Barrameda vda. de Ballesteros vs. Rural Bank of Canaman Inc.

The liquidation court constituted under Section 30 of RA 7653 has exclusive jurisdiction over all claims against an insolvent bank, whether money claims or otherwise, and the doctrine of adherence to jurisdiction does not prevent the transfer of pending cases to the liquidation court when the jurisdictional change is curative in character designed to prevent prejudice to other creditors and depositors.

The case involves a dispute over two parcels of land inherited by Lucia Barrameda Vda. de Ballesteros from her deceased husband. Her children allegedly executed a deed of extrajudicial partition without her knowledge or consent, allotting the parcels to her son Rico Ballesteros, who subsequently mortgaged one parcel to Rural Bank of Canaman, Inc. (RBCI). When the bank initiated foreclosure proceedings, Lucia filed a civil action for annulment of the partition and mortgage. Meanwhile, RBCI was placed under receivership and liquidation by the Philippine Deposit Insurance Corporation (PDIC), with the RTC of Makati constituted as the liquidation court to assist in the adjudication of claims against the insolvent bank.

• Lucia Barrameda Vda. de Ballesteros is the surviving spouse of Eugenio Ballesteros, who died leaving two parcels of land located in San Nicolas, Baao, Camarines Sur, each with an area of 357 square meters.
• On March 6, 1995, Lucia's children executed a Deed of Extrajudicial Partition and Waiver of the estate of their deceased father without Lucia's knowledge and consent, allotting both parcels to Rico Ballesteros.
• Rico Ballesteros subsequently mortgaged Parcel B to Rural Bank of Canaman, Inc. (RBCI) without Lucia's knowledge and consent.
• The mortgage was foreclosed in 1999 due to failure to settle the loan secured by the lot.
• Lucia was occupying Parcel B at the time of the foreclosure and claimed she had no other place to live.
• On March 17, 2000, Lucia filed a complaint for Annulment of Deed of Extrajudicial Partition, Deed of Mortgage and Damages with prayer for Preliminary Injunction before the RTC of Iriga City, Branch 36 (Civil Case No. IR-3128).
• In its Answer, RBCI claimed that Lucia had sold one of the two parcels to Rico in 1979, representing her share in the estate, and that the extrajudicial partition and mortgage were executed with her knowledge and consent although she did not sign the documents.
• RBCI was placed under the receivership of the Philippine Deposit Insurance Corporation (PDIC) after being ordered closed, and on August 10, 2001, the RTC of Makati, Branch 59 constituted itself as the liquidation court to assist PDIC in the liquidation of RBCI (Special Proceeding No. M-5290).
• During the pre-trial conference, RBCI's counsel filed a motion to withdraw after being informed that PDIC would handle the case, and PDIC lawyers formally took over the defense on February 4, 2002.

• The RTC-Iriga is vested with jurisdiction to continue trying Civil Case No. IR-3128 until final disposition under the doctrine of adherence to jurisdiction, as the case was filed on March 17, 2000, before RBCI was placed under receivership in January 2001.
• Once a court obtains jurisdiction over a controversy, its jurisdiction to proceed to final determination is not affected by subsequent legislation or events transferring jurisdiction to another tribunal.
• The consolidation of Civil Case No. IR-3128 with the liquidation case is improper because the action is not a simple money claim arising from a creditor-debtor relationship, but involves Lucia's rights and interest over property irregularly acquired by RBCI.
• Lucia is not a creditor of the bank entitled to file claims before the liquidator under the August 10, 2001 Order of the RTC-Makati, and therefore her case should not be transferred to the liquidation court.

• The consolidation of Civil Case No. IR-3128 with the liquidation proceeding is proper because the liquidation court has exclusive jurisdiction over all claims against the insolvent bank under Section 30 of RA 7653.
• Section 30 of RA 7653 is curative in character and constitutes a recognized exception to the doctrine of adherence to jurisdiction.
• The time of filing the complaint is immaterial; what matters is that any execution of judgment would prejudice the other depositors and creditors of the insolvent bank.
• Lucia's complaint for annulment of deed of mortgage and damages falls within the purview of "disputed claims" under Section 30, which encompasses all claims whether against the assets of the insolvent bank, for specific performance, breach of contract, damages, or whatever.
• The assets of the insolvent bank are held in trust for the equal benefit of all creditors, and allowing Lucia's case to proceed independently would allow her to obtain preference over other creditors.

• Procedural Issues:
  • Whether the RTC-Iriga has jurisdiction to continue trying and ultimately decide Civil Case No. IR-3128 despite the subsequent constitution of the RTC-Makati as the liquidation court.
  • Whether the Court of Appeals erred in ordering the consolidation of Civil Case No. IR-3128 with the liquidation case pending before the RTC-Makati instead of allowing the RTC-Iriga to retain jurisdiction.
• Substantive Issues:
  • Whether the liquidation court has jurisdiction over claims for annulment of deed of partition, annulment of mortgage, and damages (non-money claims) against an insolvent bank undergoing liquidation.
  • Whether Lucia's action constitutes a "disputed claim" within the jurisdiction of the liquidation court under Section 30 of RA 7653.

• Procedural:
  • The doctrine of adherence to jurisdiction is not absolute and admits exceptions, particularly when the change in jurisdiction is curative in character as provided by statute.
  • Section 30 of RA 7653 is curative in nature, designed to prevent multiplicity of actions against the insolvent bank and to establish due process and orderliness in the liquidation for the equal benefit of all creditors.
  • The Court of Appeals correctly ordered the consolidation of Civil Case No. IR-3128 with the liquidation proceedings before the RTC-Makati, as consolidation prevents confusion, avoids multiplicity of suits, and serves the ends of equity and justice.
  • The RTC-Iriga properly dismissed the case as against RBCI, but the CA correctly modified the dismissal to consolidation rather than outright dismissal without prejudice.
• Substantive:
  • The liquidation court has exclusive jurisdiction over all claims against the insolvent bank, including claims for annulment of contracts and damages, and not merely simple money claims.
  • "Disputed claims" under Section 30 of RA 7653 refers to all claims, whether they be against the assets of the insolvent bank, for specific performance, breach of contract, damages, or whatever.
  • Lucia's action is a claim against RBCI that can properly be consolidated with the liquidation proceedings to determine whether she is entitled to recover the property subject of the mortgage and, if so, how much she is entitled to receive from the remaining assets of the bank.
  • Regular courts do not have jurisdiction over actions filed by claimants against an insolvent bank unless there is a clear showing that the action taken by the Bangko Sentral ng Pilipinas, through the Monetary Board, in the closure of the financial institution was in excess of jurisdiction or with grave abuse of discretion.

• Doctrine of Adherence to Jurisdiction — The principle that once a court acquires jurisdiction over a case, it retains jurisdiction until the final disposition of the case, and subsequent events cannot oust that jurisdiction. The Court clarified that this doctrine is not absolute and admits exceptions, particularly when the jurisdictional change is curative in character as provided by statute.
• Curative Statute Exception to Adherence Doctrine — When a change in jurisdiction is curative in character, designed to remedy procedural defects or prevent injustice, the doctrine of adherence to jurisdiction does not apply. Section 30 of RA 7653 was held to be curative in nature, intended to centralize all claims against insolvent banks in the liquidation court to prevent multiplicity of suits and ensure equal treatment of creditors.
• Exclusive Jurisdiction of Liquidation Courts — Under Section 30 of RA 7653 (The New Central Bank Act), the liquidation court has exclusive jurisdiction to adjudicate all claims against an insolvent bank, including claims for specific performance, breach of contract, damages, or any other claim, whether or not they are money claims against the bank's assets.
• Custodia Legis — The principle that assets of a banking institution under receivership or liquidation are deemed in custodia legis in the hands of the receiver, and are exempt from garnishment, levy, attachment, or execution from the moment the institution was placed under receivership or liquidation.

• "The requirement that all claims against the bank be pursued in the liquidation proceedings filed by the Central Bank is intended to prevent multiplicity of actions against the insolvent bank and designed to establish due process and orderliness in the liquidation of the bank, to obviate the proliferation of litigations and to avoid injustice and arbitrariness."
• "Disputed claims refers to all claims, whether they be against the assets of the insolvent bank, for specific performance, breach of contract, damages, or whatever."
• "The time of the filing of the complaint is immaterial. It is the execution that will obviously prejudice the other depositors and creditors."
• "Once jurisdiction is vested, the same is retained up to the end of the litigation... However, the rule on adherence of jurisdiction is not absolute and has exceptions. One of the exceptions is that when the change in jurisdiction is curative in character."

• Ong v. Court of Appeals — Cited for the principle that the liquidation court has jurisdiction to adjudicate all claims against the bank, whether against assets or for specific performance, breach of contract, damages, or whatever.
• Hernandez v. Rural Bank of Lucena, Inc. — Cited by the trial court for the rule that the liquidation court has jurisdiction over all claims against the insolvent bank.
• Aruego Jr. v. Court of Appeals — Cited by petitioner for the general doctrine of adherence to jurisdiction (jurisdiction once attached cannot be ousted).
• Lipana v. Development Bank of Rizal — Cited for the rule that the time of filing the complaint is immaterial in determining jurisdiction over claims against insolvent banks; what matters is preventing prejudice to other creditors through execution.
• Central Bank of the Philippines v. Morfe — Cited for the principle that after the Monetary Board declares a bank insolvent, the assets are held in trust for the equal benefit of all creditors, and no creditor may obtain preference over another by attachment, execution, or otherwise.
• Miranda v. Philippine Deposit Insurance Corporation — Cited for the rule that regular courts do not have jurisdiction over actions filed by claimants against an insolvent bank unless there is a clear showing that the Monetary Board acted in excess of jurisdiction in closing the bank.
• In Re: Petition For Assistance in the Liquidation of the Rural Bank of BOKOD (Benguet), Inc. v. Bureau of Internal Revenue — Cited for the explanation of the nature of liquidation proceedings as a single proceeding consisting of claims that are heard individually but treated in a two-phased process (approval/disapproval of claims, then distribution).

• Section 30, Republic Act No. 7653 (The New Central Bank Act) — Provides that the liquidation court shall have jurisdiction to adjudicate disputed claims against the insolvent institution, assist in enforcement of individual liabilities of stockholders, directors and officers, and decide other issues material to implementing the liquidation plan. Defines the powers of the receiver and the scope of "disputed claims" to include all claims against the bank.
• Section 2, Rule 1, Revised Rules of Court — Cited regarding the liberal construction of rules to achieve the object of just, speedy and inexpensive determination of cases, used to justify the consolidation of cases.