CONSERVATORSHIP (SEC.

29, NCBA) DOLINOG

RECEIVERSHIP AND MEJIA
LIQUIDATION (SEC. 30, MONREAL
NCBA)
 BANKS IN DISTRESS
Whenever a bank is in distress, whether seriously
or otherwise, as in the case where it is having
liquidity problems – the BSP may perform any of
the following:
1. Grant Emergency loans to the bank;
2. Appoint a Conservator; and
3. Appoint a Receiver and order the liquidation of
the bank.
 APPOINTMENT OF
CONSERVATOR
The Monetary Board may appoint a
conservator for a bank or a quasi-bank on
the basis of a report submitted by an
appropriate supervising or examining
department.
LEGAL BASIS
REPUBLIC ACT 7653 – NEW CENTRAL
BANK ACT
 BANGKO SENTRAL NG
PILIPINAS
MONETARY BOARD
CHAIRMAN: FELIPE M. MEDALLA (BSP
GOVERNER)
SEC. OF FINANCE: BENJAMIN E. DIOKNO
MEMBERS:
1. PETER B. FAVILA
2. ANTONIO S. ABACAN, JR.
3. V. BRUCE J. TOLENTINO
 SEC. 29. GROUNDS ON THE
APPOINTMENT OF CONSERVATOR.
Whenever a bank or a quasi-bank is in:
1. A state of continuing inability to maintain a
condition of liquidity;
2. Unwillingness to maintain a condition of
liquidity deemed adequate to protect the
interest of depositors and creditors
 LIQUIDITY DEFINED
Liquidity is a measure of the cash and other assets
banks have available to quickly pay bills and meet
short-term business and financial obligations. (1)
Liquidity of banks refers to those cash or assets that
can be converted into cash at little or no loss of value.
(2)

Sources:
(1) https://www.federalreserve.gov/faqs/cat_21427.htm
 QUALIFICATIONS OF A
CONSERVATOR
The conservator should be competent and knowledgeable in bank
operations and management.
The conservatorship shall not exceed one (1) year.
The conservator shall receive remuneration to be fixed by the
Monetary Board in an amount not to exceed two-thirds (2/3) of the
salary of the president of the institution in one (1) year, payable in
twelve (12) equal monthly payments.
Provided, that, if at any time within the one-year period, the
conservatorship is terminated on the ground that the institution can
operate on its own, the conservator shall receive the balance of the
remuneration which he would have received up to the end of the
 QUALIFICATIONS OF A
CONSERVATOR
The Monetary Board may appoint a conservator
connected with the Bangko Sentral, in which case he
shall not be entitled to receive any remuneration or
emolument from the Bangko Sentral during the
conservatorship.
The expenses attendant to the conservatorship
shall be borne by the bank or quasi-bank concerned.
 SEC. 29. POWERS OF
CONSERVATOR.
The Conservator appointed by the Monetary Board shall be given
powers which the board deem necessary to:
1. Take charge of the assets, liabilities, and the management
thereof.
2. Reorganize the management
3. Collect all monies and debts due said institution
4. Exercise all powers necessary to restore its viability.
The conservator shall report and be responsible to the Monetary
Board and shall have the power to overrule or revoke the actions
 FIRST PHILIPPINE
INTERNATIONAL BANK, ET
AL., VS. CA, ET AL.,
The Supreme Court explained that a conservator may
not revoke a contract that was already perfected and
enforceable at the time he was appointed as such
conservator.
While admittedly, the BSP gives vast and far-reaching
powers to the conservator of the bank, it must be pointed
out that such powers must be related to the preservation
of the assets of the bank, the reorganization if the
management thereof and the restoration of its viability.
 FIRST PHILIPPINE INTERNATIONAL
BANK, ET AL., VS CA, ET AL.,
Section 28 of the NCBA merely gives the
conservator the power to revoke contracts that are,
under existing law, deemed to be defective, i.e.,
void, voidable, unenforceable or rescissible.
Hence, the conservator merely takes the place of
a bank’s board of directors
 TERMINATION OF
CONSERVATORSHIP
The Monetary Board shall terminate the
conservatorship when it is satisfied that the institution
can continue to operate on its own and the
conservatorship is no longer necessary.
The conservatorship shall likewise be terminated
should the Monetary Board, on the basis of the report
of the conservator or of its own findings, determine
that the continuance in business of the institution
would involve probable loss to its depositors or
SEC. 30. RECEIVERSHIP AND
LIQUIDATION.
The Monetary Board has the power to
designate the Philippine Deposit Insurance
Corporation (PDIC) as receiver of the
banking institution in certain conditions
and grounds, based on the report by
appropriate supervising or examining
department.
GROUNDS ON RECEIVERSHIP
AND LIQUIDATION.
A receiver shall be assigned by the MB if the bank
or quasi-bank:
(a) Is unable to pay its liabilities as they become due
in the ordinary course of business.
*Provided, That this shall not include inability to pay caused by
extraordinary demands induced by financial panic in the banking
community.
(b) Has insufficient realizable assets, as determined
by the Bangko Sentral, to meet its liabilities.
 GROUNDS ON RECEIVERSHIP
AND LIQUIDATION.
(c) Cannot continue in business without involving
probable losses to its depositors or creditors.
(d) Has willfully violated a cease and desist order
under Section 37 that has become final, involving
acts or transactions which amount to fraud or a
dissipation of the assets of the institution.
 GROUNDS ON RECEIVERSHIP
AND LIQUIDATION.
 In which cases, the Monetary Board may
summarily and without need for prior hearing
forbid the institution from doing business in the
Philippines and designate the Philippine Deposit
Insurance Corporation as receiver of the banking
institution.
RECEIVERSHIP
A receiver is a person who is a temporary
caretaker of the property for the court or
agency that appointed the receiver.
A receiver, for this matter, refers to the
PDIC or “any of its duly authorized agents
acting as receiver of a closed bank.”
 GENERAL POWERS OF A RECEIVER
(SECTION 175 OF THE REVISED
RULES OF COURT)
General Powers of a Receiver. — The receiver shall
have, under the control of the court in which the action
is pending, power to bring and defend actions in his
own name, as receiver; to take and keep possession of
the property in controversy; to receive rent, to collect
debts due to himself as receiver, or to the fund,
property, estate, person, or corporation of which he is
receiver; to compound for and compromise the same; to
make transfers; and generally to do such acts
 DUTIES OF RECEIVER
The receiver shall immediately gather and take charge
of all the assets and liabilities of the institution,
administer the same for the benefit of its creditors
The receiver shall exercise the general powers of a
receiver under the Revised Rules of Court
*But shall not, with the exception of administrative
expenditures, pay or commit any act that will involve the
transfer or disposition of any asset of the institution
 DUTIES OF RECEIVER
The receiver may deposit or place the funds of the
institution in non-speculative investments.
The receiver shall determine as soon as possible, but not
later than ninety (90) days from take-over, whether the
institution may be rehabilitated or otherwise placed in
such a condition so that it may be permitted to resume
business with safety to its depositors and creditors and the
general public.
*Provided, that any determination for the resumption of
business of the institution shall be subject to prior approval
 DUTIES OF RECEIVER
If the receiver determines that the institution cannot be
rehabilitated or permitted to resume business in accordance with
the next preceding paragraph, the Monetary Board shall notify in
writing the board of directors of its findings and direct the receiver
to proceed with the liquidation of the institution.
The receiver shall:
(1) file ex parte with the proper regional trial court, and without
requirement of prior notice or any other action, a petition for
assistance in the liquidation of the institution pursuant to a
liquidation plan adopted by the Philippine Deposit Insurance
 DUTIES OF RECEIVER
Upon acquiring jurisdiction, the court shall,
upon motion by the receiver after due notice,
adjudicate disputed claims against the institution,
assist the enforcement of individual liabilities of
the stockholders, directors and officers, and
decide on other issues as may be material to
implement the liquidation plan adopted. The
receiver shall pay the cost of the proceedings from
the assets of the institution.
 DUTIES OF RECEIVER
 Convert the assets of the institution to money, dispose of the
same to creditors and other parties, for the purpose of paying the
debts of such institution in accordance with the rules on
concurrence and preference of credit under the Civil Code of the
Philippines and he may, in the name of the institution, and with the
assistance of counsel as he may retain, institute such actions as may
be necessary to collect and recover accounts and assets of, or
defend any action against, the institution.
The assets of an institution under receivership or liquidation shall
be deemed in custodia legis in the hands of the receiver and shall,
from the moment the institution was placed under such
 JURISDICTION OF THE
MONETARY BOARD
The actions of the Monetary Board taken under
this section or under Section 29 of this Act shall be
final and executory, and may not be restrained or
set aside by the court except on petition for
certiorari on the ground that the action taken was in
excess of jurisdiction or with such grave abuse of
discretion as to amount to lack or excess of
jurisdiction.
 CLOSE-NOW-HEAR LATER
SCHEME
 This "close now and hear later" scheme
is grounded on practical and legal
considerations to prevent unwarranted
dissipation of the bank's assets and as a
valid exercise of police power to protect the
depositors, creditors, stockholders and the
general public.
CLOSE-NOW-HEAR LATER
SCHEME
 No prior hearing is necessary in
appointing a receiver and in closing the
bank. It is enough that subsequent
judicial review is provided for.
 DISCRETION(BANGKO SENTRAL NG
PILIPINAS V. VALENZUELA, G.R. NO.
184778, OCTOBER 2, 2009).
 Injunction does not lie against BSP in the
exercise of the power and function.
A contrary rule may lead to dissipation of
assets and trigger bank run. Judicial review
comes only after action of the Monetary Board
if the same was attended with bad faith and
grave abuse of
 CLOSE-NOW-HEAR LATER
SCHEME
 However, the closure and liquidation of a bank, which is
considered an exercise of police power maybe the subject of
judicial inquiry.
The order of closure(receivership or conservatorship) may be
assailed:
a) by the stockholders representing at least majority of the
outstanding capital stock;
b) within ten days from receipt by the board of directors of the
order;
c) thru a petition for certiorari on the ground that the action
 RURAL BANK OF LUCENA, INC.
VS. HON. FRANCISCO ARCA
FACTS:
Rural Bank of Lucena, Inc.(Lucena bank) instituted in the CFI of Manila an action to
collect damages and to enjoin the Central Bank from enforcing Resolution No. 928 of its
Monetary Board, finding that the Lucena bank had committed acts substantially
prejudicial to the Government, depositors, and creditors, and directing Lucena to
reorganize its board of directors and that its management would be taken over if the it
should fail to comply with the resolution.
While the litigation was still undecided, the Monetary Board, adopted its Resolution No.
122: "To request the Solicitor General, pursuant to section 29 of Republic Act No. 265, to
file a petition in the proper courts for the liquidation of the affairs of the Rural Bank of
Lucena, Inc.”
Two days later, the Lucena bank filed suit in the CFI of Quezon to annul Resolution
No.122 and to enjoin its enforcement. The court issued ex parte a writ of preliminary
injunction to such effect, but subsequently dissolved said preliminary injunction.
 RURAL BANK OF LUCENA, INC.
VS. HON. FRANCISCO ARCA
Aside from a denied MR, Lucena bank took no other steps to prosecute the case it had
filed CFI of Manila, as per Judge Magno Gatmaitan of Branch 16, enjoined the
enforcement of Resolution No. 928 of the Monetary Board, for having been issued
without the prior hearing prescribed by section 10 of the Rural Bank Act, and ordering
the Central Bank to pay P5,000.00 damages and costs. The Central Bank appealed.
Central Bank petitioned the CFI of Manila for assistance in the liquidation of the
Lucena bank. Judge Arca issued an interlocutory order for Lucena bank to turn over to
the Central Bank the physical possession of all assets, properties and papers and if
Lucena bank fails to comply, the Central Bank is authorized to take actual and physical
possession of all of said assets, properties and papers. Rural Bank of Lucena petitioned,
claiming that Judge Arca gravely abused his discretion in issuing the order. The court
issued a temporary restraining order until April 25, 1963, but the same was not renewed
when it expired.
 RURAL BANK OF LUCENA, INC.
VS. HON. FRANCISCO ARCA
ISSUES:
1) Whether or not there is a conflict between section 10 of Republic
Act No. 720 and section 29 of Republic Act No. 265
2) Whether or not Judge Arca gravely abused his discretion in
issuing the interlocutory order.
 DECISION OF THE
SUPREME COURT
1) NO. The court sees no irreconcilable conflict between section 10 of
Republic Act No. 720 (Rural Banks Act) and section 29 of Republic Act No.
265 (Central Bank Act).
R.A. 720 (S10) authorizes the take over of the management by the Central
Bank, until the governing body of the offending Rural Bank is recognized
with a view to assuring compliance by it with the laws and regulations.
While R.A. 265 (S29) provides for the liquidation of a rural bank by taking
over its assets and converting them into money to pay off its creditors.
 DECISION OF THE
SUPREME COURT
2) NO. In the order of Judge Arca and Judge Gatmaitan's decision, the issues involved
are different in each case. One involved a take over of management under section 10 of
the Rural Banks Act, and the other a seizure of assets and liquidation under section 29 of
the Central Bank law. Judge Arca had no reason to inquire into the merits of the case
before issuing the disputed order requiring the surrender of the assets and papers of the
Lucena bank, because:
(1) neither the statute (sec. 29, R. A. 265) nor the constitutional requirement of due
process demand that the correctness of the Monetary Board's resolution to stop
operations and proceed to the liquidation of the Lucena Bank should first be adjudged
before making the resolution effective, it being enough that a subsequent judicial review
be provided;
(2) the period for asking such Judicial review had elapsed with excess between the
adoption of the Monetary Board Resolution No. 122 (February 2, 1962) and the filing of
 RURAL BANK OF LUCENA, INC.
VS. HON. FRANCISCO ARCA
3) The correctness of said resolution had already been put in issue before
the CFI of Quezon;
(4) the latter court had refused to stop implementation of the Resolution of
the Monetary Board when it dissolved its own preliminary injunction; and
(5) because the Lucena Bank had apparently acquiesced in the action
taken by the CFI of Quezon Province, since the Rural Bank had not sought
that the action of the Quezon court be set aside by a higher court. Whether
or not the Central Bank acted with arbitrariness or bad faith in decreeing
that circumstances called for the liquidation of the Lucena Rural Bank
should be determined, not by Judge Arca but in CFI of Quezon Province,
which appears to be still pending
 CONSOLIDATED BANK VS.
CA
In 1982, Solidbank extended loans to UNAM evidenced by several promissory notes.
As security for the loans, UNAM executed Deeds of Assignment in Solidbank's favor. It also
furnished Solidbank with a "Certified List of Assigned Receivables.“
In 1985, UNAM's majority shareholder - Pacific Banking Corporation ("Pacific Bank") - was
forbidden to do business and later placed under liquidation
Liquidation proceedings, docketed as Special Proceeding (SP) No. 86-35313, were thereafter
commenced before Branch 31 of the Regional Trial Court of Manila ("Liquidation Court").
These, in turn, resulted to UNAM's inability to properly comply with its loan obligations.
Faced with UNAM's default, Solidbank tried to collect payment from the account debtors stated
in the List of Assigned Receivables. Upon learning that UNAM had already collected on some of
the credits assigned, Solidbank sent letters to UNAM demanding for the turnover of the collected
amounts.
 DECISION OF THE TRIAL
COURT
Unsuccessful, Solidbank, on January 21, 1987, filed a Complaint for Sum of
Money (with Prayer for Issuance of Writ of Preliminary Attachment) against
UNAM, its executive vice-president Antonio Andal ("Andal") and his wife.
Solidbank claimed payment for the amount of Sixteen Million Three Hundred
Eighty-One Thousand Eight Hundred Eighty-Nine Pesos and Fifty-Three
Centavos (P16,381,889.53) as UNAM's outstanding principal loan obligation.
In a Decision dated February 6, 1995, the Trial Court ruled in favor of
UNAM.
Finding that Solidbank had no authority to enter into the Compromise
Agreement, the Trial Court deemed Solidbank to have received the entire
sum of the initial loan award and deducted the same from its computation of
the total amount owing to Solidbank.
 DECISION OF THE TRIAL
COURT
On February 27, 1995, Solidbank filed a motion seeking reconsideration of the Trial Court's
decision.
In an Order dated August 9, 1995, the Trial Court, this time through Pairing Judge Lorenzo B.
Veneracion, reversed itself, ruling:

“A review and analysis of the findings upon which the awards in favor of the defendants and
against the plaintiff bank show that said awards were clearly arrived at principally from the
records of the Liquidation Court of Pacific Bank, Branch 31 of this Court.”
With respect to the claim of the plaintiff in the amounts prayed for in the complaint, the Court
believes that this Court does not possess the competence to rule on the said claims, the same
properly falling within the jurisdiction of the Liquidation Court and we strongly feel that we
cannot substitute our judgment for that of the liquidation court. Moreover, the records are in the
possession of the said liquidation court and the latter Court can properly rule on the evidence
adduced before it.
 DECISION OF THE TRIAL
COURT
Thus, the complaint and respective counterclaims were dismissed "without
prejudice to said parties litigating their respective claims before the
Liquidation Court in Special Proceeding No. 86-35313 which has
jurisdiction over the subject matter in the complaint..."

Both Solidbank and UNAM appealed to the Court of Appeals ("CA").

 DECISION OF THE CA
In a Decision dated December 22, 2004, the CA reversed and set aside the August 9,
1995 Order of the Trial Court, to wit:
WHEREFORE, premises considered, the Order dated August 9, 1995 is
hereby REVERSED and SET ASIDE.

The Decision dated February 6, 1995 is hereby REINSTATED and MODIFIED to the

effect that Solidbank is ordered to return to UNAM the sum of Twelve Million Seven
Hundred Fifty-Four Thousand Four Hundred Forty-Eight Pesos and Forty-Four
Centavos (P12,754,448.44), plus six percent (6%) per annum from the date of the trial
court's decision. After finality of this Decision, Solidbank is ordered to pay interest at the
rate of twelve
 ISSUES AS PER THE
SUPREME COURT
This case concerns actions of two courts over two different types of actions:
one is a liquidation proceeding involving Pacific Bank (a shareholder of
UNAM) and the other, an action for collection of sum of money filed by
Solidbank against UNAM.
An action for collection or recovery of sum of money falls under the
general classification of actions capable of pecuniary estimation.
Depending on the amount of money in issue, such action may be filed with
either the Municipal Trial Courts or the Regional Trial Courts. Since the
collection suit filed by Solidbank against UNAM involved millions of pesos,
Civil Case No. 87-39114 was filed with the Regional Trial Court (Branch 46
of the Regional Trial Court of Manila).
 ISSUES AS PER THE
SUPREME COURT
A liquidation proceeding, on the other hand, is a special proceeding involving the
administration and disposition, with judicial intervention, of an insolvent's assets for the
benefit of its creditors. Under the Central Bank Act, this proceeding is cognizable by the
Regional Trial Courts.
Pursuant to Central Bank of the Philippines Memorandum dated July 6, 1985, Pacific
Bank was forbidden to do business. It was subsequently placed under liquidation by
virtue of Monetary Board Resolution No. 1233 dated November 22, 1985. The liquidation
proceedings (involving Pacific Bank's assets) were conducted by the Liquidation Court in
SP No. 86-35313.
While both cases were properly cognizable by the Regional Trial Courts, the Trial
Court in this case had no jurisdiction to make a ruling on the amount awarded by the
Liquidation Court in Solidbank's favor.
 DECISION OF THE
SUPREME COURT
WHEREFORE, premises considered, the Petition is GRANTED. The
December 22, 2004 Decision and August 30, 2005 Resolution of the Court of
Appeals in CA G.R. CV 50550 are
hereby AFFIRMED with MODIFICATION. UNAM is ORDERED to pay
Solidbank the amount of Four Million Eight Hundred Sixty-Six Thousand
Two Hundred Eleven Pesos and Sixteen Centavos (P4,866,211.16) to earn
interest at the rate of six percent (6%) per annum from February 6, 1995
until the finality of this Decision. Thereafter, the total amount due shall earn
legal interest at the rate of six percent (6%) per annum until fully paid. No
pronouncement as to costs.