Who Can Sue on Behalf of a Closed Bank Under Receivership

The Supreme Court's 2018 ruling in Banco Filipino Savings and Mortgage Bank v. Bangko Sentral ng Pilipinas clarifies two important procedural rules that affect any bank that has been ordered closed by the Bangko Sentral ng Pilipinas (BSP). First, a closed bank under receivership may only sue or be sued through its statutory receiver, the Philippine Deposit Insurance Corporation (PDIC). Second, petitions for certiorari against the BSP and the Monetary Board must be filed with the Court of Appeals, not with the Regional Trial Court. The case also illustrates the consequences of failing to follow these rules: the dismissal of the bank's petition.

The Facts of the Case

Banco Filipino had a long history of disputes with the BSP. In 1991, the Supreme Court declared void the Monetary Board's earlier order closing the bank and directed that it be allowed to resume business. Years later, in 2002, Banco Filipino suffered heavy withdrawals and sought financial assistance from the BSP. After lengthy negotiations, the Monetary Board approved a financial assistance package, but with a condition: Banco Filipino had to withdraw all pending cases it had filed against the BSP.

Banco Filipino refused to accept this condition. Instead, it filed a petition for certiorari and mandamus with the Regional Trial Court of Makati, questioning the legality of the condition and seeking to compel the BSP to approve its business plan. The trial court issued a temporary restraining order in the bank's favor.

The BSP and the Monetary Board challenged the trial court's jurisdiction before the Court of Appeals, which ruled in their favor and dismissed the case. Banco Filipino then appealed to the Supreme Court.

The Issue: Who May Sue for a Closed Bank?

Before addressing the merits of the case, the Supreme Court had to resolve a preliminary question: whether Banco Filipino could file its petition at all, given that it was a closed bank under receivership.

The Court answered in the negative. Under Republic Act No. 7653, the New Central Bank Act, when the Monetary Board finds a bank insolvent, it may order the bank closed and designate the PDIC as receiver. The receiver is tasked to gather and take charge of all the assets and liabilities of the institution and administer them for the benefit of its creditors.

The Court explained that the relationship between the PDIC and a closed bank is fiduciary in nature. The PDIC holds the bank's assets in trust and has the power to bring and defend actions in the name of the institution. Consequently, a closed bank retains its juridical personality but may only sue or be sued through its receiver. Any suit filed by the closed bank without its receiver will not prosper.

In this case, Banco Filipino filed its petition with the Supreme Court without joining the PDIC. The Court noted that the bank's officers and board of directors had no authority to act on its behalf, because their powers were suspended upon the bank's placement under receivership. The petition, being unauthorized, had no legal effect and had to be dismissed.

The Second Issue: Where to File Cases Against the BSP

The Court also addressed the question of jurisdiction. Banco Filipino had filed its petition for certiorari and mandamus with the Regional Trial Court, but the Court ruled that this was the wrong forum.

The BSP is an independent central monetary authority vested with quasi-judicial powers, which it exercises through the Monetary Board. Under the Rules of Court, petitions for certiorari against a quasi-judicial agency are cognizable only by the Court of Appeals, unless otherwise provided by law. The Regional Trial Court therefore had no jurisdiction over the case.

The Ruling

The Supreme Court dismissed Banco Filipino's petition. The Court held that the petition was filed without the authority of the PDIC, making it an unsigned pleading that produced no legal effect. Even if the petition had been properly filed, the Court added, it would still have been dismissed because the trial court lacked jurisdiction over the case.

Practical Takeaways

• A closed bank under receivership cannot file a lawsuit on its own. All legal actions for or against the bank must be brought through the PDIC, acting as receiver.
• The officers and directors of a closed bank lose their authority to act on its behalf once the bank is placed under receivership. Their powers are suspended by law.
• If the PDIC refuses to authorize a suit, the closed bank may ask the court to join the PDIC as an unwilling co-petitioner or respondent, but it cannot simply proceed without the receiver.
• Petitions for certiorari against the BSP or the Monetary Board must be filed with the Court of Appeals, not with the Regional Trial Court.
• A party that files a case in the wrong court or without the proper authority risks having its case dismissed entirely, regardless of the merits of its claims.

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