G.R. No. 194589, September 21, 2015
Balayan Bay Rural Bank, Inc., represented by its Statutory Liquidator, the Philippine Deposit Insurance Corporation, Petitioner, vs. National Livelihood Development Corporation, Respondent.

FACTS

Petitioner Balayan Bay Rural Bank, Inc. (the Bank) was placed under receivership by the Bangko Sentral ng Pilipinas on November 26, 2009, and the Philippine Deposit Insurance Corporation (PDIC) was appointed as its receiver/statutory liquidator. Prior to this, on October 12, 2009, respondent National Livelihood Development Corporation (NLDC) filed a complaint for collection of a sum of money against the Bank before the Regional Trial Court (RTC) of Makati City for an unpaid obligation of P1,603,179.86. After the Bank was placed under receivership, NLDC filed a Motion for Substitution of Party, seeking to substitute or join PDIC as a defendant in the case, invoking Section 19, Rule 3 of the Revised Rules of Court on transfer of interest. The Bank opposed, arguing that PDIC is merely its statutory receiver/liquidator and not the real party in interest. The RTC granted NLDC’s motion in an Order dated June 11, 2010, directing that PDIC be substituted or joined as co-defendant. The Bank elevated the issue via a Petition for Review on Certiorari, contesting the RTC’s order while not objecting to a subsequent RTC Decision on the merits rendered on June 18, 2010, which ordered the Bank to pay NLDC.

ISSUE

Whether or not the June 11, 2010 RTC Order, which directed the substitution of PDIC as defendant or its inclusion as co-defendant, is contrary to law.

RULING

The Supreme Court DENIED the petition. It held that the RTC correctly ordered the inclusion of PDIC in the case, but for a different legal reason than that cited by the trial court. The RTC erroneously relied on Section 19, Rule 3 (transfer of interest) as justification. The Supreme Court clarified that when a bank is placed under receivership/liquidation, its assets are not transferred to the statutory receiver/liquidator by operation of law but are instead held in trust for the equal benefit of all creditors. The bank retains its juridical personality and remains the real party in interest. PDIC, as the statutory receiver/liquidator, acts in a fiduciary capacity and is mandated to administer the bank’s assets and liabilities for the benefit of creditors. Pursuant to Section 3, Rule 3 of the Revised Rules of Court, in an action prosecuted or defended by a representative acting in a fiduciary capacity, the beneficiary (the Bank) is the real party in interest and must be included in the case title, while the representative (PDIC) is the proper party to prosecute or defend the action. Therefore, PDIC should be included in the case as a representative party, not as a substitute or co-defendant. The legal personality of the Bank is not dissolved by insolvency, and any suit for or against it must be prosecuted or defended through its statutory liquidator, the PDIC.