Banco Filipino Savings and Mortgage Bank vs.

Bangko Sentral ng Pilipinas and the Monetary

A bank which has been ordered closed by the Bangko Sentral ng Pilipinas (Bangko Sentral) is placed under the
receivership of the Philippine Deposit Insurance Corporation. As a consequence of the receivership, the closed
bank may sue and be sued only through its receiver, the Philippine Deposit Insurance Corporation. Any action
filed by the closed bank without its receiver may be dismissed.
Facts: On December 11, 1991, this Court promulgated Banco Filipino Savings & Mortgage Bank v. Monetary
Board and Central Bank of the Philippines ,4 which declared void the Monetary Board's order for closure and
receivership of Banco Filipino Savings & Mortgage Bank (Banco Filipino). This Court also directed the Central
Bank of the Philippines and the Monetary Board to reorganize Banco Filipino and to allow it to resume business
under the comptrollership of both the Central Bank and the Monetary Board.

In a letter dated October 9, 2003, Banco Filipino asked for financial assistance of more than
P3,000,000,000.00 through emergency loans and credit easement terms. , Bangko Sentral informed Banco
Filipino that it should first comply with certain conditions imposed by Republic Act No. 7653 before financial
assistance could be extended. Banco Filipino was also required to submit a rehabilitation plan approved by
Bangko Sentral before emergency loans could be granted.

Banco Filipino submitted its Long-Term Business Plan to Bangko Sentral. It also claimed that Bangko Sentral
already extended similar arrangements to other banks and that it was still awaiting the payment of
P18,800,000,000.00 in damage from the court ruling and claims, "the entitlement to which the Supreme Court
has already decided with finality. In response, Bangko Sentral informed Banco Filipino that its business plan
could not be acted upon since it was neither "confirmed nor approved by [Banco Filipino's Board of Directors]."

Banco Filipino entered into discussions and negotiations with Bangko Sentral with respect to the said business
plan, which resulted to different revisions. Unable to come to an agreement, the parties constituted an Ad Hoc
Committee composed of representatives from both parties to study and act on the proposals. The Ad Hoc
Committee produced an Alternative Business Plan, which was accepted by Banco Filipino, but was subject to
the Monetary Board's approval. Later, Bangko Sentral informed Banco Filipino that the Monetary Board issued
Resolution No. 1668 granting its request for the P25,000,000,000.00 Financial Assistance and Regulatory
Reliefs to form part of its Revised Business Plan and Alternative Business Plan. The approval was also subject
to certain terms and conditions, among which was the withdrawal or dismissal with prejudice to all pending
cases filed by Banco Filipino against Bangko Sentral and its officials. The terms also included the execution of
necessary quitclaims and commitments to be given by Banco Filipino's principal stockholders, Board of
Directors, and duly authorized officers "not to revive or refile such similar cases in the future." However, Banco
Filipino informed Bangko Sentral that it was constrained to accept the Financial Assistance Package and
Regulatory Reliefs." It, however, asserted that it did not agree with the condition to dismiss and withdraw its
cases since this would require a separate discussion.

Banco Filipino a Mandamus with Regional Trial Court. It assailed the alleged "arbitrary, capricious and illegal
acts" of Bangko Sentral and of the Monetary Board in coercing Banco Filipino to withdraw all its present suits
in exchange of the approval of its Business Plan. In particula, Banco Filipino alleged that Bangko Sentral and
the Monetary Board committed grave abuse of discretion in imposing an additional condition in Resolution No.
1668 requiring it to withdraw its cases and waive all future cases since it was unconstitutional and contrary to
public policy. It prayed that a writ of mandamus be issued to compel Bangko Sentral and the Monetary Board
to approve and implement its business plan and release its Financial Assistance and Regulatory Reliefs
package.

The RTC granted the request for the issuance of a Mandamus against Bangko Sentral and the Monetary Board.
The trial court likewise found that litis pendencia and forum shopping were not present in the case, that
Bangko Sentral's verification and certification of non-forum shopping were validly signed by the Executive
Committee, and that Banco Filipino's Petition did not fail to state a cause of action.

Bangko Sentral and the Monetary Board filed a Petition For Certiorari with prayer for temporary restraining
order and/or writ of preliminary injunction with the Court of Appeals, assailing the Regional Trial Court order.
BSP also filed an amend petition. The CA granted the Certiorari and amended complaint of BSP and MB.
According to the CA, the delegation of authority from Banco Filipino's Board of Directors to the Executive
Committee to sign pleadings on its behalf validated the verification and certification of non-forum shopping
signed only by the Executive Vice Presidents.

Banco Filipino then filed a petition Petition for Review on Certiorari before the SC.

Petitioner claims that it had the authority to file this Petition since the Court of Appeals promulgated its
January 27, 2012 Decision in CA-G.R. SP No. 118599, finding petitioner's closure and receivership to have
been illegal.73 It argues that to dismiss its Petition now pending before this Court for lack of authority from its
receiver Philippine Deposit Insurance Corporation would be "an absurd and unjust situation." Petitioner admits,
however, that this decision was eventually overturned on reconsideration in the Court of Appeals November
21, 2012 Amended Decision.

Petitioner points out that there was nothing in the Philippine Deposit Insurance Corporation Charter or in
Republic Act No. 7653 that precludes its Board of Directors from suing on its behalf. It adds that there was an
obvious conflict of interest in requiring it to seek Philippine Deposit Insurance Corporation's authority to file the
case considering that Philippine Deposit Insurance Corporation was under the control of herein respondent
Monetary Board.

Respondents, on the other hand, counter that the Petition should be dismissed outright for being filed without
Philippine Deposit Insurance Corporation's authority. It asserts that petitioner was placed under receivership
on March 17, 2011, and thus, petitioner's Executive Committee would have had no authority to sign for or on
behalf of petitioner absent the authority of its receiver, Philippine Deposit Insurance Corporation. They also
point out that both the Philippine Deposit Insurance Corporation Charter and Republic Act No. 7653
categorically state that the authority to file suits or retain counsels for closed banks is vested in the receiver.85
Thus, the verification and certification of non-forum shopping signed by petitioner's Executive Committee has
no legal effect.

Issue: whether or not petitioner Banco Filipino, as a closed bank under receivership, could file this Petition for
Review without joining its statutory receiver, the Philippine Deposit Insurance Corporation, as a party to the
case.

Held:

No. A closed bank under receivership can only sue or be sued through its receiver, the Philippine Deposit
Insurance Corporation.

Under Republic Act No. 7653,97 when the Monetary Board finds a bank insolvent, it 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.

Republic Act No. 7653, this provision is substantially altered. Section 30 now states, in part:
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: Provided, That the receiver may
deposit or place the funds of the institution in non-speculative investments. The receiver shall determine as
soon as possible, but not later than ninety (90) days from take-over, whether the institution may be
rehabilitated or otherwise placed in such a condition so that it may be permitted to resume business with
safety to its depositors and creditors and the general public: Provided, That any determination for the
resumption of business of the institution shall be subject to prior approval of the Monetary Board.
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:
(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.
(2) convert the assets of the institution to money, dispose of the same to creditors and other parties, for the
purpose of paying the debts of such institution in accordance with the rules on concurrence and preference of
credit under the Civil Code of the Philippines and he may, in the name of the institution, and with the
assistance of counsel as he may retain, institute such actions as may be necessary to collect and recover
accounts and assets of, or defend any action against, the institution. The assets of an institution under
receivership or liquidation shall be deemed in custodia legis in the hands of the receiver and shall, from the
moment the institution was placed under such receivership or liquidation, be exempt from any order of
garnishment, levy, attachment, or execution.
Republic Act No. 7653 provides that the receiver shall also "in the name of the institution, and with the
assistance of counsel as [it] may retain, institute such actions as may be necessary to collect and recover
accounts and assets of, or defend any action against, the institution."Considering that the receiver has the
power to take charge of all the assets of the closed bank and to institute for or defend any action against it,
only the receiver, in its fiduciary capacity, may sue and be sued on behalf of the closed bank.

Petitioner contends that it was not a closed bank at the time of the filing of this Petition on April 10, 2012
since the Court of Appeals January 27, 2012 Decision, docketed as CA-G.R. SP No. 118599, found the closure
to have been illegal. This Court of Appeals Decision, however, was not yet final since the Monetary Board filed
a timely motion for reconsideration. There is also nothing in its dispositive portion which states that it was
immediately executory. Through its November 21, 2012 Amended Decision, the Court of Appeals reversed its
January 27, 2012 Decision,118 confirming petitioner's status as a closed bank under receivership. It was,
therefore, erroneous for petitioner to presume that it was not a closed bank on April 10, 2012 when it filed its
Petition with this Court considering that 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. Petitioner likewise claims
that there was "an obvious conflict of interes” if it was required to sue respondents only through Philippine
Deposit Insurance Corporation, considering that respondent Monetary Board appointed Philippine Deposit
Insurance Corporation as petitioner's receiver. This is a fact, however, that petitioner failed to address when it
filed its Petition, signifying that petitioner had no intention of complying with the law when it filed its Petition
or anytime after.
It was speculative on petitioner's part to presume that it could file this Petition without joining its receiver on
the ground that Philippine Deposit Insurance Corporation might not allow the suit. At the very least, petitioner
should have shown that it attempted to seek Philippine Deposit Insurance Corporation's authorization to file
suit. It was possible that Philippine Deposit Insurance Corporation could have granted its permission to be
joined in the suit. If it had refused to allow petitioner to file its suit, petitioner still had a remedy available to it.

Under Rule 3, Section 10 of the Rules of Court, petitioner could have made Philippine Deposit Insurance
Corporation an unwilling co-petitioner and be joined as a respondent to this case.

Petitioner's suit concerned its Business Plan, a matter that could have affected the status of its insolvency.
Philippine Deposit Insurance Corporation's participation would have been necessary, as it had the duty to
conserve petitioner's assets and to examine any possible liability that petitioner might undertake under the
Business Plan.

Philippine Deposit Insurance Corporation also safeguards the interests of the depositors in all
legal proceedings. Most bank depositors are ordinary people who have entrusted their money to
banks in the hopes of growing their savings. When banks become insolvent, depositors are
secure in the knowledge that they can still recoup some part of their savings through Philippine
Deposit Insurance Corporation. Thus, Philippine Deposit Insurance Corporation's participation in
all suits involving the insolvent bank is necessary and imbued with the public interest.

In any case, petitioner's verification and certification of non-forum shopping was signed by its Executive Vice
Presidents Maxy S. Abad and Atty. Francisco A. Rivera, as authorized by its Board of Directors.

Under Section 10(b) of the Philippine Deposit Insurance Corporation Charter, as amended:
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 prerequisites 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. (Emphasis supplied)
When petitioner was placed under receivership, the powers of its Board of Directors and its officers were
suspended. Thus, its Board of Directors could not have validly authorized its Executive Vice Presidents to file
the suit on its behalf. The Petition, not having been properly verified, is considered an unsigned pleading. A
defect in the certification of non-forum shopping is likewise fatal to petitioner's cause. Considering that the
Petition was filed by signatories who were not validly authorized to do so, the Petition does not produce any
legal effect. Being an unauthorized pleading, this Court never validly acquired jurisdiction over the case. The
Petition, therefore, must be dismissed.