The Rules on Liquidation of Closed Banks (“Rules”), which took effect on 1 April 2020, was approved by the Supreme Court on 18 February 2020 (A.M. No. 19-12-02-SC). The Rules applies to banks closed and placed under liquidation by the Monetary Board (MB) of the Bangko Sentral ng Pilipinas (BSP). The summary or primer is provided below.
Banks are classified into: (1) universal banks; (2) commercial banks; (3) thrift banks composed of savings and mortgage banks, stock savings and loan associations, and private development banks; (4) rural banks; (5) cooperative banks; and (6) other classifications of banks as determined by the MB.
JURISDICTION AND VENUE
The Liquidation Court (LC), which refers to the Regional Trial Court designated as Special Commercial Court, has exclusive jurisdiction to adjudicate disputed claims against the closed bank, assist in the enforcement of individual liabilities of the stockholders, directors, and officers, and decide on all other issues as may be material to implement the Master Liquidation Plan.
Actions shall be filed at the Special Commercial Court which has jurisdiction over the principal office of the closed bank or the principal office of the Receiver, at the option of the latter. Upon the publication of the Order setting the petition for initial hearing, the Liquidation Court shall acquire exclusive jurisdiction over all persons affected by the proceedings.
PETITION FOR ASSISTANCE IN LIQUIDATION
The verified Petition for Assistance in the Liquidation (PAL) shall be filed by the Receiver not later than 180 days from the date of publication of notice of the bank’s closure. TheReceiver refers to the Philippine Deposit Insurance Corporation (PDIC), or any of its duly authorized agents acting as receiver of a closed bank.
The PAL shall be filed in three (3) printed copies and one (1) digitized copy (in PDF format) contained in a compact disc, flash drive, or other compatible Information andCommunications Technology media. The petition must contain the following material facts:
- 1) The name of the closed bank.
- 2) The MB Resolution ordering the closure and directing the PDIC, as Receiver, to proceed with the takeover and liquidate the bank.
- 3) The grounds for closure as stated in the MB Resolution;
- 4) The date of publication of notice of closure giving creditors 60 days to file their claims before the Receiver.
- 5) The financial condition of the bank as of date of closure showing the estimated realizable value of its assets.
- 6) An attachment showing the names and addresses of creditors with valid claims, those with claims filed but yet to be found valid, those with claims that have been denied and the reason/s for denial, as well those with claims that have been disallowed.
Certified true copies of the following documents shall be attached to the PAL:
- 1) MB Resolution ordering the closure and liquidation of the closed bank.
- 2) Takeover Report.
- 3) Publisher’s affidavit of publication of the notice of closure to creditors.
- 4) Master Liquidation Plan, which refers to the liquidation plan adopted by the PDIC for general application to all closed banks referred to in Section 16 (h) of the PDIC Charter.
- 5) Financial statements of the bank together with an inventory of its assets.
ORDER FOR INITIAL HEARING; POSTING AND PUBLICATION
If the PAL is sufficient in form and substance, the LC shall, within 10 from filing thereof, issue an Order:
- a) Stating that the PAL is sufficient in form and substance;
- b) Setting the initial hearing within 60 days from receipt of the PAL;
- c) Directing the court sheriff or process server to post the Order in the bulletin boards of the LC and of the municipal or city hall where the principal office of the closed bank is located, at the expense of the Receiver;
- d) Directing all claimants whose claims were denied or disallowed by the Receiver to file their claims with the LC within 60 days from date of receipt of final notice of denial or disallowance of their claims or within 20 days from date of publication of this Order, whichever is later; and
- e) Directing the Receiver to cause, within a period of 5 days from receipt of the Order, the one-time publication of the Order in a newspaper of general circulation in the Philippines.
INITIAL HEARING; GIVING DUE COURSE
During the initial hearing, the Receiver shall present proof of posting and publication as required herein and mark the documents in support of the PAL. Thereafter, formal offer of evidence shall be made in open court and the PAL shall be submitted for resolution.
After being satisfied that the jurisdictional requirements have been complied with, the court shall, within a period of not more 10 days from the date of the Order submitting the PAL for resolution, issue an Order giving due course to the PAL and constituting itself as the LC of the closed bank.
CLAIMS AGAINST THE ASSETS OF CLOSED BANKS
A. Disputed Claims. Disputed claims are classified into:
- a) Monetary claims – those filed against the assets of a closed bank which were denied by the Receiver after evaluation, or disallowed by the Receiver for failure to file within the 60-day period from publication of notice of closure; and
- b) Other claims – those non-monetary claims such as for specific performance, breach of contract, or damages of whatever nature or character.
B. Monetary Claims. Within a period of 60 days from receipt of final notice of denial or disallowance by the Receiver or 20 days from publication, whichever is later, the claimant shall file a Verified Claim with the LC and furnish a copy thereof to the Receiver. Failure to file a Verified Claim with the prescribed period shall render the denial of the claim by the Receiver final. A Verified Claim shall contain the following:
- a) A clear and concise statement of facts;
- b) Material dates pertaining to the date of filing of the claim with the Receiver and the date of receipt of the notice of denial or disallowance of claim by the Receiver;
- c) Grounds in support of the Verified Claim together with the original or certified true copies of relevant documentary evidence; and
- d) Affidavits of witnesses and other evidence in support of the Verified Claim.
The Receiver has 15 days from receipt of the Verified Claim to file a verified Comment thereto. The claimant, on the other hand, may file a verified Reply within 10 days from receipt of the Comment. Upon receipt of the Verified Reply or upon the lapse of the 10-day period to file the same, the Verified Claim shall be submitted for resolution. Within a period not exceeding 30 days from submission for resolution, the LC shall either allow or disallow the Verified Claim based on the pleadings, affidavits, and evidence submitted and without need of a full-blown trial. The LC may, motu proprio or based on the Verified Comment, dismiss the Verified Claim on any of the applicable grounds under Section 1, Rule 16 of the Rules of Court. [Note: The Supreme Court already deleted Rule 16 in the 2019 Proposed Amendments to the 1997 Rules of Civil Procedure.]
C. Other Claims. All claims against the assets of the closed bank, other than those covered under Section B, shall be filed with the LC, at any time prior to the submission of the Final ADP, by way of a Verified Notice of Claim. The Verified Notice of Claim shall contain a clear and concise statement of facts with original or certified true copies of the relevant documentary evidence attached thereto.
Within 15 days from receipt of the Verified Notice of Claim, the Receiver shall file a Verified Answer, including any ground for dismissal based on Section 1, Rule 16 of the Rules of Court. [Note: The Supreme Court already deleted Rule 16 in the 2019 Proposed Amendments to the 1997 Rules of Civil Procedure.] Before the pre-trial, the LC may, motu proprio or based on the Verified Answer and Verified Reply, dismiss the Verified Notice of Claim on any of the applicable grounds.
After the issues are joined, the LC may conduct pre-trial and trial in accordance with the Rules of Court.
- Within 10 days after termination of the pre-trial, the LC may, motu proprio or on motion, resolve the Verified Notice of Claim based on the pleadings pursuant to Rule 34 of the Rules of Court.
- After trial, the LC shall render a Decision within a period of 45 days from submission of the Verified Notice of Claim for resolution.
After the LC has given due course to the petition, the Receiver shall file with the LC an annual Liquidation Report on the closed bank not later than the end of the third quarter of the succeeding year or as may be required by the LC. The Liquidation Report shall include the following information on the closed bank:
- a) Statement of Affairs;
- b) Plan of action for the succeeding fiscal year;
- c) Significant developments and/or financial highlights;
- d) Comparative statement of condition; and
- e) Other information material to assist the LC in the liquidation of the closed bank,including the status of implementation of the approved Partial ADP, if any.
THE ASSET DISTRIBUTION PLAN
The Asset Distribution Plan (ADP) refers to the plan of distribution of the assets of a closed bank to its creditors, based on its estimated realizable value as of a certain cut-off date, prepared in accordance with the rules on concurrence and preference of credits under the Civil Code or other laws. An ADP may be partial when it pertains to the distribution of a portion or some of the assets of the closed bank, or final when it pertains to the distribution of all the assets of the closed bank.
- A motion for approval of a Partial ADP may be filed at any time after the submission of the first Liquidation Report.
- The Receiver shall file a motion for approval of a Final ADP within 5 years from the date of bank closure, which may be extended for compelling reasons but not beyond 7 years from such closure.
Within 10 days from receipt of the motion for approval of the Partial or Final ADP, the LC shall issue an Order:
- setting the motion for hearing within 90 days from receipt thereof; and
- directing the creditors to file their comments not later than 10 days before the hearing.
The Receiver shall: (a) cause the publication of the Order once in a newspaper of general circulation in the Philippines at least 30 days prior to the date of hearing; and (b) serve thecreditors a copy of the Order by personal service, registered mail, private courier, or electronic means, at least 60 days prior to the date of hearing, attaching thereto a Notice containing the required information.
On the basis of the pleadings submitted and without need of a full-blown trial, the LC mayapprove or disapprove the motion, in whole or in part, or order the amendment of the Partial or Final ADP within 45 days from submission of the motion for resolution.
The Resolution approving the Final or Partial ADP shall be published once in a newspaper of general circulation. The Resolution shall become final after the lapse of 30 days from publication of the Resolution, or upon denial of a motion for reconsideration thereon. Upon finality of the Resolution, the Receiver shall implement the Partial or Final ADP.
TERMINATION OF THE PROCEEDINGS
The finality of the Resolution approving the Final ADP shall usher in the winding-up phase under the PDIC Charter and the termination of the liquidation proceeding. The PAL shall, for all intents and purposes, be considered closed and terminated without prejudice to anyassistance the LC may extend in the implementation of the Final ADP.
The Receiver shall submit a final report on the implementation of the approved Final ADP to the MB and the Securities and Exchange Commission after the expiration of the winding-up period and serve a copy thereof to the LC.
NO RESTRAINING ORDER
No court, except the Court of Appeals, shall issue any temporary restraining order, preliminary injunction, or preliminary mandatory injunction against the Receiver for any act done in connection with or in the exercise of its powers and functions under the PDIC Charter and other applicable laws.
The Supreme Court may issue a restraining order or injunction when the matter is of extreme urgency involving a constitutional issue, such that unless a temporary restraining order is issued, grave injustice and irreparable injury will arise. The party applying for the issuance of a restraining order or injunction shall file a bond in an amount to be fixed by the Supreme Court, which bond shall accrue in favor of the Receiver if the Court should finally decide that the applicant was not entitled to the relief sought.