VOLUNTARY LIQUIDATION

GBLSec. 68.Voluntary Liquidation. In case of voluntary liquidation of any bank organized under the laws of the Philippines, or of any branch or office in the Philippines of a foreign bank, written notice of such liquidation shall be sent to the Monetary Board before such liquidation shall be sent to the Monetary Board before such liquidation is undertaken, and the Monetary Board shall have the right to intervene and take such steps as may be necessary to protect the interests of creditors.

RECEIVERSHIP AND VOLUNTARY LIQUIDATION

GBL Sec. 69.Receivership and Involuntary Liquidation. The grounds and procedures for placing a bank under receivership or liquidation, as well as the powers and duties of the receiver or liquidator appointed for the bank shall be governed by the provisions of Sections 30, 31, 32, and 33 of the New Central Bank Act:Provided, That the petitioner or plaintiff files with the clerk or judge of the court in which the action is pending a bond, executed in favor of the Bangko Sentral, in an amount to be fixed by the court. This Section shall also apply to the extent possible to the receivership and liquidation proceedings of quasi-banks.

a. Governing law- b. Grounds

NCBA Section 30.Proceedings in Receivership and Liquidation.- Whenever, upon report of the head of the supervising or examining department, the Monetary Board finds that a 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; or(c) cannot continue in business without involving probable losses to its depositors or creditors; or(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; 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. For a quasi-bank, any person of recognized competence in banking or finance may be designed as 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, and 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: Provided, That 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 of the Monetary Board.

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 Corporation for general application to all closed banks. In case of quasi-banks, the liquidation plan shall be adopted by the Monetary Board. 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.(2) convert the assets of the institutions 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 receivership or liquidation, be exempt from any order of garnishment, levy, attachment, or execution. 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. The petition for certiorari may only be filed by the stockholders of record representing the majority of the capital stock within ten (10) days from receipt by the board of directors of the institution of the order directing receivership, liquidation or conservatorship. The designation of a conservator under Section 29 of this Act or the appointment of a receiver under this section shall be vested exclusively with the Monetary Board. Furthermore, the designation of a conservator is not a precondition to the designation of a receiver.

NCBA Sec 36 2nd par: Whenever a bank or quasi-bank persists in carrying on its business in an unlawful or unsafe manner, the Board may, without prejudice to the penalties provided in the preceding paragraph of this section and the administrative sanctions provided in Section 37 of this Act, take action under Section 30 of this Act.

GBL last par: In case a bank or quasi-bank notifies the Bangko Sentral or publicly announces a bank holiday, or in any manner suspends the payment of its deposit liabilities continuously for more than thirty (30) days, the Monetary Board may summarily and without need for prior hearing close such banking institution and place it under receivership of the Philippine Deposit Insurance Corporation.

c. Who may be Receiver 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. For a quasi-bank, any person of recognized competence in banking or finance may be designed as receiver

d. Duties of ReceiverThe receiver of the bank is in fact obliged 1. to collect debts owing to the bank, which debts form part of the assets of the bank. 2. The receiver must assemble the assets and pay the obligation of the bank under receivership, and 3. take steps to prevent dissipation of such assets. 4. Accordingly, the receiver of the bank is obliged to collect pre-existing debts due to the bank, and in connection therewith, 5. to foreclose mortgages securing such debts.

e. Close Now-Hear Later DoctrineThe law does not contemplate prior notice and hearing before the bank may be directed to stop operations and placed under receivership. The purpose is to prevent unwarranted dissipation of the banks assets and as a valid exercise of police power to protect the depositors, creditors, stockholders and the general public.(Central Bank of the Philippines v. CA, G.R. No. 76118 Mar. 30, 1993)

f. Liquidationi. As opposed to rehabilitationLiquidation, in corporation law, connotes a winding up or settling with creditors and debtors.9It is the winding up of a corporation so that assets are distributed to those entitled to receive them. It is the process of reducing assets to cash, discharging liabilities and dividing surplus or loss.On the opposite end of the spectrum is rehabilitation which connotes a reopening or reorganization. Rehabilitation contemplates a continuance of corporate life and activities in an effort to restore and reinstate the corporation to its former position of successful operation and solvency.It is crystal clear that the concept of liquidation is diametrically opposed or contrary to the concept of rehabilitation, such that both cannot be undertaken at the same time. To allow the liquidation proceedings to continue would seriously hinder the rehabilitation of the subject bank. (PVB union vs Vega)

ii. Actions to take NCBA Sec 30 (supra)iii. How assets are distributed NCBA: Section 31.Distribution of Assets.- In case of liquidation of a bank or quasi-bank, after payment of the cost of proceedings, including reasonable expenses and fees of the receiver to be allowed by the court, the receiver shall pay the debts of such institution, under order of the court, in accordance with the rules on concurrence and preference of credit as provided in the Civil Code. Section 32.Disposition of Revenues and Earnings.- All revenues and earnings realized by the receiver in winding up the affairs and administering the assets of any bank or quasi-bank within the purview of this Act shall be used to pay the costs, fees and expenses mentioned in the preceding section, salaries of such personnel whose employment is rendered necessary in the discharge of the liquidation together with other additional expenses caused thereby. The balance of revenues and earnings, after the payment of all said expenses, shall form part of the assets available for payment to creditors.iv. All claims filed in liquidation court

v. Disposition of banking franchise NCBASection 33.Disposition of Banking Franchise.- The Bangko Sentral may, if public interest so requires, award to an institution, upon such terms and conditions as the Monetary Board may approve, the banking franchise of a bank under liquidation to operate in the area where said bank or its branches were previously operating: Provided, That whatever proceeds may be realized from such award shall be subject to the appropriate exclusive disposition of the Monetary Board.

g. Effects of Receivership and Liquidationi. restriction on capacity to act

ii. Penalties for transaction after bank becomes insolventGBL Sec. 70.Penalty for Transactions After a Bank Becomes Insolvent. Any director or officer of any bank declared insolvent or placed under receivership by the Monetary Board who refuses to turn over the banks records and assets to the designated receivers, or who tampers with banks records, or who appropriates for himself for another party or destroys or causes the misappropriation and destruction of the banks assets, or who receives or permits or causes to be received in said bank any deposit, collection of loans and/or receivables, or who pays out or permits or causes to be transferred any securities or property of said bank shall be subject to the penal provisions of the New Central Bank Act.

iii. Effect on Garnishment, levy on attachment or execution- Sec 30 NCBA

iv. Stoppage of Business

v. Interest on Deposits

JUDICIAL REVIEW

a. Availability of remedy sec 30 NCBAb. Ground: grave abuse of discretionc. Jurisdiction:Rule 65 Sec. 4. Where petition filed.The petition may be filed not later than sixty (60) days from notice of the judgment, order or resolution sought to be assailed in the Supreme Court or, if it relates to the acts or omissions of a lower court or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction over the territorial area as defined by the Supreme Court. It may also be filed in the Court of Appeals whether or not the same is in aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of its jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, and unless otherwise provided by law or these Rules, the petition shall be filed in and cognizable only by the Court of Appeals.

d. Who may question:

e. Actions of MB final and executor; injunctionf. Effect of filing petition for Reviewg. Liability of MB and PDICthe BSP should not be held liable on the crossed cashier's checks for it was not a party to the issuance of the same; nor can it be held liable for imposing the sanctions on Prime Savings Bank which indirectly affected Miranda, since it is mandated under Sec. 37 of R.A. No. 7653 to act accordingly.26The BSP, through the Monetary Board was well within its discretion to exercise this power granted by law to issue a resolution suspending the interbank clearing privileges of Prime Savings Bank, having made a factual determination that the bank had deficient cash reserves deposited before the BSP. There is no showing that the BSP abused this discretionary power conferred upon it by law.In addition, co-respondent PDIC was impleaded as a party-litigant only in its representative capacity as the receiver/liquidator of Prime Savings Bank. Both BSP and PDIC cannot therefore be held directly and solidarily liable for the payment of the two cashier's checks. Sole liability rests with Prime Savings Bank. (Miranda vs PDIC)