Vda. De Ballesteros v.

Bank of Canaman
GR. No. 176260 – November 24, 2010
J. Mendoza

Topic: Principle of Adherence to Jurisdiction

Doctrine: Rule of Adherence to Jurisdiction: The principle that once a court has acquired jurisdiction,
that jurisdiction continues until the court has done all that it can do in the exercise of that jurisdiction. An
exception to this rule is when the change in jurisdiction is curative in character.

Petitioners: Lucia Barrameda Vda. De Ballesteros

Respondents: Rural Bank of Canaman, Inc. (Represented by its Liquidator, The Philippine Deposit
Insurance Corporation)

Case Summary: Lucia de Ballesteros filed a complaint with RTC Iriga for Annulment of Deed of
Extrajudicial Partition, Deed of Mortgage and Damages against her children and RBCI. She said that
the lot she’s living in which she inherited from her husband was mortgaged and was then foreclosed by
RBCI. Pending the case, RBCI was put under the receivership of PDIC pursuant to RA7653 (New
Central Bank Act). Thus, a liquidation proceeding was commenced with RTC Makati. RTC Iriga
dismissed Lucia’s case stating that it is the RTC Makati who has jurisdiction (JD) over the case. On
appeal, the CA ordered the consolidation of Lucia’s case with the liquidation proceeding at the RTC
Makati. Lucia argues at the SC that RTC Iriga has JD – considering the rule on adherence of JD –
given that she filed the case even before RBCI was put under receivership.

SC Ruling: Lucia is wrong. Yes, the Court recognizes the doctrine on adherence of jurisdiction, but
there are exceptions! One of the exceptions is when the change in JD is curative in character. Section
30, R.A. 7653 is curative in character when it declared that the liquidation court shall have
jurisdiction in the same proceedings to assist in the adjudication of the disputed claims against
the Bank. Furthermore, the time of filing is immaterial. It is the execution that will obviously prejudice
the other depositors and creditors. Thus, to allow Lucia's case to proceed independently, a possibility of
favorable judgment and execution against the assets of RBCI would not only prejudice the other
creditors and depositors but would defeat the very purpose for which a liquidation court was
constituted as well.

Facts: [IMPT == Important]

 March 17, 2000: Lucia de Ballesteros (Petitioner) filed a complaint for Annulment of Deed of
Extrajudicial Partition, Deed of Mortgage and Damages with Prayer for Preliminary Injunction
against her seven (7) children1 and the Rural Bank of Canaman, Inc. Baao Branch [RBCI]
(Respondent) before the RTC Iriga.
 In the complaint, she alleged that without her knowledge and consent, her children executed a
deed of extrajudicial partition and a waiver of the estate in favor of Rico (one of her children).
Rico then mortgaged in favor of RBCI “Parcel B” of the estate, where Lucia was living. The
mortgage was foreclosed leaving Lucia with nowhere to live.
 RBCI Answer: The land was actually sold by Lucia to Rico, and that she consented to the
extrajudicial partition, waiver, and mortgage.
 Pre-Trial: RBCI filed a motion to withdraw after being informed that the Philippine Deposit
Insurance Corporation (PDIC) would handle the case given that the former was placed under the
latter’s receivership  Basically RBCI was “substituted” by PDIC
 [IMPT] May 9, 2003: RBCI (through PDIC) filed a Motion to Dismiss (MTD) stating that RTC
Iriga has no jurisdiction (JD) over the subject matter of the action. RBCI stated that pursuant to
1
Roy, Rito, Amy, Arabel Rico, Abe, Ponce, and Adden
 Section 30, RA7653 (New Central Bank Act)2, the RTC Makati already constituted itself as the
liquidation court to assist PDIC in undertaking the liquidation of RBCI. Thus, the subject matter
of the instant case fell within the exclusive JD of such liquidation court.
 RTC Iriga Ruling: The RTC granted the MTD. Thus, Lucia appealed to the CA arguing that
RTC Iriga had JD over the case under the rule on adherence of JD 3.
 CA Ruling: The CA modified the decision, and ordered the consolidation of the liquidation case
pending with the RTC Makati and Lucia’s complaint. Lucia then appealed to the SC via a
petition for review on certiorari under Rule 45.

Issue + Held:
1. [IMPT] W/N a liquidation court can take cognizance of a case wherein the main cause of action
is not a simple money claim against a bank placed under the receivership of PDIC [YES]  The
SC ruled in favor of RBCI/PDIC
 Lucia’s Argument: The RTC Iriga has JD given that the case was filed with the court even
before RBCI was placed under receivership. Ken Note: She’s basically saying that the rule on
adherence of JD should apply in favor of RTC Iriga’s retention of JD.
o Furthermore, her case cannot be legally consolidated and brought before the RTC Makati
considering her cause of action against RBCI is not a simple claim arising out of a
creditor-debtor relationship, but one which involves her rights and interest over a certain
property irregularly acquired by RBCI.
 PDIC’s Argument: The case can be consolidated given that the liquidation court of RBCI,
having been established, shall have exclusive jurisdiction over all claims against the bank.
 [IMPT] SC Ruling: Lucia is wrong. Yes, the Court recognizes the doctrine on adherence of
jurisdiction, but there are exceptions! One of the exceptions is when the change in JD is
curative in character. Section 30, R.A. 7653 is curative in character when it declared that the
liquidation court shall have jurisdiction in the same proceedings to assist in the adjudication of
the disputed claims against the Bank.
o Manalo v. CA (2001): “The requirement that all claims against the bank be pursued in
the liquidation proceedings filed by the Central Bank is intended to prevent multiplicity
of actions against the insolvent bank and designed to establish due process and
orderliness in the liquidation of the bank, to obviate the proliferation of litigations and to
avoid injustice and arbitrariness.”
 Furthermore, the time of filing is immaterial. It is the execution that will obviously prejudice the
other depositors and creditors. Thus, to allow Lucia's case to proceed independently, a possibility
of favorable judgment and execution against the assets of RBCI would not only prejudice the
other creditors and depositors but would defeat the very purpose for which a liquidation court was
constituted as well.

2. [NOT IMPT] W/N consolidation is proper [YES]

 The CA was correct in directing the consolidation of the cases. Lucia’s complaint involving
annulment of deed of mortgage and damages falls within the purview of a disputed claim under
Section 30, RA76534.

2
Proceedings in Receivership and Liquidation
3
The principle that once a court has acquired jurisdiction, that jurisdiction continues until the court has done all that it can do in
the exercise of that jurisdiction.
4
Section 30 is a long provision. Relevant part:
“xxxxxxxxxxx
If the receiver determines that the institution cannot be rehabilitated or permitted to resume business in accordance with the next
preceding paragraph, the Monetary Board shall notify in writing the board of directors of its findings and direct the receiver to
proceed with the liquidation of the institution. The receiver shall:
  "Disputed claims" refers to all claims, whether they be against the assets of the insolvent bank,
for specific performance, breach of contract, damages, or whatever. Lucia's action being a claim
against RBCI can properly be consolidated with the liquidation proceedings before the RTC-
Makati.
 In Re: Petition for Assistance in the Liquidation of the Rural Bank of BOKOD (Benguet), Inc. v.
Bureau of Internal Revenue: A liquidation proceeding is commenced by the filing of a single
petition by the Solicitor General with a court of competent jurisdiction. All claims against the
insolvent are required to be filed with the liquidation court.

Ruling: WHEREFORE, the petition is DENIED.

(1) file ex parte with the proper regional trial court, and without requirement of prior notice or any other action, a petition for
assistance in the liquidation of the institution pursuant to a liquidation plan adopted by the Philippine Deposit Insurance
Corporation for general application to all closed banks. In case of quasi-banks, the liquidation plan shall be adopted by the
Monetary Board. Upon acquiring jurisdiction, the court shall, upon motion by the receiver after due notice, adjudicate disputed
claims against the institution, assist the enforcement of individual liabilities of the stockholders, directors and officers, and decide
on other issues as may be material to implement the liquidation plan adopted. The receiver shall pay the cost of the proceedings
from the assets of the institution.
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