d. Liquidation

Liquidation

The recovery and conversion of assets into cash for distribution to all creditors in accordance with the rules on concurrence and preference of credits. PDIC is the receiver and liquidator (AM No. 19-12-02-SC, Sec. 1 (m), Rule 2)¹.

Note: With the removal of the 90-day receivership to determine if the bank can still be rehabilitated, a bank placed under receivership is considered also as under liquidation.

Types of Liquidation

• Voluntary liquidation

In case of the voluntary liquidation of any bank organized under the laws of the Philippines, or of any branch or office in the Philippines of a foreign bank, written notice of such liquidation shall be sent to the Monetary Board before such liquidation is undertaken, and the Monetary Board shall have the right to intervene and take such steps as may be necessary to protect the interests of creditors. (GBL, Sec. 68)²

• Involuntary Liquidation (Sec. 30)³

Modes of Liquidation

• Conventional liquidation.
• Purchase of Assets and/or Assumption of Liabilities

Note: This shall be further discussed under the topic on PDIC.

Exclusive jurisdiction of the Liquidation Court

Liquidation court is a court where the PDIC as receiver files a petition for assistance in the liquidation (judicial liquidation).

General Rule: In a judicial liquidation of an insolvent bank, all claims against the bank should be filed in the liquidation proceeding. (In Re: Petition for Assistance in the Liquidation of the Rural Bank of Bokod v. BIR, G.R. No. 158261, 18 December 2006)⁴

Exceptions:

• When re-filing and re-litigating the case before the liquidation court would be an exercise in futility in view of the number of years the case has been on trial and additional expenses to the party who is living in poverty. (Valenzuela v. Court of Appeals, G.R. No. L-56168, 22 December 1988)⁵
• When more inconveniences would be caused to the parties, entailing waste of more money and precious time (Carandang v. Court of Appeals, G.R. No. L-44932, 15 April 1988)⁶; and
• When the issue is the validity of contracts upon which a claim is based.

Note: Even if the case falls within the exceptions, the claimant should still file the adjudicated claim with the liquidator or liquidation court for processing of claims to determine the proper concurrence and preference of credit among the different creditors of the bank. (Cudiamat v. Batangas Savings and Loan Bank, Inc., G.R. No. 182403, 9 March 2010)⁷