Ong vs. Court of Appeals

The liquidation court has exclusive jurisdiction to adjudicate all disputed claims against an insolvent bank, including claims for specific performance or delivery of property, regardless of whether the property subject of the claim is still part of the bank's assets. The term "disputed claims" is not limited to claims directly against the bank's assets but extends to all contentious matters that may arise in the course of liquidation.

Jerry Ong was a creditor of Omnibus Finance, Inc., which had money market obligations to him in the principal amount of ₱863,517.02. Rural Bank of Olongapo, Inc. (RBO) mortgaged two parcels of land in Tagaytay City, covered by TCT Nos. 13769 and 13770, in favor of Ong on December 29, 1983, to guarantee Omnibus Finance's obligations. RBO was subsequently placed under liquidation by the Central Bank on November 9, 1984, and a petition for assistance in its liquidation was approved by the Regional Trial Court of Olongapo City on May 30, 1985, docketed as Sp. Proc. No. 170-0-85 before Branch 73. The liquidation proceedings were governed by Section 29, paragraph 3 of R.A. 265 (The Central Bank Act), as amended by P.D. 1827, which vests in the liquidation court jurisdiction to adjudicate disputed claims against the bank.

On December 29, 1983, Rural Bank of Olongapo, Inc. (RBO) mortgaged two parcels of land in Tagaytay City, covered by TCT Nos. 13769 and 13770, in favor of Jerry Ong to guarantee the money market obligations of Omnibus Finance, Inc. to Ong in the principal amount of ₱863,517.02. Omnibus Finance failed to seasonably settle its obligations, prompting Ong to effect the extrajudicial foreclosure of the mortgages. On March 23, 1984, the City Sheriff of Tagaytay City issued a Certificate of Sale in Ong's favor, which was registered with the Registry of Deeds of Tagaytay City on July 16, 1985. RBO failed to redeem the properties within the redemption period, and Ong executed an Affidavit of Consolidation of Ownership. However, Ong could not register the consolidation because RBO refused to surrender the owner's duplicate copies of the certificates of title.

On November 9, 1984, the Central Bank placed RBO under liquidation after determining it was insolvent. On May 30, 1985, the Regional Trial Court of Olongapo City approved the petition for assistance in RBO's liquidation, docketed as Sp. Proc. No. 170-0-85 before Branch 73. On February 5, 1991, Ong filed Civil Case No. Q-91-8019 with the Regional Trial Court of Quezon City, a petition under Sections 63(b) and 107 of P.D. 1529 (the Property Registration Decree) seeking the surrender of TCT Nos. 13769 and 13770. RBO moved to dismiss on grounds of res judicata and, in a supplemental motion, argued that the liquidation court had exclusive jurisdiction over Ong's claim.

The trial court denied the motions to dismiss, reasoning that the subject parcels had been sold to Ong through public bidding on March 23, 1984 and were therefore no longer part of RBO's assets when liquidation commenced on November 9, 1984, or when the liquidation petition was approved on May 30, 1985. RBO elevated the matter to the Court of Appeals via certiorari and prohibition. The appellate court reversed, annulling the trial court's orders and directing dismissal of the case without prejudice to Ong's filing his claim in the liquidation proceedings. The Court of Appeals noted that Section 29, paragraph 3 of R.A. 265, as amended by P.D. 1827, does not limit the liquidation court's jurisdiction to claims against the bank's assets, and that the certificates of title remained in RBO's name, such that, as far as third persons were concerned, registration was the operative act that would convey title.

• Independent Action: Petitioner maintained that Civil Case No. Q-91-8019 could proceed independently of the liquidation proceedings (Sp. Proc. No. 170-0-85), the disputed parcels having been extrajudicially foreclosed and the corresponding Certificate of Sale issued in his favor.
• Consolidation of Title: Petitioner argued that since RBO failed to redeem the properties, he should be allowed to consolidate his title thereto.
• Validity of Foreclosure: Petitioner contended that RBO's mortgage of the titles in his favor and the subsequent foreclosure were presumed valid and regular.
• No Jurisdiction of Liquidation Court: Petitioner asserted that the liquidation court had no jurisdiction over the subject parcels of land since they were no longer assets of RBO.
• No "Disputed Claim": Petitioner argued that, to the best of his personal knowledge, there was no pending action before any court or agency contesting his right over the subject properties, and thus his petition could not be considered a "disputed claim" as contemplated by law.

• Res Judicata: Respondent RBO argued that petitioner had earlier sought similar relief from Branch 18 of the RTC of Tagaytay City, which case was dismissed with finality on appeal before the Court of Appeals.
• Liquidation Court Jurisdiction: Respondent RBO contended that it was undergoing liquidation and, pursuant to prevailing jurisprudence, the liquidation court had exclusive jurisdiction to take cognizance of petitioner's claim.
• Properties Still Part of Assets: Respondent RBO argued that the validity of the certificate of sale issued to petitioner was still at issue in another case between them, and therefore the properties covered by said certificate were still part and parcel of its assets.

• Jurisdiction of Liquidation Court: Whether the liquidation court has exclusive jurisdiction over a claim for the surrender of certificates of title covering properties of an insolvent bank that were extrajudicially foreclosed prior to the commencement of liquidation proceedings.
• Scope of "Disputed Claims": Whether the term "disputed claims" under Section 29, paragraph 3 of R.A. 265, as amended by P.D. 1827, requires that a claim be initially contested in another court or agency before it may be filed with the liquidation court.

• Jurisdiction of Liquidation Court: Yes. The liquidation court has exclusive jurisdiction to adjudicate all disputed claims against the insolvent bank, including claims for the surrender of certificates of title, regardless of whether the subject properties are still part of the bank's assets.
• Scope of "Disputed Claims": No. It is not necessary that a claim be initially disputed in a court or agency before it is filed with the liquidation court; "disputed claims" simply connotes that contentious cases might arise in the course of liquidation requiring a full-dress hearing and resolution of legal issues.

• Jurisdiction of Liquidation Court: Section 29, paragraph 3 of R.A. 265, as amended by P.D. 1827, provides that "the court shall have jurisdiction in the same proceedings to adjudicate disputed claims against the bank." This provision is general and unqualified — it does not limit the liquidation court's jurisdiction to claims against the assets of the insolvent bank. Applying this provision in Hernandez vs. Rural Bank of Lucena, Inc., the Court ruled that all claims against the insolvent bank should be filed in the liquidation proceeding. The rationale is to prevent multiplicity of actions, establish due process and orderliness, obviate the proliferation of litigations, and avoid injustice and arbitrariness. The lawmaking body contemplated that one court should pass upon claims against the insolvent bank and assist the Superintendent of Banks. Moreover, since RBO was insolvent, other claimants not privy to Ong's transaction could be involved, and as far as those claimants were concerned, the certificates of title still being in RBO's name meant the properties still formed part of the insolvent bank's assets. Registration is the operative act that conveys title to property as far as third persons are concerned.

• Scope of "Disputed Claims": The phrase "disputed claims" misled petitioner into arguing that his petition could not be considered a "disputed claim" because no pending action contested his right over the properties. As gleaned from Hernandez, the term "disputed claim" simply connotes that, in the course of liquidation, contentious cases might arise requiring a full-dress hearing and resolution of legal issues, necessitating that a court assist and supervise the liquidation and act as umpire or arbitrator in the allowance and disallowance of claims. It is not a prerequisite that the claim be initially disputed elsewhere. Petitioner overlooked that since RBO was insolvent, other claimants not privy to their transaction may be involved, and as far as those claimants are concerned, the absence of certificates of title in petitioner's name means the subject lots still form part of the assets of the insolvent bank.

• Exclusive Jurisdiction of the Liquidation Court — When a bank is placed under liquidation pursuant to Section 29, paragraph 3 of R.A. 265, as amended by P.D. 1827, the liquidation court has exclusive jurisdiction to adjudicate all disputed claims against the bank. The term "disputed claims" is not limited to claims against the assets of the insolvent bank but encompasses all claims — for specific performance, breach of contract, damages, or whatever — that may arise in the course of liquidation. The rationale is to prevent multiplicity of actions, establish due process and orderliness, obviate the proliferation of litigations, and avoid injustice and arbitrariness. One court, if possible, should pass upon all claims against the insolvent bank.

• Registration as the Operative Act of Conveyance — As far as third persons are concerned, registration is the operative act that conveys title to property. Until certificates of title are transferred to the claimant's name through registration, the properties remain in the name of the registered owner and, for purposes of liquidation, still form part of the insolvent bank's assets.

• "The fact that the insolvent bank is forbidden to do business, that its assets are turned over to the Superintendent of Banks, as a receiver, for conversion into cash, and that its liquidation is undertaken with judicial intervention means that, as far as lawful and practicable, all claims against the insolvent bank should be filed in the liquidation proceeding." — This passage, quoted from Hernandez vs. Rural Bank of Lucena, Inc., articulates the controlling doctrine on the concentration of all claims against an insolvent bank within the liquidation proceeding.

• "It is a pragmatic arrangement 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." — This statement explains the legislative rationale behind vesting exclusive jurisdiction in the liquidation court, emphasizing the prevention of multiplicity of suits and orderly administration of the insolvent bank's affairs.

• "It is not necessary that a claim be initially disputed in a court or agency before it is filed with the liquidation court." — This clarifies the scope of "disputed claims" under Section 29, paragraph 3 of R.A. 265, rejecting the argument that prior contestation is a prerequisite for liquidation court jurisdiction.

• Hernandez vs. Rural Bank of Lucena, Inc., No. L-29791, 10 January 1978, 81 SCRA 75 — Controlling precedent. The Court applied the same provision (Section 29, paragraph 3 of R.A. 265, as amended by P.D. 1827) to hold that all claims against an insolvent bank should be filed in the liquidation proceeding. The case defined "disputed claims" as connoting contentious cases that might arise in the course of liquidation requiring a full-dress hearing, and established the rationale of preventing multiplicity of actions and ensuring orderly liquidation.

• Section 29, paragraph 3, Republic Act No. 265 (The Central Bank Act), as amended by Presidential Decree No. 1827 — Provides that upon determination of a bank's insolvency, the Monetary Board may order its liquidation, and the court (now the Regional Trial Court) shall have jurisdiction in the same proceedings to adjudicate disputed claims against the bank, enforce individual liabilities of stockholders, and do all that is necessary to preserve the bank's assets and implement the liquidation plan. The Court interpreted "disputed claims" broadly to encompass all claims, not merely those against the bank's assets.
• Sections 63(b) and 107, Presidential Decree No. 1529 (The Property Registration Decree) — The provisions under which Ong filed his petition for surrender of certificates of title in the RTC of Quezon City. The Court effectively held that these provisions could not override the exclusive jurisdiction of the liquidation court over claims against the insolvent bank.

Padilla, Vitug, Kapunan, and Hermosisima, Jr., JJ., concurred.