G.R. No. 161771, 15 February 2012

FACTS:

On September 16, 1997, the EYCO Group of Companies (“EYCO”) filed a petition for suspension of payments and rehabilitation before the Securities and Exchange Commission (SEC). A stay order was issued on September 19, 1997 enjoining the disposition in any manner except in the ordinary course of business and payment outside of legitimate business expenses during the pendency of the proceedings, and suspending all actions, claims and proceedings against EYCO until further orders from the SEC.

On September 14, 1999, the SEC rendered its decision disapproving the petition 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. Petitioner Bank of the Philippine Islands (BPI), filed with the Office of the Clerk of Court, Regional Trial Court of Valenzuela City, a petition for extra-judicial foreclosure of real properties mortgaged.

Claiming that the foreclosure proceedings initiated by petitioner was illegal, respondent Eduardo Hong, an unsecured creditor of Nikon Industrial Corporation, one of the companies of EYCO, filed an action for injunction and damages against the petitioner in the same court (RTC of Valenzuela City).

The CA affirmed the trial court’s denial of petitioner’s motion to dismiss. It held that questions relating to the validity or legality of the foreclosure proceedings, including an action to enjoin the same, must necessarily be cognizable by the RTC, notwithstanding that the SEC likewise possesses the power to issue injunction in all cases in which it has jurisdiction.

ISSUE:

Whether an action for foreclosure of mortgage and all incidents relative thereto including its validity or invalidity is within the jurisdiction of the RTC and is not among those cases over which the SEC exercises exclusive and original jurisdiction.

RULING:

As a rule, actions for injunction and damages lie within the jurisdiction of the RTC pursuant to Section 19 of Batas Pambansa Blg. 129, otherwise known as the “Judiciary Reorganization Act of 1980,”

R.A. No. 8799, which took effect on August 8, 2000, transferred to the appropriate regional trial courts the SEC’s jurisdiction over those cases enumerated in Sec. 5 of P.D. No. 902-A. Section 5.2 of R.A. No. 8799 provides:

SEC. 5.2 The Commission’s jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided, that the Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over 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 from the enactment of this Code. The Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed. (Emphasis supplied.)

With the enactment of the new law, jurisdiction over the liquidation proceedings ordered in SEC was transferred to the RTC branch designated by the Supreme Court to exercise jurisdiction over cases formerly cognizable by the SEC.

The SEC assumed jurisdiction over CMC’s petition for suspension of payment . While CMC’s petition was still pending with the SEC as of 30 June 2000, it was finally disposed of on 29 November 2000 when the SEC issued its Omnibus Order directing the dissolution of CMC and the transfer of the liquidation proceedings before the appropriate trial court.

However, the SEC’s jurisdiction does not extend to the liquidation of a corporation. Jurisdiction over the liquidation of the corporation now pertains to the appropriate regional trial courts. This is the reason why the SEC directed that “the proceedings on and implementation of the order of liquidation be commenced at the Regional Trial Court to which this case shall be transferred.” This is the correct procedure because the liquidation of a corporation requires the settlement of claims for and against the corporation, which clearly falls under the jurisdiction of the regular courts. Hence, petition denied.

*Case Digest by April Rose B. Tuanda, JD-IV, Andres Bonifacio Law School, S.Y 2019-2020