RULING:
Larrobis, Jr. v. Philippine Veterans Bank
FACTS:
In March 1980, Larrobis contracted a monetary loan with respondent Philippine Veterans Bank in the
amount of ₱135,000.00
● evidenced by a promissory note, due and demandable on February 27, 1981, and
● secured by a Real Estate Mortgage executed on their lot together with the improvements
thereon.
In March 1985, Philippine Veterans Bank (PVB) went bankrupt and was placed under
receivership/liquidation by the Central Bank from April 1985 until August 1992.
On August 23, 1985, the bank, through Francisco Go, sent the spouses Larrobis a demand letter for
"accounts receivable in the total amount of ₱6,345.00 as of August 15, 1984," which pertains to the
insurance premiums advanced by respondent bank over the mortgaged property of petitioners.
More than 14 years from the time the loan became due and demandable, PVB filed a petition for
extrajudicial foreclosure of mortgage of petitioners’ property. On October 18, 1995, the property was
sold in a public auction by Sheriff Arthur Cabigon with PVB as the lone bidder.
Spouses Larrobis filed a complaint with the RTC to declare the extra-judicial foreclosure and the
subsequent sale thereof to respondent bank null and void.
● RTC dismissed the complaint for lack of merit.
Larrobis argued that the extrajudicial foreclosure was null and void since it happened 14 years from
the date the obligation became due in 1981.
● Larrobis aver that PVB is barred by prescription; and that the RTC erred in finding that the
fortuitous event (receivership and liquidation) interrupted the running of the prescriptive
period.
● In addition, the demand letter was sent after the ten (10) year prescriptive period, thus it
cannot be deemed to have been revived after the period had already elapsed.
ISSUE:
W/N the period within which the PVB was put under receivership and liquidation was a fortuitous
event that interrupted the running of the prescriptive period;
W/N the demand letter sent by the respondent bank’s representative is sufficient to interrupt the
running of the prescriptive period.
The Court ruled that Section 29 of the Republic Act No. 265, as amended known as the Central Bank
Act, provides that when a bank is forbidden to do business in the Philippines and placed under
receivership, the person designated as receiver shall immediately take charge of the bank’s assets
and liabilities, as expeditiously as possible, collect and gather all the assets and administer the same
for the benefit of its creditors, and represent the bank personally or through counsel as he may retain
in all actions or proceedings for or against the institution, exercising all the powers necessary for
these purposes including, but not limited to, bringing and foreclosing mortgages in the name of the
bank.
Section 29. Proceedings upon Insolvency – x x x The Board may, upon finding the
statements of the department head to be true, forbid the institution to do business in the
Philippines and designate the official of the Central Bank or a person of recognized
competence in banking or finance, as receiver to immediately take charge its assets and
liabilities, as expeditiously as possible, … x x x
This is consistent with the purpose of receivership proceedings, i.e., to receive collectibles and
preserve the assets of the bank in substitution of its former management, and prevent the
dissipation of its assets to the detriment of the creditors of the bank.
In this case, it is not disputed that Philippine Veterans Bank was placed under receivership by the
Monetary Board of the Central Bank by virtue of a RESOLUTION, pursuant to Section 29 of the
Central Bank Act on insolvency of banks.
Unlike Provident Savings Bank, there was no legal prohibition imposed upon herein respondent
to deter its receiver and liquidator from performing their obligations under the law. Thus, the ruling laid
down in the Provident case cannot apply in the case at bar.
● Settled is the principle that a bank is bound by the acts, or failure to act of its receiver.
● However, the bank may go after the receiver who is liable to it for any culpable or negligent
failure to collect the assets of such bank and to safeguard its assets.
Having reached the conclusion that the period within which the respondent bank was placed under
receivership and liquidation proceedings does not constitute a fortuitous event which interrupted
the prescriptive period in bringing actions..
As to the second issue, prescription of actions is interrupted:
● when they are filed before the court;
● when there is a written extra-judicial demand by the creditors; and
● when there is any written acknowledgment of the debt by the debtor.
Considering that the mortgage contract and the promissory note refer only to the loan of petitioners in
the amount of ₱135,000.00, we have no reason to hold that the insurance premiums, in the amount of
₱6,345.00, which was the subject of the August 1985 demand letter, should be considered as
pertaining to the entire obligation of petitioners.
The Court held that the notices of foreclosure sent by the mortgagee to the mortgagor cannot be
considered tantamount to written extrajudicial demands, which may validly interrupt the running
of the prescriptive period
● where it does not appear from the records that the notes are covered by the mortgage
contract.
○ The receiver must assemble the assets and pay the obligation of the bank
under receivership, and
○ Take steps to prevent dissipation of such assets.
○ Accordingly, the receiver of the bank is obliged
■ to collect pre-existing debts due to the bank, and
■ in connection therewith, to foreclose mortgages securing such debts.
Having arrived at the conclusion that a foreclosure is part of a bank’s business activity which
could not have been pursued by the receiver then because of the circumstances discussed in the
Central Bank case.

In this case, it is clear that the advanced payment of the insurance premiums is not part of the
mortgage contract and the promissory note signed by petitioners.

● They pertain only to the amount of ₱135,000.00 which is the principal loan of petitioners plus
interest.
● The arguments of the respondent bank on this point must therefore fail.

DOCTRINE:
When a bank is declared insolvent and placed under receivership
● the Central Bank, through the Monetary Board, determines whether to proceed with the
liquidation or reorganization of the financially distressed bank.
● A receiver, who concurrently represents the bank, then takes control and possession of its
assets for the benefit of the bank’s creditors.
● A liquidator meanwhile assumes the role of the receiver upon the determination by the
Monetary Board that the bank can no longer resume business.
○ His task is to dispose of all the assets of the bank and effect partial payments of
the bank’s obligations in accordance with legal priority.
● In both receivership and liquidation proceedings, the bank retains its juridical personality
notwithstanding the closure of its business and may even be sued as its corporate existence
is assumed by the receiver or liquidator.
● The receiver or liquidator meanwhile acts not only for the benefit of the bank, but for its
creditors as well.

When a bank is prohibited from continuing to do business by the Central Bank and a receiver is
appointed for such bank
● that bank would not be able to do new business, i.e.,
○ to grant new loans or
○ to accept new deposits.
● However, the receiver of the bank is in fact obliged to collect debts owing to the bank,
which debts form part of the assets of the bank.

Chavez v. CA
FACTS:
Fidela Vargas owned a 5-hectare mixed coconut land and rice fields in Sorsogon.
● Evelina Chavez had been staying in a remote portion of the land with her family, planting
coconut seedlings on the land and supervising the harvest of coconut and palay.
● Fidela and Evelina agreed to divide the gross sales of all products from the land between
themselves.
● Since Fidela was busy with her law practice, Evelina undertook to hold in trust for Fidela her
half of the profits.
○ But Fidela claimed that Evelina had failed to remit her share of the profits
○ despite demand to turn over the administration of the property to Fidela, had refused
to do so.
Consequently, Fidela filed a complaint against Evelina and her daughter, Aida C. Deles, who was
assisting her mother, for recovery of possession, rent, and damages with prayer for the immediate
appointment of a receiver before the Regional Trial Court (RTC)
● In their answer, Evelina and Aida claimed that the RTC did not have jurisdiction over the
subject matter of the case since it actually involved an agrarian dispute.
● the RTC dismissed the complaint for lack of jurisdiction based on Fidela's admission that
Evelina and Aida were tenants who helped plant coconut seedlings on the land and
supervised the harvest of coconut and palay.
○ As tenants, the defendants also shared in the gross sales of the harvest.
○ The court also regarded as relevant Fidela's pending application for a five-hectare
retention and Evelina's pending protest relative to her 3-hectare beneficiary share.
Dissatisfied, Fidela appealed to the CA. She also filed with that court a motion for the appointment of
a receiver.
● The CA granted the motion and ordained receivership of the land
○ noting that there appeared to be a need to preserve the property and its fruits in light
of Fidela's allegation
ISSUE:
W/N CA erred in granting respondent Fidela's application for receivership.
RULING:
The Court held that the CA erred in granting receivership over the property in dispute in this case.
Here Fidela's main gripe is that Evelina and Aida deprived her of her share of the land's produce.
● She does not claim that the land or its productive capacity would disappear or be wasted
if not entrusted to a receiver.
● Nor does Fidela claim that the land has been materially injured, necessitating its protection
and preservation.
● Because receivership is a harsh remedy that can be granted only in extreme situations,
○ Fidela must prove a clear right to its issuance.
○ But she has not. Indeed, in none of the other cases she filed against Evelina and
Aida has that remedy been granted to her.
Besides, the RTC dismissed Fidela's action for lack of jurisdiction over the case, holding that the
issues it raised properly belong to the DARAB. The case before the CA is but an offshoot of that RTC
case. Given that the RTC has found that it had no jurisdiction over the case, it would seem more
prudent for the CA to first provisionally determine that the RTC had jurisdiction before
granting receivership which is but an incident of the main action.
DOCTRINE:
For one thing, a petition for receivership under Section 1(b), Rule 59 of the Rules of Civil Procedure
requires
● that the property or fund subject of the action is in danger of being lost, removed, or
materially injured
● necessitating its protection or preservation.
● Its object is the prevention of imminent danger to the property.
○ If the action does not require such protection or preservation, the remedy is not
receivership.

Parenthetically, Fidela also filed 3 estafa cases with the RTC and a complaint for dispossession with
the Department of Agrarian Reform Adjudication Board (DARAB) against Evelina and Aida. In all
these cases, Fidela asked for the immediate appointment of a receiver for the property.