When a bank is ordered closed by the Bangko Sentral ng Pilipinas (BSP), it’s placed under the receivership of the Philippine Deposit Insurance Corporation (PDIC). This means that only the PDIC, as the receiver, has the authority to sue or be sued on behalf of the closed bank. Any legal action initiated by the closed bank without the PDIC’s involvement can be dismissed. This case clarifies the legal standing of a closed bank and ensures that the PDIC, as the receiver, properly manages the bank’s assets and liabilities for the benefit of its creditors and depositors.

Banco Filipino’s Battle: Who Holds the Reins in Legal Disputes After Closure?

This case revolves around Banco Filipino Savings & Mortgage Bank, which faced closure orders from the Monetary Board. The central legal question is whether Banco Filipino, after being placed under receivership, could independently file a lawsuit against Bangko Sentral ng Pilipinas (BSP) and the Monetary Board without the explicit authority of its receiver, the Philippine Deposit Insurance Corporation (PDIC). This issue stems from a series of financial difficulties Banco Filipino experienced, leading to disputes over financial assistance and regulatory reliefs offered by BSP. The Supreme Court’s decision hinged on determining the extent of authority a closed bank retains, especially concerning its capacity to engage in legal proceedings.

The legal framework for this case is rooted in Republic Act No. 7653, also known as the New Central Bank Act, which governs the establishment and operation of Bangko Sentral as the country’s monetary authority. Section 30 of this Act outlines the procedures and powers of the receiver when a bank is declared insolvent. Crucially, it dictates that the receiver is responsible for taking charge of the assets and liabilities of the institution and administering them for the benefit of its creditors. This provision is pivotal in understanding the PDIC’s role and authority in representing a closed bank in legal matters.

Building on this principle, the Supreme Court emphasized that a closed bank under receivership loses the power to sue or be sued except through its receiver. The court cited several precedents, including Hernandez v. Rural Bank of Lucena, which established that an insolvent bank under liquidation could only function through the finance commissioner or liquidator. Furthermore, the court referenced Manalo v. Court of Appeals, reiterating that while a closed bank retains its juridical personality, the prosecution or defense of any action must be done through the liquidator.

The Supreme Court drew a clear distinction between the bank’s legal existence and its ability to act independently in legal proceedings. While the bank still exists as a legal entity, its powers are curtailed, and its representation is vested solely in the receiver. This is to ensure that the assets of the bank are properly managed and that legal actions are aligned with the interests of the creditors and depositors.

The relationship between the PDIC and a closed bank is fiduciary in nature. Section 30 of Republic Act No. 7653 directs the receiver to “immediately gather and take charge of all the assets and liabilities of the institution” and “administer the same for the benefit of its creditors.” To further illustrate this point, the Court cited Balayan Bay Rural Bank v. National Livelihood Development Corporation, where it was explained that a receiver of a closed bank is tasked with the duty to hold the assets and liabilities in trust for the benefit of the bank’s creditors.

As fiduciary of the insolvent bank, PDIC conserves and manages the assets of the bank to prevent the assets’ dissipation. This includes the power to bring and defend any action that threatens to dissipate the closed bank’s assets. The Court stated that PDIC does so, not as the real party-in-interest, but as a representative party. Republic Act No. 3591, or the Philippine Deposit Insurance Corporation Charter, as amended, grants PDIC the power to bring suits to enforce liabilities to or recoveries of the closed bank.

Petitioner Banco Filipino contended that it was not a closed bank at the time of the filing of this Petition. The Court did not agree with this contention as there was no final declaration yet on the matter. Petitioner should have attempted to comply after the promulgation of the November 21, 2012 Amended Decision. Its substantial compliance would have cured the initial defect of its Petition.

The Court emphasized that a closed bank cannot presume that it could file this Petition without joining its receiver on the ground that PDIC might not allow the suit. At the very least, petitioner should have shown that it attempted to seek PDIC’s authorization to file suit. Thus, the Petition was dismissed.

Even assuming that the Petition did not suffer from procedural infirmities, it must still be denied for lack of merit. Unless otherwise provided for by law and the Rules of Court, petitions for certiorari against a quasi-judicial agency are cognizable only by the Court of Appeals. The Regional Trial Court had no jurisdiction over the Petition for Certiorari filed by petitioner against respondents.

FAQs

What was the key issue in this case?	The central issue was whether Banco Filipino, as a closed bank under receivership, could file a lawsuit without the authority of its receiver, the PDIC. The court ruled that it could not, as the receiver has the sole authority to represent the bank in legal matters.
What is the role of the Philippine Deposit Insurance Corporation (PDIC) in this case?	The PDIC acts as the receiver of the closed bank, Banco Filipino. As the receiver, it has the fiduciary duty and the legal authority to manage the bank’s assets, liabilities, and legal affairs, including the power to sue or be sued on behalf of the bank.
What law governs the authority of the receiver in cases of bank closure?	Republic Act No. 7653, also known as the New Central Bank Act, governs the powers and responsibilities of the receiver, in this case, the PDIC. Section 30 of this Act outlines the procedures and authority of the receiver in managing the assets and liabilities of a closed bank.
What is the significance of the fiduciary relationship between the PDIC and the closed bank?	The fiduciary relationship means that the PDIC must act in the best interests of the bank’s creditors and depositors. This includes conserving the bank’s assets, preventing their dissipation, and ensuring that all legal actions are aligned with protecting those interests.
What happens to the powers of the Board of Directors and officers of a bank placed under receivership?	Upon being placed under receivership, the powers, functions, and duties of the directors, officers, and stockholders of the closed bank are suspended. This includes the authority to initiate legal proceedings, which is then vested solely in the receiver, the PDIC.
Why was Banco Filipino’s petition ultimately dismissed?	Banco Filipino’s petition was dismissed because it was filed without the proper authorization from its receiver, the PDIC. Additionally, the court found that the Regional Trial Court lacked jurisdiction over the petition, as special civil actions against quasi-judicial agencies should be filed with the Court of Appeals.
What is the effect of a closed bank retaining its juridical personality?	While a closed bank retains its juridical personality, it cannot act independently in legal proceedings. The prosecution or defense of any action must be done through the receiver to ensure proper management of assets and protection of creditor interests.
What recourse does a closed bank have if it disagrees with the receiver’s actions?	If a closed bank disagrees with the receiver’s actions, it can attempt to seek the receiver’s authorization to file suit. If authorization is refused, the bank may seek legal remedies to compel the receiver to act or to be joined as an unwilling co-petitioner in the case.

In conclusion, the Supreme Court’s decision reinforces the principle that a closed bank under receivership must act through its designated receiver, the PDIC, in all legal matters. This ruling ensures the orderly management of the bank’s assets, protects the interests of creditors and depositors, and maintains the stability of the financial system.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: BANCO FILIPINO SAVINGS AND MORTGAGE BANK v. BANGKO SENTRAL NG PILIPINAS, G.R. No. 200678, June 04, 2018