7/21/2019 1. Balayan Bay v Nldc

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GR No. 194589 September 21, 2015

BALAYAN BAY RURAL BANK, INC., represente b! "ts St#t$tor! L"%$"#tor, &'( )'ILI))IN( *()+SI& INSURANC( C+R)+RA&I+N

  NA&I+NAL LI-(LI'++* *(-(L+)(N& C+R)+RA&I+N

Commercial Law; Banking; Insolvency.  After the Monetary Board hasdeclared that a bank is insolvent and has ordered it to cease operations, the Board becomes the trustee of its assets for the eual bene!t of all thecreditors, including depositors" #he assets of the insolvent bankinginstitution are held in trust for the eual bene!t of all creditors, and after its insolvency, one cannot obtain an advantage or a preference over another by an attachment, e$ecution or otherwise"

%ame; %ame; %ame" #he properties of an insolvent bank are not transferredby operation of law to the statutory receiver&liuidator but rather these

assets are 'ust held in trust to be distributed to its creditors after theliuidation proceedings in accordance with the rules on concurrence andpreference of credits" #he debtor(s properties are then deemed to havebeen conveyed to the Liuidator in trust for the bene!t of creditors,stockholders and other persons in interest" #his notwithstanding, any lienor preference to any property shall be recogni)ed by the Liuidator in favor of the security or lienholder, to the e$tent allowed by law, in theimplementation of the liuidation plan"

)(R(/, .

AC&S The case sprouts from a collection suit led by the respondentagainst the petitioner bank prior to the declaration of the Monetary Boardthat it will be placed on receivership. And during the pendency of the case,the said declaration was made appointing P!" as the receiver of thepetitioner bank pursuant to #A $%&'. After being placed into receivership,the respondent led a motion for substitution invoking (ection )*, #ule ' of the #evised #ules of "ourt and claimed that by virtue of transfer of interestof the petitioner bank to the P!", the latter may be substituted as party or +oined with the original party. espite opposition, the trial court granted themotion.

"ontending that the substitution is not proper in the instant casesince the P!" is not the real party in interest but was merely tasked tokeep the assets of the bank for the benet of its creditors, petitioner bank raised the matter before the (" on -uestion of law via Petition for #eviewon Certiorari"

ISSU(  hether or not substitution of the P!" as defendant or itsinclusion therein as co/defendant is contrary to law.

7/21/2019 1. Balayan Bay v Nldc

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'(L* N(GA&I-(. 0pon the announcement of the Monetary Board that aparticular institution is insolvent, it will become its trustee for all its assetsfor the e-ual advantage of the institution1s creditors. The P!", beingdeclared as herein petitioner bank1s statutory li-uidator, shall collate all its

assets and liabilities and be liable for its administration.

  ith this, the P!", being a duciary of the petitioner bank, mayprosecute or defend the case as a representative party but, the petitionerbank will still be included in the case since it still remains as the real partyin interest as stated in (ec. ', #ule ' of the #evised #ules of "ourt. TheP!" merely remains as a representative party, which, under the 2ew"entral Bank Act is given the authority to conserve and take care of thepetitioner bank to the benet of all its creditors.

3owever, the "ourt rmly disagreed with the reliance of therespondent with the transfer of interest pendente lite as the +ustication for

the substitution for it is contrary to law to declare any transfer of interest incase of receivership. The assets of the insolvent bank is not transferred, butmerely held in trust to be distributed to its creditors after the li-uidationproceedings in accordance with the rules on concurrence and preference of credits. !n addition, there is no dissolution of the insolvent1s bank legalpersonality merely because it is placed under receivership. !t is notreplaced nor substituted.

3ence, concluding that P!" is a mere representative of thepetitioner bank and not the real party in interest, which in this case stillremains to be the petitioner bank, both entities must be named as

defendants in the collection suit led by the respondent. The petition isdenied.