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 Attorney-in-fact, GONZALO C. SY, respondents.
MENDOZA, J.:
These cases have been consolidated because the principal question involved is the same: 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. The Fifth and
the Fourteenth Divisions of the Court of Appeals reached opposite results on this question and consequently applied different
periods for appealing.
The facts are as follows:
I.
Proceedings in the CB and the RTC
On July 5, 1985, the 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 1 and a Liquidator was
appointed. 2
On April 7, 1986, the Central Bank filed with the Regional Trial Court of Manila Branch 31, a petition entitled "Petition for Assistance
in the Liquidation of Pacific Banking Corporation." 3 The petition was approved, after which creditors filed their claims with the court.
On May 17, 1991, a new Liquidator, Vitaliano N. Naagas, 4 President of the Philippine Deposit Insurance Corporation (PDIC), was
appointed by the Central Bank.
On March 13, 1989 the 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. In its order dated September 13, 1991,
the trial court ordered payment of the principal claims of the Union. 5
The Liquidator received a copy of the order on September 16, 1991. On October 16, 1991, he filed a Motion for Reconsideration
and Clarification of the order. In his order of December 6, 1991, the judge modified his September 13, 1991 6 but in effect denied
the Liquidator's motion for reconsideration. This order was received by the Liquidator on December 9, 1991. The following day,
December 10, 1991, he filed a Notice of Appeal and a Motion for Additional Time to Submit Record on Appeal. On December 23,
1991, another Notice of Appeal was filed by the Office of the Solicitor General in behalf of Naagas.
In his order of February 10, 1992, 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. The judge declared his September 13, 1991 order and subsequent orders to be
final and executory and denied reconsideration. On March 27, 1992, he granted the Union's Motion for issuance of a writ of
Execution.
Ang Keong Lan and E.J. Ang Int'l., private respondents in G.R. No. 112991, likewise 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.
In his order dated September 11, 1992, respondent judge of the RTC directed the Liquidator to pay private respondents the total
amount of their claim as preferred creditors. 7
The Liquidator received the order on September 16, 1992. On September 30, 1992 he moved for reconsideration, but his motion
was denied by the court on October 2, 1992. He received the order denying his Motion for Reconsideration on October 5, 1992. On
October 14, 1992 he filed a Notice of Appeal from the orders of September 16, 1992 and October 2, 1992. As in the case of the
Union, however, the judge ordered the Notice of Appeal stricken off the record on the ground that it had been filed without authority
of the Central Bank and beyond 15 days. In his order of October 28, 1992, the judge directed the execution of his September 11,
1992 order granting the Stockholders/ Investors' claim.
II.
Proceedings in the Court of Appeals
The Liquidator filed separate Petitions for Certiorari, Prohibition and Mandamus in the Court of Appeals to set aside the orders of
the trial court denying his appeal from the orders granting the claims of Union and of the Stockholders/Investors. The two Divisions
of the Court of Appeals, to which the cases were separately raffled, rendered conflicting rulings.
In its decision of November 17, 1992 in CA-G.R. SP No. 27751 (now G.R. No. 09373) the Fifth Division 8 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.
On the other hand, on December 16, 1993, the Fourteenth Division 9 ruled in CA-G.R. SP No. 29351 (now G.R. No. 112991) 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.
III.
Present Proceedings
The Union and the Liquidator then separately filed petitions before this Court.
In G.R. No. 109373 the Union contends that:
1. The Court of Appeals acted without jurisdiction over the subject matter or nature of the suit.
2. The Court of Appeals gravely erred in taking cognizance of the petition for certiorari filed by Naagas who was without any legal
authority to file it.
3. The Court of Appeals erred in concluding that the case is a special proceeding governed by Rules 72 to 109 of the Revised
Rules of Court.
4. The Court of Appeals erred seriously in concluding that the notice of appeal filed by Naagas was filed on time.
5. The Court of Appeals erred seriously in declaring that the second notice of appeal filed on December 23, 1991 by the Solicitor
General is a superfluity.
On the other hand, in G.R. No. 112991 the Liquidator contends that:
1. The Petition for Assistance in the Liquidation of the Pacific Banking Corporation s 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.
2. Private respondents are not creditors of PaBC but are plain stockholders whose right to receive payment as such would accrue
only after all the creditors of the insolvent bank have been paid.
3. The claim of private respondents in the amount of US$22,531,632.18 is not in the nature of foreign investment as it is understood
in law.
4. The claim of private respondents has not been clearly established and proved.
5. The issuance of a writ of execution against the assets of PaBC was made with grave abuse of discretion.
The petitions in these cases must be dismissed.
First. As stated in the beginning, 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.
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 corpus cases 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.
The Fourteenth Division of the Court of Appeals held that the proceeding is an ordinary action similar to an action for interpleader
under Rule 63. 10 The Fourteenth Division stated:
The petition filed is akin to an interpleader under Rule 63 of the Rules of Court where there are conflicting claimants or several
claims upon the same subject matter, a person who claims no interest thereon may file an action for interpleader to compel the
claimants to "interplead" and litigate their several claims among themselves. (Section I Rule 63).
An interpleader is in the category of a special civil action under Rule 62 which, like an ordinary action, may be appealed only within
fifteen (15) days from notice of the judgment or order appealed from. Under Rule 62, the preceding rules covering ordinary civil
actions which are not inconsistent with or may serve to supplement the provisions of the rule relating to such civil actions are
applicable to special civil actions. This embraces Rule 41 covering appeals from the regional trial court to the Court of Appeals.
xxx xxx xxx
Thus, under Section 1 Rule 2 of the Rules of Court, an action is defined as "an ordinary suit in a court of justice by which one party
prosecutes another for the enforcement or protection of a right or the prevention or redress of a wrong." On the other hand, Section
2 of the same Rule states that "every other remedy including one to establish the status or right of a party or a particular fact shall
be by special proceeding.
To our mind, from the aforequoted definitions of an action and a special proceeding, the petition for assistance of the court in the
liquidation of an asset of a bank is not "one to establish the status or right of a party or a particular fact." Contrary to the submission
of the petitioner, the petition is not intended to establish the fact of insolvency of the bank. The insolvency of the bank had already
been previously determined by the Central Bank in accordance with Section 9 of the CB Act before the petition was filed. All that
needs to be done is to liquidate the assets of the bank and thus the assistance of the respondent court is sought for that purpose.
It should be pointed out that this petition filed is not among the cases categorized as a special proceeding under Section 1, Rule 72
of the Rules of Court, nor among the special proceedings that may be appealed under Section 1, Rule 109 of the Rules.
We disagree with the foregoing view of the Fourteenth Division. Rule 2 of the Rules of Court provide:

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.
Elucidating the crucial distinction between an ordinary action and a special proceeding, Chief Justice Moran states:" 11
Action is 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 while special proceeding is the act by which one seeks to establish the status or right of a party, or a particular
fact. Hence, action is distinguished from special proceeding in that the former is a formal demand of a right by one against another,
while the latter is but a petition for a declaration of a status, right or fact. Where a party litigant seeks to recover property from
another, his remedy is to file an action. Where his purpose is to seek the appointment of a guardian for an insane, his remedy is a
special proceeding to establish the fact or status of insanity calling for an appointment of guardianship.
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. Put in another way, 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.
Contrary to the rulings of the Fourteenth Division, liquidation proceedings do not resemble petitions for interpleader. For one, an
action for interpleader involves claims on a subject matter against a person who has no interest therein. 12 This is not the case in a
liquidation proceeding where the Liquidator, as representative of the corporation, takes charge of its assets and liabilities for the
benefit of the creditors. 13 He is thus charged with insuring that the assets of the corporation are paid only to rightful claimants and
in the order of payment provided by law.
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 the Fifth Division of the Court of Appeals, quoting the Liquidator, correctly noted:
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).
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.
On the other hand, in G.R. No. 109373 (case of the Labor Union), we 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.
The Fifth Division of the Court of Appeals correctly granted the Liquidator's Petition for Certiorari, Prohibition and Mandamus and its
decision should, therefore, be affirmed.
Second. In G.R. No. 109373, The Union claims that under 29 of Rep. Act No. 265, the court merely assists in adjudicating the
claims of creditors, preserves the assets of the institution, and implements the liquidation plan approved by the Monetary Board
and that, therefore, as representative of the Monetary Board, the Liquidator cannot question the order of the court or appeal from it.
It contends that since the Monetary Board had previously admitted PaBC's liability to the laborers by in fact setting aside the
amount of P112,234,292.44 for the payment of their claims, there was nothing else for the Liquidator to do except to comply with
the order of the court.
The Union's contention is untenable. 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." 14 As this Court held in Rural Bank of Buhi, Inc. v. Court of Appeals: 15
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.
Finally the Union contends that the notice of appeal and motion for extension of time to file the record on appeal filed in behalf of
the Central Bank was not filed by the office of the Solicitor General as counsel for the Central Bank. This contention has no merit.
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. 16 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. 17
WHEREFORE, in G.R. No. 109373 and G.R. No 112991, the decisions appealed from are AFFIRMED.
SO ORDERED.
Narvasa, C.J., Bidin, Regalado and Puno, JJ. concur.