In Prime Savings Bank v. Spouses Santos, the Supreme Court reiterated that interlocutory orders, such as denials of applications for temporary restraining orders, cannot be appealed until a final judgment is rendered. The Court also emphasized that once a bank is placed under liquidation, its assets are in custodia legis and are not subject to garnishment or execution outside the liquidation proceedings. This ruling underscores the importance of adhering to established legal procedures and respecting the finality of judgments, especially in the context of bank liquidations, to ensure equitable distribution of assets to creditors.

Prime Savings Bank’s Last Stand: Can a Bank Evade Liquidation Through Certiorari?

The case revolves around a complaint filed by Spouses Roberto and Heidi Santos against Engr. Edgardo Torcende and Prime Savings Bank for rescission of sale and real estate mortgage. While the case was pending, the Bangko Sentral ng Pilipinas (BSP) prohibited Prime Savings Bank from doing business and placed it under receivership, later under liquidation, with the Philippine Deposit Insurance Corporation (PDIC) as the designated liquidator. The RTC ruled in favor of the Spouses Santos, leading to a notice of garnishment against Prime Savings Bank. The bank then sought to lift the writ of execution and notice of garnishment, arguing that the Spouses Santos should file their claim in the liquidation court. This highlights the tension between the rights of individual creditors and the orderly liquidation of a distressed financial institution.

Prime Savings Bank’s argument was rooted in Section 30 of Republic Act No. 7653 (The New Central Bank Act), which stipulates that assets of an institution under receivership or liquidation are in custodia legis and exempt from garnishment, levy, attachment, or execution. The RTC initially agreed with Prime Savings Bank, but later reversed its decision and allowed the execution of the judgment. This prompted Prime Savings Bank to file a Petition for Certiorari with the Court of Appeals (CA), seeking to reverse the RTC’s order and enjoin the enforcement of the garnishments.

The CA denied Prime Savings Bank’s application for a Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction (WPI). The denial was based on the bank’s failure to sufficiently demonstrate a clear legal right or urgent necessity to justify the injunctive relief. The Supreme Court, in its resolution, pointed out that the bank had availed itself of the wrong remedy by filing a Petition for Review on Certiorari under Rule 45 of the Rules of Court to question the CA’s resolutions regarding the TRO/WPI application. Rule 45 is intended for appeals from judgments or final orders, not interlocutory orders. The Court emphasized that interlocutory orders cannot be appealed until a final judgment is rendered.

“No appeal may be taken from an interlocutory order. Instead, the proper remedy to assail such an order is to file a petition for certiorari under Rule 65.”

Even if the Court were to treat the Petition as one filed under Rule 65, it would still be dismissed as moot and academic. This is because the CA had already decided the underlying Certiorari Petition in favor of Prime Savings Bank. The Spouses Santos had appealed the CA’s decision to the Supreme Court, which denied their petition, and their subsequent motion for reconsideration was also denied with finality. Therefore, the issue of whether the TRO/WPI should have been granted became irrelevant, as the main issue had already been resolved in favor of Prime Savings Bank.

The concept of custodia legis is central to this case. It means that the assets of a bank under liquidation are under the protection and control of the law, specifically the liquidation court. This principle is designed to ensure that all creditors are treated fairly and that the bank’s assets are distributed in an orderly manner. Allowing individual creditors to pursue garnishment or execution outside of the liquidation proceedings would undermine this principle and potentially prejudice the rights of other creditors.

This case also highlights the importance of understanding the different remedies available to litigants and choosing the correct procedural path. Filing an appeal under Rule 45 when the proper remedy is a petition for certiorari under Rule 65 can result in the dismissal of the case. Litigants must carefully assess the nature of the order they are seeking to challenge and choose the appropriate remedy to ensure that their rights are properly protected.

The ruling in Prime Savings Bank v. Spouses Santos reinforces the principle that once a bank is placed under liquidation, its assets are subject to the exclusive jurisdiction of the liquidation court. Creditors seeking to recover their claims must file them with the liquidation court and participate in the liquidation proceedings. They cannot circumvent these proceedings by pursuing separate actions for garnishment or execution. This is essential to maintain the integrity of the liquidation process and ensure the equitable distribution of assets to all creditors.

The decision also serves as a reminder of the importance of seeking timely and appropriate legal remedies. Had Prime Savings Bank properly questioned the interlocutory orders of the CA through a Rule 65 petition, the procedural issues might have been resolved differently. However, because the substantive issue of the execution and garnishment was eventually decided in their favor, the procedural misstep became moot.

FAQs

What was the key issue in this case?	The key issue was whether the Court of Appeals erred in denying Prime Savings Bank’s application for a Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction (WPI) against the execution of a judgment against its assets.
Why did the Supreme Court dismiss Prime Savings Bank’s petition?	The Supreme Court dismissed the petition because Prime Savings Bank used the wrong remedy (Rule 45 instead of Rule 65) to question interlocutory orders, and the issue became moot because the main case was decided in favor of the bank.
What is the significance of ‘custodia legis’ in this case?	‘Custodia legis’ means that the assets of a bank under liquidation are under the protection of the law and cannot be garnished or executed upon outside the liquidation proceedings, ensuring fair distribution to all creditors.
What is the difference between Rule 45 and Rule 65 of the Rules of Court?	Rule 45 governs appeals from judgments or final orders, while Rule 65 is used to question interlocutory orders or acts tainted with grave abuse of discretion.
What happens to creditors’ claims when a bank is placed under liquidation?	Creditors must file their claims with the liquidation court and participate in the liquidation proceedings to recover their debts, as they cannot pursue separate actions for garnishment or execution.
What was the outcome of the main case in the Court of Appeals?	The Court of Appeals ultimately ruled in favor of Prime Savings Bank, reversing the RTC’s order that allowed the execution and garnishment of the bank’s assets.
What is a Temporary Restraining Order (TRO) and Writ of Preliminary Injunction (WPI)?	A TRO is a short-term order restraining a party from performing an act, while a WPI is a more extended order that maintains the status quo pending the resolution of a case.
Why was the petition considered moot and academic?	The petition was considered moot because the main issue regarding the execution and garnishment of Prime Savings Bank’s assets had already been resolved in its favor by the Court of Appeals and affirmed by the Supreme Court.

In conclusion, the Supreme Court’s decision in Prime Savings Bank v. Spouses Santos clarifies the procedural requirements for challenging interlocutory orders and reinforces the principle of custodia legis in bank liquidation proceedings. This case serves as a valuable guide for creditors and financial institutions navigating the complexities of debt recovery and bank liquidation.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Prime Savings Bank v. Spouses Santos, G.R. No. 208283, June 19, 2019