Whether PDIC, as the Receiver of BFSMB, has the Obligation to Enter Its Appearance and Represent BFSMB in Cases Filed Against Government Officials

DOJ OPINION NO. 026 , s. 2012 May 7, 2012 Secretary Cesar V. Purisima Department of Finance Roxas Boulevard Manila Dear Secretary Purisima : This refers to your request for opinion on the query stated therein relating to certain pending cases 1 filed by Banco Filipino Savings and Mortgage Bank (BFSMB) against several government agencies and officials in connection with the bank's closure in 1985. Specifically, your inquiry is "whether PDIC (Philippine Deposit Insurance Corporation), as the Receiver of BFSMB, has the obligation to enter its appearance and represent BFSMB in these cases". We take it that your above-stated query is raised in connection with Section 10 (c) (1) of Republic Act (R.A.) No. 3591, as further amended by R.A. No. 9302, which specifically empowers the PDIC to "bring suits to enforce liabilities to or recoveries of the closed bank," after the Monetary Board (MB) of the Bangko Sentral ng Pilipinas (BSP) designated the PDIC as the Receiver of the BFSMB which the MB ordered closed on March 17, 2011. You state that as Receiver of closed banks, PDIC, under the law and existing jurisprudence, gathered and took charge of all the assets of BFSMB and is administering the same for the benefits of its creditors; and that as such Receiver, it is also empowered to bring suits to enforce liabilities to or recoveries of the closed bank. You also say that as a matter of procedure, PDIC evaluates all cases filed for or against a closed bank and which are pending as of closure date to determine the merits thereof and the possibility of recovery if favorable judgment is obtained; and that if the case appears meritorious and recovery possible, PDIC, as Receiver, enters its appearance in the case and, through an external counsel, continues, the prosecution/defense for and in behalf of the bank. ICTHDE Moreover, you aver that the aforesaid pending cases filed by BFSMB stemmed from the 1991 Decision of the Supreme Court which found the 1985 closure of BFSMB to be arbitrary and with grave abuse of discretion. Considering that all the subject cases are being handled by an external counsel engaged by the BFSMB, who has rejected the demand by PDIC to turn over to it the cases, and considering further that resolution/ruling in any of said cases favoring BFSMB could possibly give rise to monetary judgment against the BSP and the MB-BOL, among others, you now elevate the matter to us for our views and opinion. The Secretary of Justice, pursuant to settled policy and precedents, does not pass upon issues which, as in this case, are sub-judice or pending litigation in court. 2 However, the fact that the issue raised involves laws that directly affect not only the exercise of your functions as member of both the MB and the PDIC but also the government agencies involved in said cases, we are impelled to rule on the issue. We answer your query in the negative. It must be noted, at the outset, that dispositive portion of the Supreme Court en banc Decision in the consolidated cases of Bangko Filipino Savings and Mortgage Bank, et al. vs. Monetary Board, et al. , 3 is clear, thus: "ACCORDINGLY, decision is hereby rendered as follows: "1. The motion for reconsideration in G.R. Nos. 68878 and 81303, and the petitions in G.R. Nos. 77255-58, 78766, 81304 and 90473 are DENIED; "2. The petitions in G.R. No. 70054, 78767 and 78894 are GRANTED and the assailed order of the Central Bank and the Monetary Board dated January 25, 1985 is hereby ANNULED AND SET ASIDE. The Central Bank and the Monetary Board are ordered to reorganize petitioner Banco Filipino Savings and Mortgage Bank and to allow the latter to resume business in the Philippines under the controllership of both the Central Bank and the Monetary Board and under such conditions as may be prescribed by the latter in connection with its reorganization until such time that petitioner bank can continue with safety to its creditors, depositors and the general public . SO ORDERED." 4 Upon the other hand, Section 30 of the New Central Bank Act and Section 10 of the PDIC Charter, insofar as pertinent, respectively provide, to wit: "Section 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 quasi-bank: "(a) is unable to pay its liabilities as they become due in the ordinary course of business: Provided, That this shall not include inability to pay caused by extraordinary demands induced by financial panic in the banking community; TaDAIS "(b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its liabilities; or "(c) cannot continue in business without involving probable losses to its depositors or creditors; or "(d) has willfully violated a cease and desist order under Section 37 that has become final, involving acts or transactions which amount to fraud or a dissipation of the assets of the institution; in which cases, the Monetary Board may summarily and without need for prior hearing forbid the institution from doing business in the Philippines and designate the Philippine Deposit Insurance Corporation as receiver of the banking institution . "For a quasi-bank, any person of recognized competence in banking or finance may be designated as receiver. "The receiver shall immediately gather and take charge of all the assets and liabilities of the institution, administer the same for the benefit of its creditors, and exercise the general powers of a receiver under the Revised Rules of Court but shall not, with the exception of administrative expenditures, pay or commit any act that will involve the transfer or disposition of any asset of the institution: . . . 5 "xxx xxx xxx" "SECTION 10. "a. The provisions of other laws, general or special, to the contrary notwithstanding, whenever it shall be appropriate for the Monetary Board of the Bangko Sentral ng Pilipinas to appoint a receiver of any banking institution pursuant to existing laws, the Monetary Board shall give prior notice and appoint the Corporation as receiver. "b. The Corporation as receiver shall control, manage and administer the affairs of the closed bank. Effective immediately upon takeover as receiver of such bank, the powers, functions and duties, as well as all allowances, remunerations and perquisites of the directors, officers, and stockholders of such bank are suspended, and the relevant provisions of the Articles of Incorporation and By-laws of the closed bank are likewise deemed suspended. "c. The assets of the closed bank under receivership shall be deemed in custodia legis in the hands of the receiver. From the time the closed bank is placed under such receivership, its assets shall not be subject to attachment, garnishment, execution, levy or any other court processes. Therefore, a judge, officer of the court or any person who shall issue, order, process or cause the issuance or implementation of the writ of garnishment, levy, attachment or execution shall be liable under Section 21 hereof. "xxx xxx xxx" 6 Construing the Supreme Court ruling in the above-mentioned BFSMB case vis--vis the provisions of the PDIC Charter and the New Central Bank Act above-quoted, the issue that comes to our mind is not whether PDIC can continue to exercise the powers and functions of a duly appointed receivership but whether, despite the said 1991 Supreme Court decision, PDIC remains the receiver of BFSMB. CDAEHS Evidently, when the Supreme Court nullified and set aside the CB-MB Order that led to the closure of BFSMB and, consequently, the appointment of PDIC as the bank's receiver, the effects are as if no bank was closed and no receivership was established. In fact, the Supreme Court was even explicit in mandating the "Central Bank and the Monetary Board . . . to reorganize petitioner Banco Filipino Savings and Mortgage Bank and to allow the latter to resume business in the Philippines under the controllership of both the Central Bank and the Monetary Board and under such conditions as may be prescribed by the latter in connection with its reorganization until such time that petitioner bank can continue with safety to its creditors, depositors and the general public." Thus, undeniably, the Supreme Court decision effectively rendered PDIC's receivership of BFSMB non-existent. For the same reason, we find it but logical to say that, insofar as BFSMB is concerned, PDIC cannot intervene, much less appear and represent BFSMB, in subject pending cases filed against several government agencies and officials in connection with the bank's closure in 1985. This is true especially because, admittedly, these cases were but offshoots of the 1991 decision which, as stated earlier, effectively nullified the receivership of PDIC. Moreover, assuming arguendo that the status of PDIC as receiver of BFSMB has not been affected and rendered invalid by the 1991 decision, it cannot still appear and represent the bank in said cases. The rationale is because the said cases, including the one pending with the Court of Appeals, do not appear to have been filed by the bank. Rather, all appear to have been filed by the stockholders thereof, in their private and personal capacities. Under the law, it must be stressed, said stockholders have personalities separate and distinct from the BFSMB. Please be advised accordingly. Very truly yours, (SGD.) LEILA M. DE LIMA Secretary Footnotes 1. These cases appear to be classified into four (4) groups, i.e. , 1) Damages cases against Central Bank-Board of Liquidators (CB-BOL), Bangko Sentral ng Pilipinas/Monetary Board (BSP/MB) and former Central Bank of the Philippines (CBP) officials; 2) Revival of Judgment cases against CB-BOL, BSP and MB; 3) Dacion en pago cases against BSP and MB; and 4) Business plan cases against BSP and MB. 2. Secretary of Justice Op. Nos. 53 and 51, s. 2010; Nos. 25, 22, and 16, s. 2009. 3. 204 SCRA 767 (1991). 4. At p. 807; stress added. 5. R.A. No. 7653; emphasis ours. 6. R.A. No. 3591, as further amended by R.A. No. 9302; underscoring supplied.