PDIC vs. Stockholders of Intercity Savings and Loan Bank, Inc.

A statute cannot be given retroactive effect to award surplus dividends to creditors whose claims were settled prior to its enactment, absent an express provision indicating retroactive application.

On June 17, 1987, the Central Bank of the Philippines filed a Petition for Assistance in the Liquidation of Intercity Savings and Loan Bank, Inc. (Intercity Bank) before the Regional Trial Court of Makati, alleging the bank's insolvency and the probable loss to depositors and creditors if it continued operating. PDIC was subsequently substituted as petitioner and liquidator. Intercity Bank creditors were paid their principal claims in 2002. On July 27, 2004, Republic Act No. 9302 was enacted, Section 12 of which provides that after payment of all liabilities, the PDIC shall pay surplus dividends at the legal rate of interest to creditors before distribution to shareholders.

• Insolvency and Liquidation: On June 17, 1987, the Central Bank of the Philippines filed a Petition for Assistance in the Liquidation of Intercity Bank due to insolvency. PDIC was later substituted as the liquidator.
• Payment of Claims: The creditors of Intercity Bank were paid their principal claims in 2002, prior to the enactment of Republic Act No. 9302 in 2004.
• Enactment of RA 9302: Republic Act No. 9302 was enacted on July 27, 2004. Section 12 thereof provides that after payment of all liabilities and claims, the PDIC shall pay surplus dividends at the legal rate of interest to creditors before distribution to shareholders.
• Motion for Final Distribution: On August 8, 2005, PDIC filed a Motion for Approval of the Final Distribution of Assets, seeking, among other things, the approval of a Final Project of Distribution and authorization to hold as trustee the liquidating and surplus dividends allocated for creditors.
• RTC Ruling: By Order of July 5, 2006, the RTC granted the motion but disapproved the payment of surplus dividends to creditors. The trial court ruled that applying Section 12 of RA 9302 retroactively would run counter to prevailing jurisprudence and unduly prejudice Intercity Bank shareholders, as the creditors had been paid in 2002, before RA 9302's passage.
• Appellate Proceedings: PDIC appealed the RTC order to the Court of Appeals via an ordinary appeal under Rule 41. The Stockholders moved to dismiss, arguing the issue was purely legal and required a Rule 45 petition. The Court of Appeals dismissed the appeal, a decision affirmed on reconsideration, prompting PDIC to elevate the matter to the Supreme Court.

• Question of Fact: Petitioner argued that the Court of Appeals disregarded the issue of the trial court’s disapproval of additional liquidating dividends, which involved a question of fact entailing a review of evidence.
• Factual Determination on Surplus Dividends: Petitioner maintained that the prayer for surplus dividends involved a question of fact, as there must first be a factual finding that all claims against Intercity Bank have been paid.
• Trusteeship over Unclaimed Dividends: Petitioner asserted that the denial of its prayer to be appointed trustee for previously approved but unclaimed liquidating dividends resulted in an anomalous situation where no entity has the authority to handle them until claimed.

• Pure Question of Law: Respondent countered that only a question of law was brought to the appellate court, the parties having stipulated in the trial court that the sole issue was whether RA 9302 may be applied retroactively.
• Deemed Approval of Liquidating Dividends: Respondent argued that the payment of additional liquidating dividends should be deemed approved since it was never opposed, and the trial court specifically disapproved only the payment of surplus dividends.
• Prospectivity of RA 9302: Respondent maintained that RA 9302 cannot be given retroactive effect absent an express provision therein providing for it.

• Mode of Appeal: Whether PDIC availed of the correct mode of appeal in elevating the case to the Court of Appeals.
• Retroactivity of RA 9302: Whether Section 12 of RA 9302 should be applied retroactively to entitle Intercity Bank creditors to surplus dividends.

• Mode of Appeal: The appeal to the Court of Appeals was correctly dismissed. Whether a statute has retroactive effect is a pure question of law. The proper recourse was a petition for review on certiorari under Rule 45, not an ordinary appeal under Rule 41.
• Retroactivity of RA 9302: Retroactive application of Section 12 of RA 9302 was denied. Statutes are prospective in operation, being formulations of rules for the future. Nothing in RA 9302 authorizes its retroactive application; its effectivity clause indicates a clear legislative intent to the contrary. Applying the law retroactively would unsettle vested rights and disturb the legal effect of prior transactions, especially since the creditors were fully paid in 2002, prior to the law's enactment.

• Prospectivity of Laws (Lex de futuro, judex de praeterito) — Laws shall have no retroactive effect unless the contrary is provided. Statutes are the formulation of rules for the future, not the past. Retroactive legislation tends to be unjust and oppressive by unsettling vested rights or disturbing the legal effect of prior transactions. Applied to deny the retroactive application of RA 9302 to award surplus dividends to creditors already paid prior to the law's enactment.
• Resort to Foreign Jurisprudence — Foreign jurisprudence is resorted to only if no local law or jurisprudence exists to settle the controversy, and even then, it is merely persuasive. Applied to reject PDIC's citation of foreign cases supporting the award of surplus dividends.

• "Statutes are prospective and not retroactive in their operation, they being the formulation of rules for the future, not the past."
• "The reason for the rule is the tendency of retroactive legislation to be unjust and oppressive on account of its liability to unsettle vested rights or disturb the legal effect of prior transactions."

• Quezon City v. ABS-CBN Broadcasting Corporation, G.R. No. 166408 — Followed; held that when the issue raised is purely one of law, the proper mode of appeal is a petition for review on certiorari under Rule 45.
• Curata v. Philippine Ports Authority, G.R. Nos. 154211-12 — Followed; reiterated the principle that laws operate prospectively, not retroactively.
• Philippine Airlines, Inc. v. Court of Appeals, G.R. No. 54470 — Followed; established that resort to foreign jurisprudence is proper only in the absence of local law or jurisprudence and is at most persuasive.

• Section 12, Republic Act No. 9302 — Provides that after payment of all liabilities, the PDIC shall pay surplus dividends at the legal rate of interest to creditors before distribution to shareholders. The Court ruled this provision cannot apply retroactively.
• Section 28, Republic Act No. 9302 — The effectivity clause, stating the act takes effect 15 days following its publication. Cited as evidence of legislative intent against retroactive application.
• Article 4, Civil Code — States that laws shall have no retroactive effect unless the contrary is provided. Applied as the statutory basis for denying retroactive effect to RA 9302.
• Rule 41, Rules of Court — Governs ordinary appeals. Held to be the incorrect mode of appeal for pure questions of law.
• Rule 45, Rules of Court — Governs appeals by petition for review on certiorari to the Supreme Court. Held to be the proper mode of appeal for pure questions of law.

Reynato S. Puno, Teresita J. Leonardo-De Castro, Lucas P. Bersamin, Martin S. Villarama, Jr.