Philippine Veterans Bank v. Intermediate Appellate Court
REITERATIONFacts
The Antecedents: Emiliana C. Doblon filed a complaint against Philippine Veterans Bank (PVB) for reformation of instrument and damages, seeking recovery for funds forfeited by Majait Construction, which PVB had paid to the construction company. The Regional Trial Court (RTC) rendered a summary judgment in favor of Doblon, awarding her P221,000.00 in actual damages with legal interest, and additional daily compensation for loss of income, commencing from April 1, 1984, until she was restored to possession of the leased market building complex. Procedural History: Following the RTC's summary judgment and denial of its motion for reconsideration, PVB filed an appeal. The Intermediate Appellate Court (IAC) denied the appeal and ordered the issuance of a writ of execution. PVB then filed a petition for certiorari, prohibition, and mandamus with the IAC, which was dismissed. This Court denied PVB's subsequent petition for review. Crucially, while these proceedings were ongoing, the Monetary Board of the Central Bank placed PVB under receivership on April 25, 1985, and subsequently ordered its liquidation on June 7, 1985, due to insolvency. Despite PVB being under liquidation, the RTC issued an alias writ of execution, leading to the public auction of PVB's properties on July 8 and 9, 1985. The Petition: Philippine Veterans Bank filed this petition for review on certiorari, seeking to reverse the decision of the Intermediate Appellate Court (now Court of Appeals) which dismissed PVB's special civil action for certiorari. PVB argues that the execution of the RTC's judgment and the subsequent public auction of its properties were illegal and void because these actions occurred after the bank was placed under receivership and ordered for liquidation by the Monetary Board. PVB contends that its assets were in custodia legis and should be administered through the liquidation proceedings, asserting that allowing execution would prejudice other creditors and that the sales at public auction were unauthorized under Section 29 of the Central Bank Act.
Issue(s)
Whether the judgment in Civil Case No. 84-23585 can be legally enforced by execution after PVB was placed under liquidation. Whether the sales at public auction conducted by the sheriff to enforce the writ of execution are illegal and void.
Ruling
The petition is granted. The decision of the respondent Intermediate Appellate Court dated November 6, 1985, and its resolution dated December 5, 1985, are reversed and set aside. The sales at public auction of the real properties belonging to the petitioner conducted by the respondent deputy sheriff on July 8 and 9, 1985, are declared null and void. Private respondent Emiliana Doblon is ordered to file her judgment claim in the liquidation proceedings in the lower court.
Ratio Decidendi
On the enforceability of the judgment after liquidation: The Court held that while the judgment in Civil Case No. 84-23585 had become final and executory, its execution was rendered unenforceable by a supervening event: the placement of Philippine Veterans Bank (PVB) under receivership and subsequent liquidation by the Monetary Board of the Central Bank. Section 29 of Republic Act No. 265 (The Central Bank Act) explicitly states that once a bank is found to be insolvent, the Monetary Board shall forbid it to do business and take charge of its assets. This action places the bank's properties under the custody and jurisdiction of the Monetary Board, removing them from the jurisdiction of the trial court for enforcement of judgments. The Court emphasized that the assets of an institution under receivership or liquidation are deemed in custodia legis and are exempt from any order of garnishment, levy, attachment, or execution. On the illegality and voidness of the auction sales: The Court ruled that the public auction sales of PVB's properties conducted by the sheriff on July 8 and 9, 1985, were not authorized under the law because they occurred while PVB was in the process of liquidation. The doctrine established in Central Bank v. Morfe and reiterated in Spouses Lipana v. Development Bank of Rizal dictates that the stay of execution is justified when a bank is placed under receivership to prevent undue depletion of assets to the prejudice of other creditors. The Court clarified that the time of filing the complaint is immaterial; it is the execution that prejudices other depositors and creditors. The effect of a judgment is merely to fix the amount of the debt, not to grant priority over other creditors.
Main Doctrine
A writ of execution to enforce a final and executory judgment against a bank cannot be issued after the bank has been placed under receivership or liquidation by the Monetary Board of the Central Bank, as its assets are deemed in custodia legis and exempt from execution.