiaoqul report on the receivers petitioner bank dated March 19, 1985, indicates that tot petitioner bank as of january 25,1985 prepared bythe Central Bank Authorized Deputy Receiver Artemio Cruz shows that total assets 1 P4,540,836,534.15.. Based on the foregoing, there reason for the Val Feport to Instead of lation of petitioner bank ii). Inability to continie in business without involving probable losses to its depositors or creditors w transactions which amount to fraud of a di the assets of the institution (Notification to the Bangko Sentrafor public announcement of bank holiday, or suspension in any manner of payment of its depo: inuously for more than thirty G0) days.” BORLONGAN v. REYES GR, No. 161276, January 31, 2005 ‘months prior to closure, Urban Bank had ity problems and on April 25 declared 3 sear 1 Ro Act No. 8791, § 59 2000, cunTeR faaee ‘ecion 90 HELD: ‘Section 30 of Republic Act No. 7653, in relation to Section 53 of Republic Act No. 8791 (The General Banking Law ‘of 2000), underscores the summary character of the Monetary Board's initiative of placing a bank under receivership. it provides that in case a bank or quasi-bank notifies the Bangko Sentral or publicly announces @ bank holiday, or in any manner suspends the payment ofits dep s continuously for more than thirty (Go) days, the Monetary Board may summarily and without need of prior hearing close such banking receivership of the PDIC. Such auth ‘When a bank goes on a bank holiday, it is an Indication and admission that the bank cannot pay due in the ordinary course of business. (w) Persistence In conducting business in an unsafe or unsound manner: 303.6 Non-Retroactivity ‘The grounds for placing a bank under receivership cannot be siven retroactive application. GENERAL BANK AND TRUST COMPANY INBANK) v. CENTRAL BANK G.R. No. 152551, June 15, 2006 (490 S.C.R.A. 703) FACTS: Under Republic Act No 265, as amended by Presidential Decree No 1007 of September 1976, insolvency was understood to ‘mean as the inability of a banking insttution to pay les a5 they fll due In the usual and ordinary course of in June 1864, Republic Act No, 265 was subsequently amended by Presidential Decree No. 1937, wherein insolvency was understood to mean 2s the realizable assets of a bank ar anon-bank financial Intermediary performing quas-banking Funct ‘determined by the Central Bank, are Insufficient to mest its abilities, Genbank was declared insolvent and was placed under receivership and liquidation on March 25, 1977 and March 29, 1977, respectively. ‘According to Genbank, twas nt insolvent when twas placed under 177 ass assets at that time was P599,743,639.00, of insolvency in Republic Act No. 265, a3, amended by Presidential Decree No. 1937, should have been made ‘Op. Of. General Counsel Gane, 1998 520 $536.37 Sv ep. At No 79,5 56 chaerer' the factor for dete by the Central Bab ing Whether or not declaration of insolvency 1977 constitutes grave abuse of clscretion. HELD: Genbank cannot plausibly be allowed to adopt a statutory definition of insolvency which was not set forth In the law when the bank was placed under receivership in 1977 30.3.7 Notice and Hearing ‘The Monetary Board may summarily and without need for prior hearing forbid the bank from doing business in the Philippines. Even bank regulations in the United States recognize the appointment of a receiver without prior notice and hearing, which have been sustained as constitutional. hear later” scheme was explained by the Supreme ing cases: Court in the fol [RURAL BANK OF LUCENA, INC. v. ARCA, G.R, No, L-21146, September 20, 1965 (15 S.C.R.A. 68) Manifesty, whether a rural bank's continuance in business would involve probable lass to its clients or creditors and that it ‘cannot resume business with safety is a matter of appreciation and Judgment that the law entrusts primarily to the Monetary Board, apparent Is that ithe rufa bank affected isin the condition {rom dissipation inevitably increases the danger to the crecitors, For this reason, the statute has provided for a subsequent judic review of the Monetary Board, it lieu ofa previous hearing, RURAL BANK OF BUI, INC. v. COURT OF APPEALS G.R. No. [-61689, June 20, 1988 (162 5.CR.A. 288) ‘The evident implication of the law Is thatthe appointment of 2 recelver may be made by the Monetary Board without notice land hearing but its action is subject to judicial inquiry to insure the protection of the banking institution. Stated otherwise, cus process does not necessary require a prior hearing; a hearing oF An opportunity to be heard may be subsequent tothe closure. One an Just imagine the dire consequences of a prior hearing: bank runs would be the order of the day, resulting in panic and hysteria, Gen wand Busines) fling he cave of Fey. Malone, 330 US, 245, 255-254 a ‘Sexton In the process, fortunes may be wiped out, and dislusionment run the gamut ofthe entre banking community. CENTRAL BANK v. COURT OF APPEALS GR. No, 76118, March 30, 1993 (220 SCRA. 536) FACTS: Respondents alleged that the Supreme Court in the ‘anco Filipino case held that the Central Bank Violated the rule on ative due process lald down in Ang Tay v. CIR (69 Phil 1635) and Eastern Telecom Corporation v. Dans, Jt, (137 SCRA. 628) which requires that prior notice and heaving be afforded to all parties in administrative proceedings, According to respondent ‘Thumph Savings Bank, since Monetary Board Resolution No. 596 was adopted without the respondent bank being previously notified, the same is void for want of due process HELD: Under Section 29 of Republic Act No. 265, the C Bank, through the Monetary Board, 1s vested with © authority to assess, evaluate and determine. the. cond any bank, and finding such condition to be one of insolvency, or 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 inthe Phiippines; and shall designate an fr Competent person as receiver (assets and liabilities. The fourth ing of 2 case to set aside the actions of iness and bad Contrary to the notion of private respondent, Section 29 does rot contemplate prior notice and hearing before a bank may be directed to stop operations and placed under receivership. When paragraph 4 (now paragraph 5, as amended by Executive Order No.289) provides forthe 10) days after the ‘unmistakable of the.case. Plainly, the legislature could mot have Intended to authorize "no prior otice and hearing” in the closure of the bank and at the same time allow a sult 0 annul fon the basis of absence thereof Inthe early case of Rural BankofLucena, nc. v. Arca, was held that a previous hearing is nowhere required in Section 29 nor does the constitutional requirement of due process demand that the correctness of the Monetary Board's resalution to stop operation and proceed to liquidation be first adjudged before making the Tesolution effective. Itis enough that a subsequent judicial review be provided. Even in Banco Filpin, it was reiterated that Section 28 does not require a previous hearing before the Monetary Board . comeren 1 can implement its resolution closing a bank, since ie action is Subject o Joc idea by la. Ik may be emphasized that Section 29 does not attogether divest 8 bank or 2 non-bank financial institution placed under ent evidence ten (10) days fom fe receiver takes charge of the assets ofthe bak nga complaint withthe Rego ‘Quezon city on ‘the eighth day folowing the takeover bythe receiver of the banks assets on June 3, 1985, ‘This“close now and hear ater” scheme i grounded on practical and legal considerstione ted dissipation af the bank's assets and as a valid exercise of police power to protect the depositors, creditors, stockholders and the general publ Admittedly, the mere fling of a case for receivership by the Central Bank ean trigger @ bark ron and drains assets in Gays for even hours leading to insolvency even ifthe bank Be actualy Solvent. The procedure prescribed in Section 29 i truly designed to protect the interest” of all concerned, ew the. cepositrs, editors and stockholders, afforded publie Interest. At any ‘portunity to°p lance of respondents on the Banco View of factual crcumstances ndant Inthe present case, We ruled ice and hearing, but thatthe Monetary doard had no suficent basis (0 arrive at sound conclusion of Insolvency to justify the osure. In other words, the arltrariness, bad flth and abuse of discretion were determined only after the bank was placed under ip and evidence thergon was received by the tal ‘court. AS this Court found in thet case, the Valenzuela Arellano and Tiaogul. Report the subtraction ofan uncertain amount 3¢ valuation reserve fom the bank would merely result {nts net worth or the unimpaired capral and surplus Fed not reflect the total financial condition of dance Flpine, sum, appeal to procedural due proces cannot just outweigh ‘the evll sought to be prevented; hence, We rue that Section 29 3 0 sound lelslation promulgated in accordance withthe Constitution ing a bar The absence of prior noice and heating cannot be deemed of arbitrariness and bad fat. Thus, 2 Monetary Board resolution placing bank under receivership, or conservatorship for that made, the stats quo shall be inue to be under receivership, 304 Powers and Duties of a Recelver 304.1 Designation of a Receiver In cases of closed banks, the PDIC is the designated statutory receiver. For quasi-banks, any person of recognized competence in banking or finance may be designated as receiver. ‘The power to appoint a receiver is vested by law upon the Monetary Board. Such authority excludes the courts from acquiring Jurisdiction to appoint a receiver. 3042 Statutory Powers The receiver is bound to gather and take charge ofall the assets and lablities ofthe institution, administer the same for the benefit ofthe creditors and exercise the general powers ofa receiver under the Rules of Court. The receiver may depositor place the funds of the institution in non-speculative investments. ‘Specifically for closed banks, Section 10 of the PDIC Charter sets forth the powers of the POIC as recever, as Fallows: (Control, manage and administer the affairs ofthe closed bank; Bing’ suits to enforce iabilties; ‘Appoint and hire persons and entities of recognized competence in banking or finance; (@) Suspend or terminate the employment of officers and ‘employees ofthe closed bank; 2s, rentals, salaries of personnel of the lect loans and other claims of the closed bank, and the purpose, modify, compromise or restructure the tsims and conditions of such loans or lms as may be deemed advantageous; ve treo retain private counsels as maybe necessary, Borrow oF obtain loan, or mortgage, pledge or fcumber any asset of the osed banks when necessary fo\preserve oF revert the dspaton of assets oF © redeem foreclosed assets of he cose bank if the stipulated interest on deposits is unusually high Compared with the prevaling applicable terest rate, reduce the intrest rate to a reasonable ate: and (0) Exercise such other powers a inherent and necessary for the effective discharge of duties as receiver. " However, the receiver shall not pay or commit any act that wi Involve the transfer or disposition of any asset of the institution, ABACUS REAL ESTATE DEVELOPMENT CENTER, INC. (ABACUS) v. THE MANILA BANKING CORPORATION ‘GR. No. 162270, April 6, 2005 (855 SCRA. 97) FACTS: On May 22, 1987, the Central Bank placed the Mania Sank under recelvership. Then on November Bank placed the bark under iquidation by Board Reso coupren 1 a ofthe closure. Consequenty, the designation of Atty. Santos as tlautdator was amended to tia of Statstory Receiver aleter dated August 30, 1989, Puyat accepted the Laureano Group's offer and granted tan chase" the property for the Laureano Group “exclusive option fo the substan Santos to dlseuss the Abacus offer to which Atty. Santos 1990, the Laureano Group transferred and assigned to Btanga Of RS rights in Abacus. ‘On September 16, 1994, Abacus sen ter to Manila Bank informing the later offs desire to exercise is "exclusive option to purchase". Manila Bank refused to honor the same, ‘authorized to transact. business In connector Assets and property. Clear ie unenforceable against Mama Bank. Even assuming that Aty rowed. the "exclusive option to purchase” granted ne sare Is sil of no force and effect asthe Feclver ppointed (ty, Santos) only had authority to administer the same ‘reditrs. Granting or approving an “exclusive ut an act of ‘of property of the bank " “aoproval by Bank recelver Ary. Santos amounts to no approval ‘alla Bank receiver not being authorized to do so on his own, 30.43 Legal Effects on the Assets During receivership, the assets of the closed bank shall be deemed in custadia legis in the hands ofthe recelver and such assets shall not be subject to attachment, garnishment, execution, levy oF any other court processes.*® A jdge, officer of the court or any fther person who shall issue, order, process or cause the issuance ‘of gamishment, levy, attachment or ‘execution shall be llable to criminal prosecution." comers 1 3044 Prohibited Acts of Bank Officers and Employees Receivership prohibits the bank and is oficers from performing the following acts (@ Doing new business, such as to grant new loans or to accept new deposits; G _Refusing to turn over the bank's records and assets tothe designated receivers" (i) ‘Tampering with bank records” {W)—Appropriating for himself or another party, or destroying fr causing misappropriation and destruction of the bank assets: Paying out or permitting or causing to be pald out any funds of sald banks- and Transferring or permitting oF causing to be transferred any securities of property of said bank. VILLANUEVA v. COURT OF APPEALS GR. No, 114870, May 26, 1995 (244 SCRA. 395) FACTS: The Pillpine Veterans Bank (PVB) was placeé under receivership on Ape 1985. Respondent Ong offered to purchase that was acquired by PVB through forecosure approved Ns subject offer the purchase price of 110,000 payable In eazh within fteen days from receipt of approval ofthe offer When respondent ‘Ong returned to the country im mid. Apr of the approval ana thus Informed the to pay the subject balance provided the bank would execute the Corresponding deed of conveyance. at that time, the PVS Was Already placed under receivership, ‘= are Phppine Veterans nk © No 15706, Oc 1, 2004 HORA 3h sw wore, $82. lehas been sa that where, upon insolvency ofa bank, aeceiverthereforis appointed, the asset ofthe bank pass beyond Info the possession and contol ofthe recelver whose st suspend ‘irectors and officers over ts property and effects, such author and inthis respec, the receivers To restrain the bank officers from intermeddling withthe props "upon insolvency of either party, ‘Ong’s offer to purchase the ots became ineffective because the PVE became insolvent before the bank's acceptance ofthe offer ‘ame to his Knowledge. Hence, the purported contract of sale between them did nt reach the stage of perfection. 30.45 Collection of Bank Debts and Foreclosure The receiver is obliged to collect pre-existing debts owing to the bank, which debts form part of the aseets of the bank, and, in connection therewith, foreclose mortgages securing such debt All actions against a bank under receivership ar liquidation are suspended and receivership or uldation proceeding *™ 3046 Payment of interest Closed banks cannot be held lable to pay interest on deposits which accrued during the period when the bank is actually closed us o comers 1 and non-opérational:%* However, the closed bank has to pay interest and other appropriate charges to the Bangko Sentral on al the loans and advances the latter extended to the closed bank receivership and liquidation notwithstanding. On the other hand, the borrower or debtor of the closed bank 's obligated to pay interest even after the bank Is closed. The Fecelvership of a closed bank is an extraneous circumstance and 304.7 Rehabilitation tation contemplates a continuance of corporate s in an effort to restore and reinstate the corpora former position of successful operation and solvency." the responsibilty of the receiver to determine as soon as ‘but not later than ninety (90) days from takeover whether tion may be rehabilitated or otherwise placed in such 0 that it may be permitted to resume business with safety to its depositors and creditors and the general public. Any determination fr the resumption of business ofthe institution shall however, be subject to prior approval of the Monetary Board Ifthe Feceiver Getermines that the Institution cannot be rehabilitated o ermitted to resume business, the Monetary Board shall notify in iting the board of directors ofits findings and direct the recelver to proceed with the liquidation of the institution, 30.5 CourtAssisted Liquidation Proceeding Liquidation, in corporation with creditors’ and debtors. I ‘onnotes winding up or setting is the process of winding up 2 Sp aur a ang Craton, no. Foi var tank Eos Union = URE Woh Gk Ma 10536528 6 ration « reducing assets to cash, discharging labilities and ing surplus or loss ~ in order to distribute the assets to those od to receive them, PACIFIC BANKING CORPORATION EMPLOYEES! ‘ORGANIZATION v. COURT OF APPEALS (GR, No. 109373, March 20,1995 242 SCRA. 492) A liquidation proceeding resembles the proceeding for the settlement of estate of deceased persons under Rule 73 to 91 of the Rules of Court. The court's concern i with the declaration af reitors and thelr rights and the determination ofthe order of Dayment. eis a single proceeding which consists of « number of a3e8 properly classified a5 “claims” Tes basicly atwophesed proceeding, The frst phase ls concerned withthe red to be without reafterIncuded by het case, th order allowing or dsllowing © inal order, and may be appealed by the party agerleved. ‘The second phase involves the approval ofthe distribution blan prepared by the duly appointed Dan species in deal the ttl feces wove cms wee a tisposes of thetesue of how much property Moreover, ushers inthe ial phase of ce “payment of 305.1 Involuntary Liquidation luntary liquidation where der receivership by the Monetary Board and subsequently, under liquidation. 305.2 Voluntary Liquidation In ease of voluntary liquidation of any bank organized under the laws of the Philippines, or of any branch or office inthe Philipines of foreign bank, written notice of such liquidation shall be sent to the Monetary Board before such liquidation is undertaken, and the cuore t Monetary Board shall have the right to intervene and take such steps as may be necessary to protect the interests of crectors.°" 30.5.3 Recelver and Liquidator Distinguished Broadly speaking, the term “iquidator’ is embraced In the definition of “receiver” The following are the specific distinctions © Arreceiveris appointed by the Monetary Board based on the recommendation of the supervising department of the Bangko Sentral, while a liguidator Is appointed by the Monetary Board based on the determination by the receiver; There are six (6) grounds for the appointment of a receiver, while there is only one (1) ground. for the appointinent ofa liquidator, that is, when the Institution ‘Gannot be permitted to resume business with safety to the depositors and creditors and the general public: A teceiver has ninety (90) days from take Whether the I Fy period fora liquidator to prepare the liquidation plan for the approval of the liquidation court: Generally, the receiver has the duty to take charge of the assets ani ies for the benefit ofthe creditors, while idator is bound to convert the assets to money for the purpose of paying the debts of the institution: and ‘A receiver is normally appointed ahead ofthe liquidator. 305.4 Rehabilitation and Liquidation Distinguished PHILIPPINE VETERANS BANK (PVE) EMPLOYEES’ UNIONNUB-E, ¥, VEGA GR. No. 105364, June 28, 2001 GED S.CRA. 33) ‘the respondent judge continue ofthe vB, so that assets are distribute to receive them, “itis the process of reducing assets to lscharging abies and dividing surplus or loss. On the oppo fend of the spectrum i oh imer postion of successful oper and solvency. it crystal clear that the concept of liguidation Ie “lametialy opposed at contrary tothe concept of renab hat both cannot be undertaken at the same time, To allow 305.5 Jurisdiction of the Liquidation Court ‘The regional trial courthas exclusivejurisdiction in he liquidation, 19S of banks. Such exclusive ji adjudication of situation where it's the bank which files a claim against another person or legal entity MANALO v. COURT OF APPEALS GR.No 141297, October 8 20 FACTS: Respondent PAl Instance ofthe Ligidator, vested with the Liquidation Court pursuant ‘Act No. 265, tng the Valenzuela ¥ Court of Appeals case (168 SCRA. 623) where the Supreme Court held that “Fenere a ju claims agaiast the bank should be receeding™ HELD: Apparenty, Manalo file to appreciate the corect rearing of the law thatthe [lout shal same proceedings to assist inthe (cases where there ar. ‘ctually an action instituted by the bank fits assets and recovery offs property. 30.5.6 Commencement of Liquidation Proceeding by the exparte fi ourt of a pel uldation of the institution pursuant to-2 dation proceeding is commence by the receiver for assistance i uo comerer 1 liquidation plan adopted by the PDIC or the designated recelver for ‘quasl-banks. 30.5.7 Nature of Liquidation Proceeding for liquidation of an insolvent corporation is classified proceeding and nat an ordinary action. Such petition does not seek the enforcement or protection of a right nor the Prevention or redress of a wrong against @ party. it nelther prays for affirmative relief for injury arising from a party's wrongful act or Comission, nor state a cause of action that can be enforced against any person. ‘The courtassisted liquidation proceeding cannot be summary ‘in nature it requires the holding of hearings and presentation of evidence of the parties concerned such that creditors must prove and substantiate their claims, and the liquidator disputes the same, uidation proceedings iy-contested and drawn-out because, at the st the corporation undergoing litigation must be settled definitively and its assets properly disposed of far as lawful and practicable, al claims against the insolvent bank should be filed in the liquidation proceeding.” ‘ONG v. COURT OF APPEALS GR. No, 12830, February 1, 1996 (253 SCRA, 100) “Therationale behind judicial lquidationisto prevent m factions against the insolvent bank. iti, making body contemplated that Possole, should pass upon the 305.8 Exceptions ‘The exceptions to the fling of case before the uidation court o igating the case before the liquidation court would be an exercise in futility in view ‘of the number of years the case has been om trial and the additional expenses to the party who is living in poverty When more Inconveniences would be caused to the parties, entaling waste of more money and precious times" When the issue is the validity of contracts upon which a claim is based*® and (iv) When the issue involves money claims of an employee against his employer.** "However, in. the case of Clarion Printing House, nc. v. National Labor Relations Commission, "the Supreme Court opined that “Twlith the appointment of a management receive proceedings against. the corporation, ‘complaints for illegal dismissal and should instead direct the employees to lodge their claims before the duly appointed receiver. falls within the enumerated exceptions, the le the adjudicated claim with the liquidator or iquidation court for processing of claims to determine the proper ‘concurrence and preference of credit among the different ereditors and depositors of the bank. 305.9 Adjudication of Disputed Claims Disputed claims refer to all claims, whether they be against the assets of the insolvent bank, for specific performance, breach of “Cranarg Cou fen Ne 852, Ao as a oomere 1 contract, damages or cases of similar nature, To limit the jurisdiction of the liquidation court to those clalms against the assets of the bank is to remove significantly and without basis the cases that may bbe brought against a bank in case of insolvency. Upon acquiring jurisdiction, the court shall, upon motion by the receiver after due notice, adjudicate disputed the institution, assist the enforcement of individual stockholders, directors and officers and decide on ather Issues thet ‘may be material to implement the liquidation plan adopten, MIRANDA v. PHILIPPINE DEPOSIT INSURANCE CORPORATION. ‘GR. No, 169334, September &, 2006 (201 SCRA, 208) fegular courts do not have jursition over actions fled by caiman against an inslvent bac uness teresa cise howing that the action taken by the Bonglo Seal hough the Monetary oatd, in the closure of fnancal Instatons one exces our 5. "Disputed ams" rte ims, wbether they be agaist the assets of {he insolvent bank, for specie performance, breach of contac, famages, or whatever from an Order Allowing or wing a Claim Generally, an order ofthe liquidation courtallowing or disallowing 4 claim is final and may be the subject of appeal" An exception is an interlocutory order as It does not constitute an adjudication of |W RE: PETITION FOR ASSISTANCE IN THE LIQUIDATION OF ‘THE RURAL BANK OF BOKOD (BENGUET) INC. PHILIPPINE DEPOSIT INSURANCE CORPORATION v. IREAU OF INTERNAL REVENUE (BIR) 18261, December 18,2006 (11 SERA. 123) “The requirement by the Bureau of intemal Revenue for a tax ‘earance is nota claim which ean be the subject of an appeal on the metion| ‘learance before ofthe closed bank can proceed. “Frome inerlocuory order of the RTC, the POIC apocaled the ssue before the Supreme Court under Rule 43 of he Fevised Rules of Cour, ralsing pire questions of faw~ ft was held thatthe rane by the RTC of the motion rea ‘tax clearance doesnot constitute an aud the bie 305.11 Powers and Duties of a Liquidator ‘The liquidator is bound to convert the assets of the institution Into money, and dispose of the same to creditors and other partes, forthe purpose of paying the debts of the closed bank, n accordance with the rules on concurrence and preference of credit under the Code of the Philippines. The liquidator, in the name of the Institution and with nse, may institute actions as may be necessary to collect and recover accoumts and assets of, fr defend any action against, the institution 30.6 Judicial Review ‘The actions of the Monetary Board placing a bank under conservatorship, eceivership and liquidation are final and executory. However, such exercise is subject to duty before the Court of Appeals through a petition for ci tunder Rule 65 of the Rules of Court. it can only be set aside if found to be in excess of Jurisdiction or with grave abuse of discretion as to amount to lack fr excess of jurisdiction. UNITED COCONUT PLANTERS BANK v.E, GANZON, INC. GAR, Nos. 168859 and 168897 June 30,2009 Under Section 30 of Republic Act No. 7653, the order of the Monetary Board regarding the liquidation of a bank can be ‘questioned before a court, wa a petition for certovan, when the Same was issued in excess of jurisdiction er with such grave suse Of discretion as to amount to lack or excess of jurisdiction, The ‘court referred to therein can be corsrued to mean the Court of “Appeals because ts nthe sad court where a petition for cerdiorar! ‘can be fled following the hierarchy of cours, Before an order of conservatorship, receivership or liquidation may be restrained or set aside by a court, the ‘must be present The petition for certorarimust befiled by the stockholders of record representing the majority ofthe capital stack, ‘The petition for certiorari must be filed within ten (10), days from receipt by the board of directors of the order directing recelvership, liquidation or conservatorship, FACTS: Petitioner Hi shares or 8495 [MERCHANTS RURAL BANK OF TALAVERA, INC. v, "MONETARY BOARD, BANGKO SENTRAL (CAG. No. SP 9303, August 3, 2006" ‘GR No. 175114, January 15,2007 io Soria alleged that he owns 109,985. ofthe authorized capital stock and thus, had the ‘apacty to sue. It was discovered, however, that he only ows 62,734 Shares o 31.39% of theauthorized capital stock, He srqued The action taken by the Monetary Board was in excess of jon or with such grave abuse of discretion as 10 {amount to lack or excess of jurisdiction. thatthe other shares of stock which were transfer personal property an can be transferred by mere HELD: Based on the records ofthe Hangko Sentral, peti Soriano owns only 62,794 shares or 3.397% of the a

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