Title
Central Bank Board of Liquidators vs. Banco Filipino Savings and Mortgage Bank
Case
G.R. No. 173399
Decision Date
Feb 21, 2017
Banco Filipino challenged CB's closure and liquidation, resumed operations, then sought damages against BSP for post-1994 acts. SC ruled improper amendment of complaint.
procedural issues
admission
causes of action

Case Summary (G.R. No. 173399)

Factual Background

Banco Filipino commenced formal operations in 1964 after MB Resolution No. 223 dated 14 February 1963. The Central Bank of the Philippines issued MB Resolution No. 955 placing Banco Filipino under conservatorship on 27 July 1984. Thereafter, MB Resolution No. 75 of 25 January 1985 placed the bank under receivership and ordered its closure and eventual takeover of assets and liabilities. On 22 March 1985 the Central Bank issued another resolution placing the bank under liquidation. Banco Filipino filed three separate civil actions in the RTC Makati challenging, respectively, the conservatorship, the receivership, and the liquidation; those cases were consolidated pursuant to this Court’s directive in G.R. No. 70054.

Statutory Transition and Subsequent Events

While the consolidated cases were pending, R.A. No. 7653 took effect on 6 July 1993, abolishing the old Central Bank and creating the Bangko Sentral ng Pilipinas (BSP) and establishing the Central Bank Board of Liquidators (CB-BOL) to administer and liquidate certain retained assets and liabilities of the old Central Bank. Pursuant to this Court’s earlier ruling, the BSP reopened Banco Filipino on 1 July 1994.

First Amendment and Substitution

On 29 May 1995 Banco Filipino moved to admit an Amended/Supplemental Complaint to substitute the CB-BOL for the defunct Central Bank and its Monetary Board and to seek damages of at least P18 billion and other reliefs against CB-BOL and certain individuals. The RTC admitted that amended pleading by Order dated 29 March 1996, thereby substituting the CB-BOL for the defunct Central Bank in the consolidated civil cases.

Second Amended/Supplemental Complaint

On 25 September 2003 Banco Filipino filed a Motion to Admit a Second Amended/Supplemental Complaint in the consolidated cases. The second supplemental pleading sought to add the BSP and its Monetary Board as additional defendants and alleged new acts and omissions said to have occurred after the bank’s reopening in 1994. The complaint described alleged post-1994 conduct by the BSP and its MB, including refusal to grant a universal banking license except on onerous terms, a smear campaign, disqualification of a director, collusion with minority stockholders to institute proceedings leading to receivership or conservatorship, and coercive measures resulting in a Memorandum of Agreement. Banco Filipino sought actual damages of at least P18.8 billion “as a consequence of the acts herein complained of.”

Trial Court and Court of Appeals Rulings

The RTC, Branch 136, through an Order dated 27 January 2004, granted Banco Filipino’s motion and admitted the Second Amended/Supplemental Complaint. The RTC denied reconsideration on 20 July 2004. The CB-BOL filed a Rule 65 petition with the Court of Appeals challenging the admission. The CA dismissed the petition on 27 January 2006, affirming the trial court’s admission. The CA held that the old Central Bank continued to exist as CB-BOL, that the BSP was the successor-in-interest and became a transferee pendente lite with the transfer of assets, and therefore no new parties were impleaded. The CA also found that Banco Filipino raised no new issues or reliefs against CB-BOL and faulted CB-BOL for delay in the litigation. The CA denied the CB-BOL’s motion for reconsideration on 27 June 2006.

Petitioner’s Contentions

In its Rule 45 Petition before the Supreme Court, petitioner CB-BOL contended that the admission of the Second Amended/Supplemental Complaint was procedurally improper because it introduced new parties and new causes of action unrelated to the original complaint. Petitioner argued that the second supplemental complaint lacked proper corporate authorization, violated the rules on joinder of causes of action and parties, and expanded the scope of the litigation to include matters that arose only after the filing of the original complaint and after the enactment of R.A. No. 7653. Petitioner maintained that CB-BOL is a separate legal entity from the abolished Central Bank and that the new allegations against the BSP should be pursued in a separate case.

Respondent’s Contentions

Respondent Banco Filipino urged that the Second Amended/Supplemental Complaint did not alter the substance of the original demand, change the cause of action against the original defendants, or seek new reliefs; instead, it merely added the BSP and its Monetary Board as defendants as successors-in-interest. Banco Filipino contended that allegations of post-1994 conduct only demonstrated adoption by the successor of the predecessor’s conduct and thus were germane to the original cause of action.

Issue Presented

The dispositive issue was whether the RTC erred in admitting Banco Filipino’s Second Amended/Supplemental Complaint in the consolidated civil cases.

Supreme Court Ruling

The Supreme Court, through Chief Justice Sereno, granted the CB-BOL’s petition. The Court reversed and set aside the Court of Appeals Decision dated 27 January 2006 and its Resolution dated 27 June 2006. The Supreme Court directed the RTC, Branch 136, to proceed with trial with utmost dispatch.

Legal Basis and Reasoning on Amendment

The Court applied Rule 10 of the 1997 Rules of Court and reiterated that pleadings may be amended liberally to secure substantial justice. The Court emphasized the limitation that an amendment cannot be used to set up a cause of action that did not exist at the time the complaint was filed. The Court found that the causes of action asserted in the Second Amended/Supplemental Complaint arose in 1994, long after the original causes of action founded on the 1984–1985 conservatorship, receivership, and liquidation. Because the alleged post-1994 acts by the BSP and its MB constituted separate causes of action distinct from those in the original complaint, their inclusion by amendment was improper.

Legal Basis and Reasoning on Supplementation

The Court analyzed the function and limits of a supplemental pleading under Rule 10, Section 6. A supplemental pleading may set forth events occurring since the original pleading that are germane to the same cause of action. The Court cited Leobrera v. CA and Planters Development Bank v. LZK Holdings & Development Corp. and concluded that a supplemental pleading must be founded on the same cause of action or, at minimum, be germane and intertwined with it so that the principal issues remain unchanged. The Court found that the Second Amended/Supplemental Complaint sought relief for acts that had no relation to the original complaint and thus amounted to a new cause of action, not a permissible supplement.

Joinder of Parties and Causes of Action

The Court examined the rules on joinder. It noted Rule 2, Section 5 allows joinder of causes of action subject to joinder of parties, and Rule 3, Section 6 permits permissive joinder of parties only when the rights to relief arise out of the same transaction or series of transactions and when common questions of law or fact exist. The Court found that neither requirement was satisfied. The damages claimed in the first amended pleading arose from the 1985 closure and liquidation, whereas the damages in the second supplemental pleading arose from alleged post-1994 oppression by the BSP. There was no common question of fact or law linking the two sets of allegations beyond the fact that Banco Filipino was the aggrieved party

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