Pacific Banking Corp. EE’s Org. v. CA, G.R. No.

109373, March 20, 1995

FACTS:
Pacific Banking Corporation (PaBC) was placed under receivership by the Central Bank of the
Philippines pursuant to Resolution No. 699 of its Monetary Board. A few months later, it was placed
under liquidation and a Liquidator was appointed.
Pacific Banking Corporation Employees Organization (Union), petitioner in G.R. No. 109373,
filed a complaint-in-intervention seeking payment of holiday pay, 13th month pay differential, salary
increase differential, Christmas bonus, and cash equivalent of Sick Leave Benefit due its members as
employees of PaBC. In its order dated September 13, 1991, the trial court ordered payment of the
principal claims of the Union.
Ang Keong Lan and E.J. Ang Int'l., private respondents in G.R. No. 112991, likewise filed claims
for the payment of investment in the PaBC allegedly in the form of shares of stocks amounting to
US$2,531,632.18. The shares of stocks, consisting of 154,462 common shares, constituted 11% of the
total subscribed capital stock of the PaBC. They alleged that their claim constituted foreign exchange
capital investment entitled to preference in payment under the Foreign Investments Law. Respondent
judge of the RTC directed the Liquidator to pay private respondents the total amount of their claim as
preferred creditors.

ISSUE(S):
WON the Union is correct in its contention that the court merely assists in adjudicating the claims of
creditors, preserves the assets of the institution, and implements the liquidation plan approved by the
Monetary Board.

RULING:
NO, the Monetary Board had previously admitted PBC's liability to the laborers by in fact setting
aside the amount of P112,234,292.44 for the payment of their claims, there was nothing else for the
Liquidator to do except to comply with the order of the court.
In liquidation proceedings, the function of the trial court is not limited to assisting in the
implementation of the orders of the Monetary Board. Under the same section (§29) of the law invoked by
the Union, the court has authority to set aside the decision of the Monetary Board “if there is a convincing
proof that the action is plainly arbitrary and made in bad faith.”
There is no question that the action of the Monetary Board in this regard may be subject to
judicial review. Thus, it has been held that the Courts may interfere with the Central Bank's exercise of
discretion in determining whether or not a distressed bank shall be supported or liquidated. Discretion has
its limits and has never been held to include arbitrariness, discrimination, or bad faith.
In truth, the Liquidator is the representative not only of the Central Bank but also of the insolvent
bank. Under §§28A-29 of Rep. Act No. 265, he acts in behalf of the bank "personally or through counsel
as he may retain, in all actions or proceedings or against the corporation" and he has authority "to do
whatever may be necessary for these purposes." This authority includes the power to appeal from the
decisions or final orders of the court which he believes to be contrary to the interest of the bank.