Whether PDIC is Obliged to Represent Banco Filipino in Cases Filed by the Latter

DOJ OPINION NO. 056 , s. 2012 August 30, 2012 Hon. Cesar V. Purisima Secretary, Department of Finance Roxas Boulevard, Manil Dear Secretary Purisima : This refers to your request for review of this Department's opinion declaring that the Philippine Deposit Insurance Corporation (PDIC), as statutory receiver/liquidator of Banco Filipino Savings and Mortgage Bank (BFSMB), has no obligation to enter its appearance and represent the BFSMB in the subject cases filed by BFSMB against the Monetary Board, Central Bank-Board of Liquidator, and Bangko Sentral ng Pilipinas. As narrated in your request, the antecedent facts surrounding the 1985 closure and the 2011 closure of BFSMB are as follows: " BFSMB 1985 Closure: "On January 25, 1985 ("1985 closure"), the Monetary Board of then Central Bank of the Philippines issued a resolution finding BFSMB insolvent and unable to do business without loss to its creditors and depositors. It placed BFSMB under receivership of Carlota Valenzuela (Valenzuela), Deputy Governor of the then Central Bank. "On March 22, 1985, the Monetary Board issued another resolution placing the bank under liquidation and designating Valenzuela as liquidator. "On March 26, 1985, BFSMB filed a petition for certiorari questioning the validity of the resolutions issued by the Monetary Board authorizing the receivership and liquidation of BFSMB. "On December 11, 1991, the Supreme Court rendered a Decision which declared the 1985 closure as annulled and set aside. The Central Bank and the Monetary Board were ordered to reorganize BFSMB and allow the latter to resume business in the Philippines under the comptrollership 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 BFSMB can continue in business with safety to its creditors, depositors and the general public. DAHCaI "The December 11, 1991 Decision of the Supreme Court became final and executory on February 4, 1992. "On August 24, 1993, Republic Act No. 7653 also known as "The New Central Bank Act" took effect. By virtue of this law, Bangko Sentral ng Pilipinas (BSP) became the new central monetary authority and all the powers, duties and functions vested by law in the then Central Bank of the Philippines were deemed transferred to BSP. The same law likewise provided for the continued existence of the Central Bank through a Central Bank Board of Liquidators. "On November 6, 1993, the Monetary Board in Resolution No. 427 allowed BFSMB to re-open and resume business subject to compliance with certain conditions. Thus, BFSMB reopened under BSP Comptrollership on July 1, 1994. "On January 21, 2000, BSP Comptrollership of BFSMB was lifted by virtue of Monetary Board Resolution No. 114. "On March 10, 2011, BFSMB was delisted by the Philippine Stock Exchange. Four (4) days after, BFSMB declared a bank holiday. " BFSMB 2011 Closure: "On March 17, 2011 ("2011 closure"), the Monetary Board in Resolution No. 327.A resolved to prohibit BFSMB from doing business and to place its assets and affairs under receivership of PDIC. "On October 27, 2011, the Monetary Board issued Resolution No. 1635 resolving to place BFSMB under liquidation of PDIC. xxx xxx xxx" With the foregoing as backdrop, you state that the authority of PDIC as Receiver of BFSMB was not the result of the 1985 closure which was eventually nullified by the 1991 Supreme Court Decision. Moreover, the BFSMB was again subsequently closed on March 17, 2011 by virtue of Monetary Board Resolution No. 327.A, consistent with Section 30 of Republic Act No. 7653, and PDIC was designated as Receiver of BFSMB. On October 27, 2011, BFSMB was placed under liquidation of PDIC by virtue of Monetary Board Resolution No. 1635. A second hard look at the facts and relevant jurisprudence convinces us to reconsider our previous opinion. cEASTa It is well-settled in both law and jurisprudence that the Central Monetary Authority, through the Monetary Board, is vested with exclusive authority to assess, evaluate and determine the condition of any bank, and finding such condition to be one of insolvency, or that its continuance in business would involve a probable loss to its depositors or creditors, forbid bank or non-bank financial institution to do business in the Philippines. 1 Under R.A. No. 7653, the Monetary Board may summarily and without need for prior hearing, forbid the banking corporation from doing business in the Philippines, for causes enumerated in Section 30 of the New Central Bank Act; and appoint the PDIC as receiver of the bank. PDIC shall immediately gather and take charge of all the assets and liabilities of the closed bank and administer the same for the benefit of its creditors. 2 On the other hand, the powers and functions of PDIC are also clearly spelled out in R.A. No. 3591, as amended, to act as deposit insurer, as a co-regulator of banks, and as receiver and liquidator of closed banks. 3 Upon designation as receiver, PDIC shall have the power to control, manage and administer the affairs of the closed bank. We note the peculiar circumstance that the parties in the pending cases filed by BFSMB as a result of the 1985 closure are government agencies or instrumentalities. However, the PDIC could not simply shirk from or evade discharging its duties and obligations as receiver because the law mandated it with a positive duty, i.e., to control, manage and administer the affairs of the closed bank. Considering that it has the power to bring suits to enforce liabilities to or recoveries of the closed bank, 4 it is a logical conclusion that it can also continue the prosecution or defense for and in behalf of the closed bank, regardless of the parties to the case. Thus, PDIC can enter its appearance in such cases in the exercise of its powers that are inherent and necessary for the effective discharge of the duties as a receiver. 5 We also note that PDIC's appearance will allow PDIC as Receiver/Liquidator of BFSMB to exhaust all possibilities of settlement under terms and conditions most beneficial to all parties concerned. We will not comment on this issue and leave it to the sound discretion of the PDIC, it being an exercise of a business judgment or decision as a receiver/liquidator. Our Opinion No. 26, s. 2012, is hereby modified accordingly. SHECcD Very truly yours, (SGD.) LEILA M. DE LIMA Secretary Footnotes 1. See Miranda v. PDIC, G.R. No. 169334, September 8, 2006, citing R.A. No. 7653, Secs. 30 and 31, Central Bank of the Philippines v. Court of Appeals, G.R. No. 76118, March 30, 1993, 220 SCRA 536, 543. 2. In Re: Petition for Assistance in the Liquidation of the Rural Bank of Bokod (Benguet), Inc., and PDIC v. BIR, G.R. No. 158261, December 18, 2006. 3. PDIC v. Philippine Countryside Rural Bank, Inc., et al., G.R. No. 176438, January 24, 2011, citing Republic Act No. 3591, as amended, Section 1. 4. See Section 10 (c) (1), RA No. 3591, as amended by RA No. 9302. 5. See Section 10 (c) (9), as added by RA No. 9302.