Understanding Jurisdiction in Bank Liquidation: Filing Claims Against Closed Banks in the Philippines

When a bank in the Philippines is ordered closed by the Bangko Sentral ng Pilipinas (BSP), creditors and depositors often wonder where to file their claims. A recent Supreme Court decision clarifies this important question: all claims against a closed bank must be filed with the liquidation court, regardless of when the claim arose or whether a case was already pending in another court.

In Hermosa Savings and Loan Bank, Inc. v. Development Bank of the Philippines (G.R. No. 222972, February 10, 2021), the Supreme Court settled a dispute over which court has jurisdiction over claims against a bank placed under receivership and liquidation by the Philippine Deposit Insurance Corporation (PDIC).

The Facts of the Case

The Development Bank of the Philippines (DBP) extended subsidiary loans to Hermosa Savings and Loan Bank, Inc. (Hermosa Bank) under the Industrial Guarantee and Loan Fund program. When Hermosa Bank failed to remit amortizations, DBP filed a complaint for sum of money and damages in September 2001 before the Regional Trial Court (RTC) of Makati City.

The complaint named not only Hermosa Bank but also its officers, who were sued in their personal capacities for alleged fraud and gross negligence. The RTC issued a writ of preliminary attachment against the defendants' properties.

In February 2005, the BSP Monetary Board ordered the closure of Hermosa Bank and placed it under receivership with the PDIC. The PDIC then filed a petition for assistance in liquidation before the RTC of Dinalupihan, Bataan, which became the liquidation court.

The Issue

The central question was whether the RTC Makati retained jurisdiction over DBP's complaint despite the pendency of liquidation proceedings before the liquidation court.

The Court of Appeals ruled that the RTC retained jurisdiction because the case was filed before the bank's closure, applying the principle that jurisdiction, once acquired, is not lost. The Supreme Court disagreed.

The Ruling

The Supreme Court held that the liquidation court has exclusive jurisdiction over all claims against a closed bank under Section 30 of Republic Act No. 7653, also known as the New Central Bank Act.

The Court cited its earlier ruling in Barrameda v. Rural Bank of Canaman, Inc. (650 Phil. 476 [2010]), which recognized that the rule on adherence of jurisdiction is not absolute. Section 30 of RA 7653 is curative in character because it consolidates all claims against the bank in a single liquidation proceeding.

The rationale is to prevent multiplicity of actions against the insolvent bank, establish due process and orderliness in liquidation, obviate the proliferation of litigations, and avoid injustice and arbitrariness.

The Court emphasized that the time of filing the complaint is immaterial. What matters is that allowing a claim to proceed outside the liquidation court could prejudice other depositors and creditors by prioritizing one claim over others.

The Court also rejected the argument that the liquidation court could not hear claims against bank officers sued in their personal capacities. Section 30 of RA 7653 expressly authorizes the liquidation court to "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."

Finally, the Court ruled that the writ of preliminary attachment, being a provisional remedy dependent on the main action, must be dissolved once the complaint is dismissed.

Practical Takeaways

• File claims with the liquidation court. Once a bank is placed under liquidation, all claims against it—including those already pending in other courts—must be filed with the liquidation court designated by the PDIC.

• Timing does not matter. Even if a lawsuit was filed before the bank's closure, the liquidation court still takes over. The goal is to ensure fair treatment of all creditors and depositors.

• Claims against bank officers also go to the liquidation court. Section 30 of RA 7653 empowers the liquidation court to determine the liabilities of stockholders, directors, and officers of the closed bank.

• Be mindful of deadlines. Creditors should promptly file their claims with the PDIC and the liquidation court to avoid being left out of the distribution of the bank's assets.

• Consult a lawyer early. Bank liquidation involves complex rules on concurrence and preference of credit under the Civil Code. Professional guidance can help protect one's rights.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.