Bank of the Philippine Islands vs.

Hong All the assets of the EYCO Group should thus be surrendered for collation to the liquidator
G.R. No. 161771 and all claims against the EYCO Group should be filed with the liquidator in the liquidation
Feb. 15, 2012 proceedings with the SEC. The SEC, at which the liquidation is pending, has jurisdiction over
FAJARDO the mortgaged properties to the exclusion of any other court.
Topic: Jurisdiction Conferred by Law
Petitioners: Bank of the Philippine Islands Moreover, the sale of the mortgaged properties on 19 December 2000 would give undue
Respondents: Eduardo Hong doing business under the name and style of “SUPER LINE preference to defendant FEBTC to the detriment of other creditors, particularly plaintiff. This
PRINTING PRESS” was specifically proscribed by the Supreme Court stating in the case of Bank of the Philippine
Ponente: Villarama, Jr., J Islands v. Court of Appeals that whenever a distressed corporation asks SEC for rehabilitation
and suspension of payments, preferred creditors may no longer assert such preference, but
DOCTRINE: shall stand on equal footing with other creditors. Consequently, foreclosure should be
FACTS: This petition for review on certiorari under Rule 45 assails the Decision dated disallowed so as not to prejudice other creditors or cause discrimination among them.
September 27, 2002 and Resolution dated January 12, 2004 of the Court of Appeals (CA) in
CA-G.R. SP No. 64166. After hearing, the trial court issued a temporary restraining order (TRO). Petitioner filed a
motion to dismiss arguing that by plaintiff’s own allegations in the complaint, jurisdiction over
On September 16, 1997, the EYCO Group of Companies ("EYCO") filed a petition for the reliefs prayed for belongs to the SEC, and that plaintiff is actually resorting to forum
suspension of payments and rehabilitation before the Securities and Exchange Commission shopping since he has filed a claim with the SEC and the designated Liquidator in the ongoing
(SEC). A stay order was issued enjoining the disposition in any manner except in the ordinary liquidation of the EYCO Group of Companies. In his Opposition, plaintiff (respondent) asserted
course of business and payment outside of legitimate business expenses during the pendency that the RTC has jurisdiction on the issue of propriety and validity of the foreclosure by
of the proceedings, and suspending all actions, claims and proceedings against EYCO until petitioner, in accordance with Section 1, Rule 4 of the 1997 Rules of Civil Procedure, as
further orders from the SEC. On December 18, 1998, the hearing panel approved the amended, the suit being in the nature of a real action.
proposed rehabilitation plan prepared by EYCO despite the recommendation of the
management committee for the adoption of the rehabilitation plan prepared and submitted by
On January 17, 2001, the trial court denied the motion to dismiss. Petitioner’s motion for
the steering committee of the Consortium of Creditor Banks which appealed the order to the
reconsideration was likewise denied. Petitioner challenged the validity of the trial court’s ruling
Commission. On September 14, 1999, the SEC rendered its decision disapproving the petition
before the CA via a petition for certiorari under Rule 65.
for suspension of payments, terminating EYCO’s proposed rehabilitation plan and ordering the
dissolution and liquidation of the petitioning corporation. The case was remanded to the
hearing panel for liquidation proceedings. On appeal by EYCO, the CA upheld the SEC ruling. The CA affirmed the trial court’s denial of petitioner’s motion to dismiss. It held that questions
EYCO then filed a petition for certiorari before this Court, docketed as G.R. No. 145977, which relating to the validity or legality of the foreclosure proceedings, including an action to enjoin
case was eventually dismissed under Resolution dated May 3, 2005 upon joint manifestation the same, must necessarily be cognizable by the RTC, notwithstanding that the SEC likewise
and motion to dismiss filed by the parties. Said resolution had become final and executory on possesses the power to issue injunction in all cases in which it has jurisdiction as provided in
June 16, 2005. Sec. 6 (a) of Presidential Decree (P.D.) No. 902-A. Further, the CA stated that an action for
Sometime in November 2000 while the case was still pending with the CA, petitioner Bank of foreclosure of mortgage and all incidents relative thereto including its validity or invalidity is
the Philippine Islands (BPI), filed with the Office of the Clerk of Court, Regional Trial Court of within the jurisdiction of the RTC and is not among those cases over which the SEC exercises
Valenzuela City, a petition for extra-judicial foreclosure of real properties mortgaged to it by exclusive and original jurisdiction under Sec. 5 of P.D. No. 902-A. Consequently, no grave
Eyco Properties, Inc. and Blue Star Mahogany, Inc. abuse of discretion was committed by the trial court in issuing the assailed orders.

Claiming that the foreclosure proceedings initiated by petitioner was illegal, respondent With the CA’s denial of its motion for reconsideration, petitioner is now before this Court
Eduardo Hong, an unsecured creditor of Nikon Industrial Corporation, one of the companies of raising the sole issue of whether the RTC can take cognizance of the injunction suit despite
EYCO, filed an action for injunction and damages against the petitioner in the same court the pendency of SEC Case No. 09-97-5764.
(RTC of Valenzuela City). On its principal cause of action, the complaint alleged that:
ISSUE: whether the RTC can take cognizance of the injunction suit despite the pendency of the
The ex-officio sheriff has no authority to sell the mortgaged properties. Upon his appointment SEC case
as liquidator, Edgardo Tarriela was empowered by the SEC to receive and preserve all
assets, and cause their valuation. Therefore, the SEC retains jurisdiction over the mortgaged HELD/RATIO: The petition has no merit.
properties of EYCO Properties, Inc.
Jurisdiction is defined as the power and authority of a court to hear and decide a case. A finally disposed of on 29 November 2000 when the SEC issued its Omnibus Order directing
court’s jurisdiction over the subject matter of the action is conferred only by the Constitution or the dissolution of CMC and the transfer of the liquidation proceedings before the appropriate
by statute. The nature of an action and the subject matter thereof, as well as which court or trial court. The SEC finally disposed of CMC’s petition for suspension of payment when it
agency of the government has jurisdiction over the same, are determined by the material determined that CMC could no longer be successfully rehabilitated.
allegations of the complaint in relation to the law involved and the character of the reliefs
prayed for, whether or not the complainant/plaintiff is entitled to any or all of such reliefs. And However, the SEC’s jurisdiction does not extend to the liquidation of a corporation. While the
jurisdiction being a matter of substantive law, the established rule is that the statute in force at SEC has jurisdiction to order the dissolution of a corporation, jurisdiction over the liquidation of
the time of the commencement of the action determines the jurisdiction of the court. the corporation now pertains to the appropriate regional trial courts. This is the reason why the
SEC, in its 29 November 2000 Omnibus Order, directed that "the proceedings on and
The complaint principally seeks to enjoin the foreclosure proceedings initiated by petitioner implementation of the order of liquidation be commenced at the Regional Trial Court to which
over those properties on the ground that such properties are held in trust and placed under this case shall be transferred." This is the correct procedure because the liquidation of a
the jurisdiction of the appointed Liquidator in SEC Case No. 09-97-5764. Thus, Civil Case No. corporation requires the settlement of claims for and against the corporation, which clearly
349-V-00 is one for injunction with prayer for damages. falls under the jurisdiction of the regular courts. The trial court is in the best position to
convene all the creditors of the corporation, ascertain their claims, and determine their
As a rule, actions for injunction and damages lie within the jurisdiction of the RTC pursuant to preferences.23 (Emphasis supplied.)
Section 19 of Batas Pambansa Blg. 129, otherwise known as the "Judiciary Reorganization
Act of 1980," as amended by Republic Act (R.A.) No. 7691.
There is no showing in the records that SEC Case No. 09-97-5764 had been transferred to
On the other hand, Sec. 6 (a) of P.D. No. 902-A empowered the SEC to "issue preliminary or
the appropriate RTC designated as Special Commercial Court at the time of the
permanent injunctions, whether prohibitory or mandatory, in all cases in which it has
commencement of the injunction suit on December 18, 2000. Given the urgency of the
jurisdiction."
situation and the proximity of the scheduled public auction of the mortgaged properties as per
the Notice of Sheriff’s Sale, respondent was constrained to seek relief from the same court
However, R.A. No. 8799, which took effect on August 8, 2000, transferred to the appropriate
having jurisdiction over the foreclosure proceedings – RTC of Valenzuela City. Respondent
regional trial courts the SEC’s jurisdiction over those cases enumerated in Sec. 5 of P.D. No.
thus filed Civil Case No. 349-V-00 in the RTC of Valenzuela City on December 18, 2000
902-A. Section 5.2 of R.A. No. 8799 provides:
questioning the validity of and enjoining the extrajudicial foreclosure initiated by petitioner.
Pursuant to its original jurisdiction over suits for injunction and damages, the RTC of
SEC. 5.2 The Commission’s jurisdiction over all cases enumerated under Section 5 of Valenzuela City, Branch 75 properly took cognizance of the injunction case filed by the
Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the respondent. No reversible error was therefore committed by the CA when it ruled that the RTC
appropriate Regional Trial Court: Provided, that the Supreme Court in the exercise of its of Valenzuela City, Branch 75 had jurisdiction to hear and decide respondent’s complaint for
authority may designate the Regional Trial Court branches that shall exercise jurisdiction over injunction and damages.
these cases. The Commission shall retain jurisdiction over pending cases involving intra-
corporate disputes submitted for final resolution which should be resolved within one (1) year
Lastly, it may be mentioned that while the Consortium of Creditor Banks had agreed to end
from the enactment of this Code. The Commission shall retain jurisdiction over pending
their opposition to the liquidation proceedings upon the execution of the Agreement dated
suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.
February 10, 2003, on the basis of which the parties moved for the dismissal of G.R. No.
145977, it is to be noted that petitioner is not a party to the said agreement. Thus, even
Upon the effectivity of R.A. No. 8799, SEC Case No. 09-97-5764 was no longer pending. The assuming that the SEC retained jurisdiction over SEC Case No. 09-97-5764, petitioner was
SEC finally disposed of said case when it rendered on September 14, 1999 the decision not bound by the terms and conditions of the Agreement relative to the foreclosure of those
disapproving the petition for suspension of payments, terminating the proposed rehabilitation mortgaged properties belonging to EYCO and/or other accommodation mortgagors.
plan, and ordering the dissolution and liquidation of the petitioning corporation. With the
enactment of the new law, jurisdiction over the liquidation proceedings ordered in SEC Case
WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated September
No. 09-97-5764 was transferred to the RTC branch designated by the Supreme Court to
27, 2002 and Resolution dated January 12, 2004 of the Court of Appeals in CA-G.R. SP No.
exercise jurisdiction over cases formerly cognizable by the SEC. As this Court held in
64166 are AFFIRMED.
Consuelo Metal Corporation v. Planters Development Bank22 :
With costs against the petitioner.
The SEC assumed jurisdiction over CMC’s petition for suspension of payment and issued a
suspension order on 2 April 1996 after it found CMC’s petition to be sufficient in form and
substance. While CMC’s petition was still pending with the SEC as of 30 June 2000, it was SO ORDERED.