PHILIPPINE VETERANS BANK, PETITIONER, VS. INTERMEDIATE APPELLATE COURT (NOW COURT OF APPEALS), HON. ANGEL DAQUIGAN, DEPUTY SHERIFF OSCAR GUASCH AND EMILIANA DOBLON, RESPONDENTS.

This is a petition for review on certiorari filed by the
Philippine Veterans Bank seeking the reversal of the decision of the respondent
Intermediate Appellate Court (now Court of Appeals) dated November 6, 1985,
dismissing for lack of merit the
special civil action for certiorari docketed as A.C.-G.R. S.P. No.
06558, entitled “Philippine Veterans Bank v. Hon. Angel Daquigan, as Judge
of the Regional Trial Court of Manila, et al.”, and its resolution dated
December 5, 1985 denying petitioner’s motion for reconsideration.

The antecedent facts in the instant case are as follows:

On March 29, 1984, private respondent Emiliana C. Doblon filed an action against petitioner
Philippine Veterans Bank for reformation of instrument and damages with prayer
for a writ of preliminary injunction. The complaint was docketed as Civil Case No. 84-23585 with the Regional
Trial Court, National Capital Region, Branch 13, Manila.

After petitioner bank had
filed its answer, the court, on September 20, 1984, rendered a summary judgment,
the dispositive portion of which states, inter alia:

“WHEREFORE, judgment is hereby rendered in favor of the
plaintiff and against the defendant:

x x x.

b) condemning the defendant to pay the
plaintiff the amount of P221,000.00, with legal interest, representing actual
damages suffered by the plaintiff on account of the forfeiture of the same
amount by Majait Construction which plaintiff paid to the latter as evidenced
by Exhibit ‘N’, ‘N-1’, ‘N-2’ and ‘N-3’;

c) directing the defendant to pay the plaintiff
the amount of P2,500.00 a day equivalent to twenty-five (25%) per cent of
P10,000.00 representing loss of income or profit to the plaintiff starting
April 1, 1984, up to the time the latter shall have been physically placed or
restored to the peaceful and adequate enjoyment and possession of the
unfinished market building complex included in the lease;

x x x.

“SO ORDERED” (pp. 83-84, Rollo).

The petitioner bank moved
to reconsider the decision of the lower court. On December 28, 1984, the respondent judge denied the said motion for
reconsideration.

On January 24, 1985, petitioner filed its notice of appeal with
the respondent court. The latter denied
the petitioner’s appeal on February 20, 1985 and ordered the issuance of the
writ of execution for the enforcement of the summary judgment.

On February 26, 1985, the petitioner filed with the then
Intermediate Appellate Court (IAC), now Court of Appeals (CA), a petition for certiorari,
prohibition and mandamus (A.C.-G.R. 05529) to set aside the orders of
respondent trial judge.

On March 26, 1985, the appellate court dismissed the petition for
lack of merit. The case was thereafter
elevated to this court thru a petition for review (G.R. 70482), which We denied in a resolution dated May 8,
1985.

Meanwhile, the Monetary Board of the Central Bank issued M.B.
Resolution No. 364 dated April 25, 1985, thereby placing Philippine Veterans
Bank under receivership pursuant to Section 29 of R.A. No. 265, as amended,
otherwise known as The Central Bank Act (See pp. 139 and 264, Rollo).

On May 15, 1985,
private respondent Emiliana Doblon filed an ex-parte motion for alias writ of
execution which was opposed by the petitioner bank on the ground that the
latter is under receivership and that all claims against it cannot be enforced
until after liquidation. On the same
date, the respondent judge granted the said motion for the writ of execution.

On June 7, 1985, the Monetary Board of the Central Bank issued a report on the
receivership of Philippine Veterans Bank as of May 31, 1985, and confirmed that
the latter can no longer resume
business with safety to its depositors, creditors and the general public. It also ordered the liquidation of PVB
pursuant to Section 29 of R.A. No. 265, as amended, in accordance with the liquidation
plan and rules and regulations approved under Resolution No. 364 dated April
25, 1985.

On July 8 and 9, 1985, the deputy Sheriff proceeded to conduct
the sales at public auction of the real properties of petitioner PVB pursuant
to the order of alias writ of execution issued by the respondent judge on May
15, 1985. Corresponding certificates of
sale were issued to the highest bidders at said auction sales.

On July 10, 1985, petitioner PVB filed with the Intermediate
Appellate Court a petition for prohibition, mandamus and certiorari
(AC-G.R. SP No. 06558) to nullify and set aside the sales at public auction of
petitioner’s properties conducted by respondent deputy sheriff on July 8 and 9,
1985 and to enjoin the respondent judge from taking cognizance of or taking any
future action in Civil Case No. 84-23585.

In the meantime, the Central Bank filed with the Regional Trial
Court of Manila, a petition for assistance in the liquidation of the Philippine Veterans Bank. On September 4, 1986, private respondent
Emiliana Doblon filed a motion for payment or satisfaction of deficiency judgment. Acting on the motion, the liquidation court
ordered Doblon to submit her claim with the committee on claims.

On September 6, 1985, the trial court approved and granted the
petition of the Central Bank for assistance in the liquidation of petitioner
and ordered all claimants on September 17, 1985 to file their claims with the
Liquidator Antonio Castro of the Supervision and Examination Sector of the
Central Bank.

On November 6, 1985, the respondent Intermediate Appellate Court
in AC-G.R. SP No. 06558 rendered a decision, the dispositive portion of which
provides:

“WHEREFORE, the petition is DISMISSED for lack of merit. The restraining order previously issued is lifted,
dissolved and set aside. Quadruple
costs against petitioner.

“SO ORDERED” (p. 157, Rollo).

The petitioner filed a motion for reconsideration of the
aforementioned decision. On December 5,
1985, the respondent appellate court denied the said motion.

Hence, the present petition was filed on January 28, 1986, to
review and reverse the decisions of the respondent appellate court in not
setting aside the public sales of petitioner’s properties conducted by
respondent sheriff on July 8 and 9, 1985.

The main issue in this case is whether or not the judgment of the
Regional Trial Court of Manila in Civil Case No. 84-23585 which awarded damages
to private respondent Emiliana Doblon, can be legally enforced against
petitioner by execution, after petitioner has been placed under liquidation by
the Monetary Board of the Central Bank.

Petitioner contends that the final judgment in Civil Case No.
84-23585 must be satisfied in the liquidation
proceedings considering that the assets of petitioners are already in custodia
legis of the liquidator, and that the sales at public auction conducted by the respondent sheriff to enforce the writ of execution issued by
respondent judge are illegal and void.

The respondent appellate
court, in its decision, stated, inter alia:

“A review of the facts of this case reveals that the judgment
rendered has long become final and executory. This fact was confirmed by this Court in
AC-G.R. SP No. 05529 (Annex “E”, Petition) and even by the High Court
in G.R. No. 70482 (Annex “G”, Petition). It is so elementary that once a judgment has become final and
executory, it is a mandatory and
ministerial duty of a court to issue the writ of execution to enforce
the judgment (Far Eastern Insurance Company vs. De Fernandez, L-30359, October
8, 1978, Sec. 1, Rule 39, Revised Rules of Court). The trial court was therefore correct in granting the motion for
an alias writ of execution.

“Finally, it could not escape the attention of this Court that
all the motions filed by the private respondent and the opposition and counter
motions of the petitioner have been duly acted upon by the respondent
court. This is evidently clear in the order issued by the court on July 3,
1985 (See recitations of facts). Petitioner has no basis again in claiming that no motion
was ever acted upon by the respondent court.

“In the main, this court finds this petition to be sham and frivolous
and was instituted merely for the purpose of delaying a just and valid
execution of a judgment. As was found by this court in AC-G.R. SP. No. 05529, petitioner’s
counsels were grossly negligent and appear afflicted in the present petition
with the virus of bad faith and deserve the condemnation of this court. (p.
157, Rollo)

The instant petition is impressed with merit.

The rule that once a decision has become final and executory, it
is the ministerial duty of the court to
order its execution, admits of certain exceptions as in cases of special and
exceptional nature where it becomes imperative in the higher interest of
justice to direct the suspension of its execution; or whenever it is necessary
to accomplish the aims of justice; or when certain facts and
circumstances transpired after the judgment became final
which would render the execution of the judgment unjust
(Lipana v. Development Bank of Rizal,
No. L-73884, September 24, 1987, 154 SCRA 257; emphasis ours).

In the instant case, there is no doubt that the decision of the
trial court in Civil Case No. 84-23585 has become final and executory, which
fact was affirmed by the Intermediate Appellate Court on March 26, 1985, and by
this Court on May 8, 1985. It is
significant to note, however, that respondent judge issued on May 15, 1985, a
writ of execution to enforce the judgment against petitioner, after the
petitioner Philippine Veterans Bank has already been placed under receivership
by the Monetary Board of the Central Bank by virtue of Resolution No. 364 on
April 25, 1985, pursuant to Section 29 of the Central Bank Act on insolvency of
banks. The fact that petitioner was
placed under receivership is a supervening event that renders a judgment,
notwithstanding its finality, unenforceable by attachment or execution.

Section 29 of Republic
Act No. 265 otherwise known as the Central Bank Act, as amended by Executive
Order No. 289 on July 25, 1987 provides for the proceedings upon insolvency of
banks, as follows:

“Section 29. Proceedings upon Insolvency – Whenever, upon examination by the head of
the appropriate supervising or examining department or his examiners or agents
into the condition of any bank or non-bank financial intermediary performing
quasi-banking functions, it shall be disclosed that the condition of the same
is one of insolvency, or that its continuance in business would involve probable
loss to its depositors or creditors, it shall be the duty of the department
head concerned forthwith, in writing, to inform the Monetary Board of the
facts. 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 an official of the Central Bank
or a person of recognized competence in
banking or finance, as receiver to immediately
take charge of its 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 or non-bank financial
intermediary performing quasi?banking functions.

“The Monetary Board
shall thereupon determine within sixty days whether the institution may
be reorganized 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 and shall prescribe the conditions under which such
resumption of business shall take place as well as the time for fulfillment of
such conditions. In such case, the
expenses and fees in the collection and administration of the assets of the
institution shall be determined by the Board and shall be paid to the Central
Bank out of the assets of such institution.

“If the Monetary Board shall determine and confirm within the
said period that the bank or non-bank financial intermediary performing
quasi-banking functions is insolvent or cannot resume business with safety to
its depositors, creditors, and the general public, it shall, if
the public interest requires, order its
liquidation, indicate the manner of its
liquidation and approved a liquidation plan
which may, when warranted, involve disposition
of any or all assets in consideration for the assumption of equivalent
liabilities. The liquidator designated
as hereunder provided shall, by the Solicitor General file a petition in the
regional trial court reciting the proceedings which have been taken and
praying the assistance of the court in the liquidation of such
institution. The court shall have
jurisdiction in the same proceedings to assist in the adjudication of the disputed claims against the bank or
non-bank financial intermediary performing quasi-banking functions and in the
enforcement of individual liabilities of the stockholders, and do all that is
necessary to preserve the assets of such institution and to implement the
liquidation plan approved by the Monetary Board. The Monetary Board shall designate an official of the Central Bank, or a person of recognized competence in
banking or finance, as liquidator who shall take over and continue the
functions of the receiver previously appointed by the Monetary Board under this
Section. The liquidator shall with all
convenient speed, convert the assets of the banking institution or non-bank
financial intermediary performing
quasi-banking functions to money or sell, assign, or otherwise dispose of the
same to creditors and other parties for the purpose of paying the debts of such
institutions and he may, in the name of the bank or non-bank financial
intermediary performing quasi-banking functions and with the assistance of
counsel as he may retain, institute such actions an may be necessary in
the appropriate court to collect and recover accounts and assets of such
institution or defend any action filed against the institutions: Provided, However, That after having
reasonably established all claims against the institution, the liquidator may,
with the approval of the court, effect partial payments of such claims from
assets of the institution in accordance with their legal priority.”
(Emphasis ours)

The aforequoted section 29 of the Central Bank’s charter
explicitly provides that when a bank is found to be insolvent, the Monetary
Board shall forbid it to do business and shall take charge of all its
assets. The Board in its Resolution No.
364 banned the bank from pursuing its business and placed it under a receiver. Furthermore, the Board, ordered the liquidation of the bank’s properties
on June 7, 1985 upon confirming that it can no longer do business with safety
to its depositors, creditors and general public. This has the effect of placing the bank’s properties under the
custody and jurisdiction of the Monetary Board, thereby removing it from the
jurisdiction and authority of the trial court to enforce its judgment. Evidently, the sale at public auction of the
properties of petitioner conducted by respondent sheriff on July 8 and 9, 1985,
while it is in the process of liquidation, is not authorized under the law.

This rule is based on the
other pertinent provisions of Section 29 of the Central Bank Act, as amended by
E.O. 289:

“Sec. 29. x x x.

x x x.

The assets of an institution under
receivership or liquidation shall be deemed
in custodia legis in the hands of the receiver or liquidator and shall, from the
moment of such receivership or liquidation be exempt from any order
of garnishment, levy, attachment, or execution.” (Emphasis ours)

Well-established is the doctrine enunciated in the case of
Central Bank v. Morfo No. L-38427, March 12,
1975, 63 SCRA 114, that the stay of an execution of judgment is
justified and warranted by the fact that respondent bank was placed under
receivership. To execute the judgment
would unduly deplete the assets of respondent bank to the obvious prejudice of
other creditors. After the Monetary
Board has declared that a bank is
insolvent and has ordered it to cease operations, the Board becomes the trustee
of its assets for the equal benefit of all the depositors and
creditors. After its insolvency, one
creditor cannot obtain an advantage or preference over another by an
attachment, execution or otherwise.

In the later case of Spouses Lipana v. Development Bank of Rizal,
(supra) this Court likewise upheld the stay of the execution of a final
judgment against a bank after it was placed on receivership. It brushed aside the contention that the placing under receivership of respondent
bank long after the filing of the complaint removed it from the doctrine in the
said Morfe case. We held that:

“This contention is untenable. The time of the filing of the complaint is immaterial. It is the execution that will obviously prejudice the
other depositors and creditors. Moreover, as
stated in the said Morfe case, the effect of
the judgment is only to
fix the amount of the debt, and not give priority over
other depositors and creditors.” (Lipana v. DBP, 154 SCRA 262; emphasis ours)

ACCORDINGLY, the petition is hereby GRANTED and the
decision of the respondent Intermediate Appellate Court (now Court of Appeals)
dated November 6, 1985 and December 5, 1985 are REVERSED and SET ASIDE; and the
sales at public auction of the real properties belonging to the petitioner
conducted by the respondent deputy sheriff on July 8 and 9, 1985 are hereby
declared null and void. The private
respondent Emiliana Doblon is ordered to file her judgment claim in the
liquidation proceedings in the lower court.

SO ORDERED.

Narvasa, (Chairman), Cruz, Gancayco, and Grino-Aquino, JJ., concur.