SPS.

LARROBIS vs PHILIPPINE VETERANS BANK

year prescriptive period in bringing actions.8 RTC ruled

infavor of the R bank- period was interrupted when it was

G.R. No. 135706

October 1, 2004

placed under receivership. Ps MR-denied. Hence, this

petition.

AUSTRIA-MARTINEZ, J.:
ISSUE: 1) Whether or not the period within which the
Topic: foreclosing mortgages is not included to the

respondent bank was placed under receivership and

prohibited act during receivership-this is consistent with the

liquidation proceedings may be considered a fortuitous event

purpose

which interrupted the running of the prescriptive period in

of

receivership

proceedings, i.e.,

to

receive

collectibles and preserve the assets of the bank in

bringing actions-NO!

substitution of its former management, and prevent the

dissipation of its assets to the detriment of the creditors of

(2) Whether or not the demand letter sent by respondent

the bank.

banks representative on August 23, 1985 is sufficient to

interrupt the running of the prescriptive period-NO!

1980- petitioner spouses contracted a monetary loan with

respondent Philippine Veterans Bank in the amount

One characteristic of a fortuitous event, in a legal sense and

of P135,000.00, evidenced by a promissory note, due and

consequently in relations to contract, is that its occurrence

demandable on February 27, 1981, and secured by a Real

must be such as to render it impossible for a party to fulfill

Estate Mortgage executed on their lot together with the

his obligation in a normal manner.22

improvements thereon.

Respondents claims that because of a fortuitous event, it

1985-the respondent bank went bankrupt and was placed

was not able to exercise its right to foreclose the mortgage

under receivership/liquidation by the Central Bank from

on petitioners property; and that since it was banned from

April 25, 1985 until August 1992.

pursuing its business and was placed under receivership

from April 25, 1985 until August 1992, it could not foreclose
the bank, through Francisco Go, sent the spouses a demand

the mortgage on petitioners property within such period

letter

since foreclosure is embraced in the phrase "doing business,"

for "accounts

receivable

in

the

total

amount

of P6,345.00 as of August 15, 1984," which pertains to the

4

are without merit.

insurance premiums advanced by respondent bank over the

mortgaged property of petitioners.5

While it is true that foreclosure falls within the broad

definition of "doing business," that is:

On August 23, 1995, more than fourteen years from thetime

the loan became due and demandable, respondent bank filed

a petition for extrajudicial foreclosure of mortgage of

arrangements and contemplates to that extent, the

petitioners property. On October 18, 1995, the property

performance of acts or words or the exercise of some

was sold in a public auction by Sheriff Arthur Cabigon with

of the functions normally incident to and in

Philippine Veterans Bank as the lone bidder.

progressive prosecution of the purpose and object of

continuity

of

commercial

dealings

and

its organization.23
On April 26, 1996, petitioners filed a complaint with the
RTC, Cebu City, to declare the extra-judicial foreclosure and

it should not be considered included, however, in the acts

the subsequent sale thereof to respondent bank null and

prohibited whenever banks are "prohibited from doing

void.

business" during receivership and liquidation proceedings.

In the pre-trial conference, the parties agreed to limit the

This we made clear in Banco Filipino Savings & Mortgage

issue to whether or not the period within which the bank

Bank

was placed under receivership and liquidation was a

Philippines where we explained that:

fortuitous event which suspended the running of the ten-

vs.

Monetary
24

Board,

Central

Bank

of

the

Section 29 of the Republic Act No. 265, as amended

to accept newdeposits. However, the receiver of

known as the Central Bank Act, provides that when

the bank is in fact obliged to collect debts

a bank is forbidden to do business in the

owing to the bank, which debts form part of

Philippines and placed under receivership, the

person designated as receiver shall immediately
take charge of the banks assets and liabilities, as
expeditiously as possible, collect and gather all the
assets and administer the same for the benefit of its
creditors, and represent the bank personally or
through counsel as he may retain in all actions or
proceedings for or against the institution,exercising
all the powers necessary for these purposes
including, but not limited to, bringing and
foreclosing mortgages in the name of the
bank.25
This is consistent with the purpose of receivership
proceedings, i.e., to receive collectibles and preserve the
assets of the bank in substitution of its former management,
and prevent the dissipation of its assets to the detriment of
the creditors of the bank.26
When a bank is declared insolvent and placed under
receivership, the Central Bank, through the Monetary
Board, determines whether to proceed with the liquidation
or reorganization of the financially distressed bank. A
receiver, who concurrently represents the bank, then takes
control and possession of its assets for the benefit of the
banks creditors. A liquidator meanwhile assumes the role of
the receiver upon the determination by the Monetary Board
that the bank can no longer resume business. His task is to
dispose of all the assets of the bank and effect partial
payments of the banks obligations in accordance with legal
priority. In both receivership and liquidation proceedings,
the bank retains its juridical personality notwithstanding
the closure of its business and may even be sued as its
corporate existence is assumed by the receiver or liquidator.
The receiver or liquidator meanwhile acts not only for the
benefit of the bank, but for its creditors as well.27
In Provident Savings Bank vs. Court of Appeals,28 we further
stated that:
When a bank is prohibited from continuing to do
business by the Central Bank and a receiver is
appointed for such bank, that bank would not be
able to do new business, i.e., to grant new loans or

the assets of the bank. The receiver must

assemble the assets and pay the obligation of
the bank under receivership, and take steps
to

prevent

dissipation

of

such

assets.

Accordingly, the receiver of the bank is

obliged to collect pre-existing debts due to the
bank,

and

foreclose

in

connection

mortgages

therewith,

securing

to

such

debts. (Emphasis supplied.)

29

It is true that we also held in said case that the period

during which the bank was placed under receivership was
deemed fuerza
prescriptive

mayor which

period. This
30

validly
is

being

interrupted

the

invoked

the

by

respondent and was used as basis by the trial court in its

decision. Contrary to the position of the respondent and
court a quohowever, such ruling does not find application in
the case at bar.
A close scrutiny of the Provident case, shows that the Court
arrived at said conclusion, which is an exception to the
general rule, due to the peculiar circumstances of Provident
Savings Bank at the time. In said case, we stated that:
Having arrived at the conclusion that a foreclosure
is part of a banks business activity which could
not have been pursued by the receiver then
because of the circumstances discussed in
the Central Bank case, we are thus convinced
that the prescriptive period was legally interrupted
by fuerza

mayor in

1972

on

account

of

the

prohibition imposed by the Monetary Board against

petitioner from transacting business, until the
directive

of

the

Board

was

nullified

in

1981. (Emphasis supplied.)

31

Further examination of the Central Bank case reveals that

the circumstances of Provident Savings Bank at the time
were peculiar because after the Monetary Board issued MB
Resolution No. 1766 on September 15, 1972, prohibiting it
from doing business in the Philippines, the banks majority
stockholders immediately went to the Court of First
Instance of Manila, which prompted the trial court to issue
its judgment dated February 20, 1974, declaring null and

void the resolution and ordering the Central Bank to desist

2. Prescription of actions is interrupted when they are filed

from liquidating Provident. The decision was appealed to

before the court, when there is a written extra-judicial

and

demand by the creditors, and when there is any written

affirmed

by

this

Court

in

1981.

Thus,

the

Superintendent of Banks, which was instructed to take

acknowledgment of the debt by the debtor.38

charge of the assets of the bank in the name of the Monetary

Board, had no power to act as a receiver of the bank and

Considering that the mortgage contract and the promissory

carry out the obligations specified in Sec. 29 of the Central

note refer only to the loan of petitioners in the amount

Bank Act.

ofP135,000.00, we have no reason to hold that the insurance

32

premiums, in the amount of P6,345.00, which was the

In this case, it is not disputed that Philippine Veterans

subject of the August 1985 demand letter, should be

Bank was placed under receivership by the Monetary Board

considered as pertaining to the entire obligation of

of the Central Bank by virtue of Resolution .

petitioners.

Unlike Provident Savings Bank, there was no legal

In Quirino Gonzales Logging Concessionaire vs. Court of

prohibition imposed upon herein respondent to deter its

Appeals,41 we held that the notices of foreclosure sent by the

receiver and liquidator from performing their obligations

mortgagee

under

tantamount to written extrajudicial demands, which may

the

law.

Thus,

the

ruling

laid

down

in

the Provident case cannot apply in the case at bar.

to

the

mortgagor

cannot

be

considered

validly interrupt the running of the prescriptive period,

where it does not appear from the records that the notes are

Settled is the principle that a bank is bound by the acts, or

covered by the mortgage contract.42

failure to act of its receiver.34 As we held in Philippine

Veterans Bank vs. NLRC,35 a labor case which also involved

In this case, it is clear that the advanced payment of the

respondent bank,

insurance premiums is not part of the mortgage contract

and the promissory note signed by petitioners. They pertain

all the acts of the receiver and liquidator pertain

only to the amount of P135,000.00 which is the principal

to petitioner, both having assumed petitioners

loan of petitioners plus interest. The arguments of

corporate existence. Petitioner cannot disclaim

respondent bank on this point must therefore fail.

liability by arguing that the non-payment of

MOLINAs just wages was committed by the

As to petitioners claim for damages, however, we find no

liquidators during the liquidation period.

sufficient basis to award the same.

36

However, the bank may go after the receiver who is liable to

it for any culpable or negligent failure to collect the assets of
such bank and to safeguard its assets.37