1) After a bank is declared insolvent by the Monetary Board, the Board becomes the trustee of the bank's assets for equal benefit of all creditors. The assets are held in trust and no creditor can obtain preference over others.
2) When a bank becomes insolvent, its properties are not transferred but held in trust by the statutory receiver/liquidator to be distributed to creditors according to rules on credit concurrence and preference.
3) In this case, the Philippine Deposit Insurance Corporation was appointed receiver of an insolvent bank. As receiver, PDIC collates the bank's assets and liabilities and is responsible for administration, but both the bank and PDIC must be named as defendants since the
1) After a bank is declared insolvent by the Monetary Board, the Board becomes the trustee of the bank's assets for equal benefit of all creditors. The assets are held in trust and no creditor can obtain preference over others.
2) When a bank becomes insolvent, its properties are not transferred but held in trust by the statutory receiver/liquidator to be distributed to creditors according to rules on credit concurrence and preference.
3) In this case, the Philippine Deposit Insurance Corporation was appointed receiver of an insolvent bank. As receiver, PDIC collates the bank's assets and liabilities and is responsible for administration, but both the bank and PDIC must be named as defendants since the
1) After a bank is declared insolvent by the Monetary Board, the Board becomes the trustee of the bank's assets for equal benefit of all creditors. The assets are held in trust and no creditor can obtain preference over others.
2) When a bank becomes insolvent, its properties are not transferred but held in trust by the statutory receiver/liquidator to be distributed to creditors according to rules on credit concurrence and preference.
3) In this case, the Philippine Deposit Insurance Corporation was appointed receiver of an insolvent bank. As receiver, PDIC collates the bank's assets and liabilities and is responsible for administration, but both the bank and PDIC must be named as defendants since the
BALAYAN BAY RURAL BANK, INC., represented by its Statutory
Liquidator, THE PHILIPPINE DEPOSIT INSURANCE CORPORATION v NATIONAL LIVELIHOOD DEVELOPMENT CORPORATION Commercial Law; Banking; Insolvency. After the Monetary Board has declared that a bank is insolvent and has ordered it to cease operations, the Board becomes the trustee of its assets for the equal benefit of all the creditors, including depositors. The assets of the insolvent banking institution are held in trust for the equal benefit of all creditors, and after its insolvency, one cannot obtain an advantage or a preference over another by an attachment, execution or otherwise. Same; Same; Same. The properties of an insolvent bank are not transferred by operation of law to the statutory receiver/liquidator but rather these assets are just held in trust to be distributed to its creditors after the liquidation proceedings in accordance with the rules on concurrence and preference of credits. The debtors properties are then deemed to have been conveyed to the Liquidator in trust for the benefit of creditors, stockholders and other persons in interest. This notwithstanding, any lien or preference to any property shall be recognized by the Liquidator in favor of the security or lienholder, to the extent allowed by law, in the implementation of the liquidation plan. PEREZ, J.: FACTS: The case sprouts from a collection suit filed by the respondent against the petitioner bank prior to the declaration of the Monetary Board that it will be placed on receivership. And during the pendency of the case, the said declaration was made appointing PDIC as the receiver of the petitioner bank pursuant to RA 7653. After being placed into receivership, the respondent filed a motion for substitution invoking Section 19, Rule 3 of the Revised Rules of Court and claimed that by virtue of transfer of interest of the petitioner bank to the PDIC, the latter may be substituted as party or joined with the original party. Despite opposition, the trial court granted the motion. Contending that the substitution is not proper in the instant case since the PDIC is not the real party in interest but was merely tasked to keep the assets of the bank for the benefit of its creditors, petitioner bank raised the matter before the SC on question of law via Petition for Review on Certiorari. ISSUE: Whether or not substitution of the PDIC as defendant or its inclusion therein as co-defendant is contrary to law.
HELD: NEGATIVE. Upon the announcement of the Monetary Board that a
particular institution is insolvent, it will become its trustee for all its assets for the equal advantage of the institutions creditors. The PDIC, being declared as herein petitioner banks statutory liquidator, shall collate all its assets and liabilities and be liable for its administration. With this, the PDIC, being a fiduciary of the petitioner bank, may prosecute or defend the case as a representative party but, the petitioner bank will still be included in the case since it still remains as the real party in interest as stated in Sec. 3, Rule 3 of the Revised Rules of Court. The PDIC merely remains as a representative party, which, under the New Central Bank Act is given the authority to conserve and take care of the petitioner bank to the benefit of all its creditors. However, the Court firmly disagreed with the reliance of the respondent with the transfer of interest pendente lite as the justification for the substitution for it is contrary to law to declare any transfer of interest in case of receivership. The assets of the insolvent bank is not transferred, but merely held in trust to be distributed to its creditors after the liquidation proceedings in accordance with the rules on concurrence and preference of credits. In addition, there is no dissolution of the insolvents bank legal personality merely because it is placed under receivership. It is not replaced nor substituted. Hence, concluding that PDIC is a mere representative of the petitioner bank and not the real party in interest, which in this case still remains to be the petitioner bank, both entities must be named as defendants in the collection suit filed by the respondent. The petition is denied.