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G.R. No.

109373 March 20, 1995


PACIFIC BANKING CORPORATION EMPLOYEES ORGANIZATION, PAULA S. PAUG, and
its officers and members, petitioners, vs. THE HONORABLE COURT OF APPEALS and
VITALIANO N. NAAGAS II, as Liquidator of Pacific Banking
Corporation, respondents.
G.R. No. 112991 March 20, 1995
THE PRESIDENT OF THE PHILIPPINE DEPOSIT INSURANCE CORPORATION, as
Liquidator of the Pacific Banking Corporation , petitioner, vs. COURT OF APPEALS,
HON. JUDGE REGINO T. VERIDIANO II, DEPUTY SHERIFF RAMON ENRIQUEZ and ANG
ENG JOO, ANG KEONG LAN and E.J ANG INT'L. LTD., represented by their Attorneyin-fact, GONZALO C. SY, respondents.
NOTES: The principal question in these cases is whether a petition for liquidation under 29
of Rep. Act No. 265 is in the nature of a special proceeding. If it is, then the period of appeal
is 30 days and the party appealing must, in addition to a notice of appeal, file with the trial
court a record on appeal in order to perfect his appeal. Otherwise, if a liquidation proceeding
is an ordinary action, the period of appeal is 15 days from notice of the decision or final
order appealed from.
FACTS:
The cases are consolidated.
Pacific Banking Corporation (PaBC) was placed under receivership by the Central
Bank of the Philippines pursuant to Resolution No. 699 of its Monetary Board. A few months
later, it was placed under liquidation and a Liquidator was appointed.
The Central Bank filed with the RTC of Manila a petition entitled "Petition for
Assistance in the Liquidation of Pacific Banking Corporation." The petition was approved,
after which creditors filed their claims with the court.
Naagas, a new Liquidator, was appointed by the Central Bank.
In G.R. No. 109373 (case of the Labor Union):
Pacific Banking Corporation Employees Organization (Union for short), petitioner in
G.R. No. 109373, filed a complaint-in-intervention seeking payment of holiday pay, 13th
month pay differential, salary increase differential, Christmas bonus, and cash equivalent of
Sick Leave Benefit due its members as employees of PaBC.
RTC:

September 13, 1991-the trial court ordered payment of the principal claims of the
Union

September 16, 1991-Liquidator received a copy of the order

October 16, 1991-he filed a Motion for Reconsideration and Clarification of the order

December 6, 1991-the judge modified his September 13, 1991 but in effect denied
the Liquidator's motion for reconsideration

December 9, 1991-the order was received by the Liquidator

December 10, 1991-he filed a Notice of Appeal and a Motion for Additional Time to
Submit Record on Appeal

December 23, 1991-another Notice of Appeal was filed by the Office of the Solicitor
General in behalf of Naagas

February 10, 1992- in his order, respondent judge disallowed the Liquidator's Notice
of Appeal on the ground that it was late, i.e., more than 15 days after receipt of the
decision and he ordered the Notice of Appeal stricken off the record on the ground
that it had been filed without authority of the Central Bank and again, beyond 15
days. The judge declared his September 13, 1991 order and subsequent orders to be
final and executory and denied reconsideration.

March 27, 1992-the judge granted the Union's Motion for issuance of a writ of
Execution

CA: The Liquidator filed a Petition for Certiorari, Prohibition and Mandamus in the
Court of Appeals to set aside the orders of the trial court denying his appeal. In its decision
of November 17, 1992, the Fifth Division held in the case of the Union that the proceeding
before the trial court was a special proceeding and, therefore, the period for appealing from
any decision or final order rendered therein is 30 days. Since the notice of appeal of the
Liquidator was filed on the 30th day of his receipt of the decision granting the Union's
claims, the appeal was brought on time. The Fifth Division, therefore, set aside the orders of
the lower court and directed the latter to give due course to the appeal of the Liquidator and
set the Record on Appeal he had filed for hearing.
SC: The Union contends that the Court of Appeals erred seriously in concluding that the
notice of appeal filed by Naagas was filed on time.
In G.R. No. 112991 (the case of the Stockholders/Investors):
Ang Keong Lan and E.J. Ang Int'l., private respondents filed claims for the payment of
investment in the PaBC allegedly in the form of shares of stocks amounting to
US$2,531,632.18. The shares of stocks, consisting of 154,462 common shares, constituted
11% of the total subscribed capital stock of the PaBC. They alleged that their claim
constituted foreign exchange capital investment entitled to preference in payment under the
Foreign Investments Law.
RTC:

September 11, 1992-respondent judge of the RTC directed the Liquidator to pay
private respondents the total amount of their claim as preferred creditors

September 16, 1992-the Liquidator received the order

September 30, 1992-he moved for reconsideration

October 2, 1992- his motion was denied

October 5, 1992- He received the order denying his Motion for Reconsideration

October 14, 1992-he filed a Notice of Appeal from the orders of September 16, 1992
and October 2, 1992

October 28, 1992- the judge directed the execution of his September 11, 1992 order
granting the Stockholders/ Investors' claim

CA: The Liquidator filed Petition for Certiorari, Prohibition and Mandamus in the
Court of Appeals to set aside the orders of the trial court denying his appeal. On
December 16, 1993, the Fourteenth Division ruled in the case of the Stockholders/Investors
that a liquidation proceeding is an ordinary action. Therefore, the period for appealing from
any decision or final order rendered therein is 15 days and that since the Liquidator's appeal
notice was filed on the 23rd day of his receipt of the order appealed from, deducting the
period during which his motion for reconsideration was pending, the notice of appeal was
filed late. Accordingly, the Fourteenth Division dismissed the Liquidator's petition.
SC: The Liquidator contends that the Petition for Assistance in the Liquidation of the Pacific
Banking Corporation is a Special Proceeding case and/or one which allows multiple appeals,
in which case the period of appeal is 30 days and not 15 days from receipt of the
order/judgment appealed from.

ISSUES:
Main Issue:
1. Whether a petition for liquidation under 29 of Rep. Act No. 265, otherwise known as the
Central Bank Act, is a special proceeding or an ordinary civil action.
Sub-issues:
2. Whether or not In G.R. No. 112991 (the case of the Stockholders/Investors), the
Liquidator's notice of appeal was filed on time.
3. Whether or not, in G.R. No. 109373 (case of the Labor Union), the Fifth Division correctly
granted the Liquidator's Petition for Certiorari, Prohibition and Mandamus.
4. Whether or not, in G.R. No. 109373, (case of the Labor Union), the Liquidator can question
the order of the court or appeal from it, in which the liquation plan was already approved by
the Monetary Board.

5. Whether or not, in G.R. No. 109373, (case of the Labor Union), the notice of appeal and
motion for extension of time to file the record on appeal filed in behalf of the Central Bank
was filed by the office of the Solicitor General as counsel for the Central Bank.
HELD:
1. The petition for liquidation under 29 of Rep. Act No. 265, otherwise known as the Central
Bank Act, is a special proceeding.
BP Blg. 129 provides:
39. Appeals. The period for appeal from final orders, resolutions, awards,
judgments, or decisions of any court in all cases shall be fifteen (15) days
counted from the notice of the final order, resolution, award, judgment or
decision appealed from: Provided, however, that in habeas corpuscases the
period for appeal shall be forty-eight (48) hours from the notice of the
judgment appealed from.
No record on appeal shall be required to take an appeal. In lieu thereof, the
entire record shall be transmitted with all the pages prominently numbered
consecutively, together with an index of the contents thereof.
This section shall not apply in appeals in special proceedings and in other
cases wherein multiple appeals are allowed under applicable provisions of the
Rules of Court.
The Interim Rules and Guidelines to implement BP Blg. 129 provides:
19. Period of Appeals.
(a) All appeals, except in habeas corpus cases and in the cases
referred to in paragraph (b) hereof, must be taken within fifteen
(15) days from notice of the judgment, order, resolution or
award appealed from.
(b) In appeals in special proceedings in accordance with Rule
109 of the Rules of Court and other cases wherein multiple
appeals are allowed, the period of appeals shall be thirty (30)
days, a record on appeal being required.
Rule 2 of the Rules of Court provides:
1. Action defined. Action means an ordinary suit in a court of justice, by
which the party prosecutes another for the enforcement or protection of a
right, or the prevention or redress of a wrong.
2. Special Proceeding Distinguished. Every other remedy, including one to
establish the status or right of a party or a particular fact, shall be by special
proceeding.

Distinction between an ordinary action and a special proceeding by Chief Justice Moran
states:

ACTION (CIVIL ACTION)

SPECIAL PROCEEDINGS

The act by which one sues another in a court


of justice for the enforcement or protection
of a right, or the prevention or redress of a
wrong.

The act by which one seeks to establish the


status or right of a party, or a particular fact.

A formal demand of a right by one against


another.

A petition for a declaration of a status, right


or fact.

Proper remedy of a party litigant that seeks


to recover property from another.

Proper remedy of a party whose purpose is


to seek the appointment of a guardian for an
insane.
Considering this distinction, a petition for liquidation of an insolvent
corporation should be classified a special proceeding and not an ordinary action.
Such petition does not seek the enforcement or protection of a right nor the prevention or
redress of a wrong against a party. It does not pray for affirmative relief for injury arising
from a party's wrongful act or omission nor state a cause of action that can be enforced
against any person.
What it seeks is merely a declaration by the trial court of the corporation's insolvency
so that its creditors may be able to file their claims in the settlement of the corporation's
debts and obligations. Put in another way, the petition only seeks a declaration of the
corporation's debts and obligations. The petition only seeks a declaration of the
corporation's state of insolvency and the concomitant right of creditors and the order of
payment of their claims in the disposition of the corporation's assets.
Also, contrary to the rulings of the Fourteenth Division, liquidation proceedings do not
resemble petitions for interpleader. Rather, a liquidation proceeding resembles the
proceeding for the settlement of state of deceased persons under Rules 73 to 91 of the
Rules of Court. The two have a common purpose: the determination of all the assets and
the payment of all the debts and liabilities of the insolvent corporation or the estate. The
Liquidator and the administrator or executor are both charged with the assets for the benefit
of the claimants. In both instances, the liability of the corporation and the estate is not
disputed. The court's concern is with the declaration of creditors and their rights and the
determination of their order of payment.
Furthermore, as in the settlement of estates, multiple appeals are allowed in
proceedings for liquidation of an insolvent corporation. As stated:
A liquidation proceeding is a single proceeding which consists of a number
of cases properly classified as "claims." It is basically a two-phased
proceeding. The first phase is concerned with the approval and disapproval of
claims. Upon the approval of the petition seeking the assistance of the proper
court in the liquidation of a close entity, all money claims against the bank are
required to be filed with the liquidation court. This phase may end with the

declaration by the liquidation court that the claim is not proper or without
basis. On the other hand, it may also end with the liquidation court allowing
the claim. In the latter case, the claim shall be classified whether it is ordinary
or preferred, and thereafter included Liquidator. In either case, the order
allowing or disallowing a particular claim is final order, and may be appealed
by the party aggrieved thereby.
The second phase involves the approval by the Court of the distribution plan
prepared by the duly appointed liquidator. The distribution plan specifies in
detail the total amount available for distribution to creditors whose claim were
earlier allowed. The Order finally disposes of the issue of how much property
is available for disposal. Moreover, it ushers in the final phase of the
liquidation proceeding payment of all allowed claims in accordance with the
order of legal priority and the approved distribution plan.
Verily, the import of the final character of an Order of allowance or
disallowance of a particular claim cannot be overemphasized. It is the
operative fact that constitutes a liquidation proceeding a "case where multiple
appeals are allowed by law." The issuance of an Order which, by its nature,
affects only the particular claims involved, and which may assume finality if
no appeal is made therefrom, ipso facto creates a situation where multiple
appeals are allowed.
A liquidation proceeding is commenced by the filing of a single petition by
the Solicitor General with a court of competent jurisdiction entitled, "Petition
for Assistance in the Liquidation of e.g., Pacific Banking Corporation. All claims
against the insolvent are required to be filed with the liquidation court.
Although the claims are litigated in the same proceeding, the treatment is
individual. Each claim is heard separately. And the Order issued relative to a
particular claim applies only to said claim, leaving the other claims
unaffected, as each claim is considered separate and distinct from the others.
Obviously, in the event that an appeal from an Order allowing or disallowing a
particular claim is made, only said claim is affected, leaving the others to
proceed with their ordinary course. In such case, the original records of the
proceeding are not elevated to the appellate court. They remain with the
liquidation court. In lieu of the original record, a record of appeal is instead
required to be prepared and transmitted to the appellate court.
Inevitably, multiple appeals are allowed in liquidation proceedings.
Consequently, a record on appeal is necessary in each and every
appeal made. Hence, the period to appeal therefrom should be thirty
(30) days, a record on appeal being required. (Record pp. 162-164).
2. Yes, In G.R. No. 112991 (the case of the Stockholders/Investors), the Liquidator's notice of
appeal was filed on time, having been filed on the 23rd day of receipt of the order granting
the claims of the Stockholders/Investors. However, the Liquidator did not file a record
on appeal with the result that he failed to perfect his appeal. As already stated a
record on appeal is required under the Interim Rules and Guidelines in special proceedings
and for cases where multiple appeals are allowed. The reason for this is that the several
claims are actually separate ones and a decision or final order with respect to any claim can

be appealed. Necessarily the original record on appeal must remain in the trial court where
other claims may still be pending.
Because of the Liquidator's failure to perfect his appeal, the order granting the claims
of the Stockholders/Investors became final. Consequently, the Fourteenth Division's decision
dismissing the Liquidator's Petition for Certiorari, Prohibition and Mandamus must be
affirmed albeit for a different reason.
3. Yes, in G.R. No. 109373 (case of the Labor Union), the court find that the Fifth Division
correctly granted the Liquidator's Petition for Certiorari, Prohibition and Mandamus. As
already noted, the Liquidator filed a notice of appeal and a motion for extension to file a
record on appeal on December 10, 1991, i.e., within 30 days of his receipt of the order
granting the Union's claim. Without waiting for the resolution of his motion for extension, he
filed on December 20, 1991 within the extension sought a record on appeal. Respondent
judge thus erred in disallowing the notice on appeal and denying the Liquidator's motion for
extension to file a record on appeal.
4. Yes, the Liquidator can question the order of the court or appeal from it
In liquidation proceedings, the function of the trial court is not limited to assisting in
the implementation of the orders of the Monetary Board. Under the same section (29) of
the law invoked by the Union, the court has authority to set aside the decision of the
Monetary Board "if there is a convincing proof that the action is plainly arbitrary and made in
bad faith." As this Court held in Rural Bank of Buhi, Inc. v. Court of Appeals:
There is no question that the action of the monetary Board in this regard may
be subject to judicial review. Thus, it has been held that the Court's may
interfere with the Central Bank's exercise of discretion in determining whether
or not a distressed bank shall be supported or liquidated. Discretion has its
limits and has never been held to include arbitrariness, discrimination or bad
faith (Ramos v. Central Bank of the Philippines, 41 SCRA 567 [1971]).
In truth, the Liquidator is the representative not only of the Central Bank but also of
the insolvent bank. Under 28A-29 of Rep. Act No. 265 he acts in behalf of the bank
"personally or through counsel as he may retain, in all actions or proceedings or against the
corporation" and he has authority "to do whatever may be necessary for these purposes."
This authority includes the power to appeal from the decisions or final orders of the court
which he believes to be contrary to the interest of the bank.
5. Yes, the notice of appeal and motion for extension of time to file the record on appeal filed
in behalf of the Central Bank was filed by the office of the Solicitor General as counsel for
the Central Bank. On October 22, 1992, as Assistant Solicitor General Cecilio O. Estoesta
informed the trial court in March 27, 1992, the OSG had previously authorized lawyers of the
PDIC to prepare and sign pleadings in the case. Conformably thereto the Notice of Appeal
and the Motion for Additional Time to submit Record on Appeal filed were jointly signed by
Solicitor Reynaldo I. Saludares in behalf of the OSG and by lawyers of the PDIC.