G.R. No. 73162 October 23, 1989
PHILIPPINE VETERANS BANK, petitioner, vs. INTERMEDIATE APPELLATE COURT (now Court of Appeals), Hon. ANGEL DAQUIGAN, Deputy Sheriff OSCAR GUASCH and EMILIANA DOBLON, respondents.

FACTS

Private respondent Emiliana Doblon filed a complaint for reformation of instrument and damages against petitioner Philippine Veterans Bank (PVB). The Regional Trial Court rendered a summary judgment in her favor, ordering PVB to pay substantial actual damages and daily compensation for loss of income. PVB’s motion for reconsideration was denied, and its notice of appeal was also denied by the trial court, which instead ordered the issuance of a writ of execution. PVB’s subsequent petitions to the Intermediate Appellate Court and the Supreme Court to challenge these orders were dismissed.
Meanwhile, the Monetary Board of the Central Bank issued Resolution No. 364 on April 25, 1985, placing PVB under receivership pursuant to Section 29 of the Central Bank Act. Subsequently, on June 7, 1985, the Monetary Board confirmed PVB could not resume business and ordered its liquidation. Despite this, the trial court granted Doblon’s ex-parte motion for an alias writ of execution. Consequently, the deputy sheriff conducted public auctions of PVB’s real properties on July 8 and 9, 1985. PVB then filed a petition with the Intermediate Appellate Court to nullify these auctions, but the petition was dismissed, prompting this review.

ISSUE

Whether a final judgment for damages against a bank can be enforced via execution through the public auction of the bank’s properties after the bank has been placed under liquidation by the Monetary Board of the Central Bank.

RULING

No. The Supreme Court reversed the appellate court’s decision and declared the auction sales null and void. The legal logic is anchored on Section 29 of the Central Bank Act, as amended. Once the Monetary Board places a bank under receivership or liquidation, its assets are deemed in custodia legis—in the legal custody of the receiver or liquidator. The law explicitly states that such assets are, from that moment, exempt from any order of garnishment, levy, attachment, or execution.
The Court applied the doctrine established in Central Bank v. Morfe, which holds that allowing execution against an insolvent bank would improperly deplete its assets to the prejudice of other creditors. The Monetary Board, upon declaring insolvency, becomes the trustee of the bank’s assets for the equal benefit of all depositors and creditors. No single creditor can obtain a preference or advantage through attachment or execution after this point. This principle applies regardless of when the complaint was filed, as the critical act is the execution, which would disrupt the equitable distribution of assets. The judgment only serves to fix the amount of the claim; it does not confer priority. Therefore, Doblon must file her claim in the ongoing liquidation proceedings for proper adjudication alongside other creditors. The sheriff’s execution was a legal nullity for want of authority.